YPF Sociedad Anonima Annual Report 2010

FY2010 Annual Report · YPF Sociedad Anonima
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 20-F
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the ﬁscal year ended December 31, 2010
Commission ﬁle number: 1-12102

YPF Sociedad Ano´nima
(Exact name of registrant as speciﬁed in its charter)
Republic of Argentina
(Jurisdiction of incorporation or organization)
Macacha Gu¨emes 515
C1106BKK Ciudad Auto´noma de Buenos Aires, Argentina
(Address of principal executive ofﬁces)
A´ ngel Ramos Sa´nchez
Tel: (011-54-11) 5441-0970
Facsimile Number: (011-54-11) 5441-0232
Macacha Gu¨emes 515
C1106BKK Ciudad Auto´noma de Buenos Aires, Argentina
(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)

Securities registered or to be registered pursuant to Section 12(b) of the Act:

Title of Each Class

Name of Each Exchange
on Which Registered

American Depositary Shares, each representing one Class D Share, par value 10 pesos per share New York Stock Exchange
Class D Shares............................................................................................................................. New York Stock Exchange*

Listed not for trading but only in connection with the registration of American Depositary Shares.

*
Securities registered or to be registered pursuant to Section 12(g) of the Act: None
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None

The number of outstanding shares of each class of stock of YPF Sociedad Ano´ nima as of December 31, 2010 was:

Class A Shares......................................................................
Class B Shares ......................................................................
Class C Shares......................................................................
Class D Shares .....................................................................

3,764
7,624
40,422
393,260,983

393,312,793

Indicate by check mark if the registrant is a well-known seasoned issuer, as deﬁned in Rule 405 of the Securities
Act.
If this report is an annual or transition report, indicate by check mark if the registrant is not required to ﬁle
reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.
Note – Checking the box above will not relieve any registrant required to ﬁle reports pursuant to Section 13 or
15(d) of the Securities Exchange Act of 1934 from their obligations under those Sections.
Indicate by check mark whether the registrant (1) has ﬁled all reports required to be ﬁled by Section 13 or 15(d)
of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to ﬁle such reports), and (2) has been subject to such ﬁling requirements for the past 90
days.
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web
site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation
S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was
required to submit and post such ﬁles).
Indicate by check mark whether the registrant is a large accelerated ﬁler, an accelerated ﬁler, or a non-
accelerated ﬁler. See deﬁnition of ‘‘accelerated ﬁler and large accelerated ﬁler’’ in Rule 12b-2 of the Exchange
Act. (Check one):
Large accelerated ﬁler
Indicate by check mark which basis of accounting the registrant has used to prepare the ﬁnancial statements
included in this ﬁling:
U.S. GAAP
Standards Board:
Indicate by check mark which ﬁnancial statement item the registrant has elected to follow.
If this is an annual report, indicate by check mark whether the registrant is a shell company (as deﬁned in Rule
12b-2 of the Exchange Act)

International Financial Reporting Standards as issued by the International Accounting

Non-accelerated ﬁler

Accelerated ﬁler

Yes

Yes

No

No

Yes

No

Yes

No

Item 17

Other
Item 18

Yes

No

TABLE OF CONTENTS

Conversion Table .........................................................................................................................
References.....................................................................................................................................
Disclosure of Certain Information...............................................................................................
Forward-Looking Statements ......................................................................................................
Oil and Gas Terms .......................................................................................................................
PART I.........................................................................................................................................
ITEM 1. Identity of Directors, Senior Managers and Advisers ..................................................
ITEM 2. Offer Statistics and Expected Timetable.......................................................................
ITEM 3. Key Information ...........................................................................................................
Selected Financial Data ............................................................................................................
Exchange Controls....................................................................................................................
Risk Factors .............................................................................................................................
ITEM 4. Information on the Company.......................................................................................
History and Development of YPF ...........................................................................................
The Argentine Market..............................................................................................................
History of YPF.........................................................................................................................
Business Organization ..............................................................................................................
Exploration and Production.....................................................................................................
Reﬁning and Marketing ...........................................................................................................
Chemicals..................................................................................................................................
Research and Development ......................................................................................................
Competition ..............................................................................................................................
Environmental Matters.............................................................................................................
Property, Plant and Equipment................................................................................................
Insurance ..................................................................................................................................
Regulatory Framework and Relationship with the Argentine Government............................
ITEM 4A. Unresolved Staff Comments. .....................................................................................
ITEM 5. Operating and Financial Review and Prospects ...........................................................
Overview ...................................................................................................................................
Presentation of Financial Information .....................................................................................
Segment Reporting ...................................................................................................................
Factors Affecting Our Operations............................................................................................
Critical Accounting Policies .....................................................................................................
Principal Income Statement Line Items ...................................................................................
Results of Operations ...............................................................................................................
Liquidity and Capital Resources ..............................................................................................
Off-Balance Sheet Arrangements..............................................................................................
ITEM 6. Directors, Senior Management and Employees............................................................
Board of Directors....................................................................................................................
The Audit Committee...............................................................................................................
Independence of the Members of our Board of Directors and Audit Committee ..................
Disclosure Committee...............................................................................................................
Executive Ofﬁcers .....................................................................................................................
Compliance with NYSE Listing Standards on Corporate Governance...................................
Compensation of Directors and Ofﬁcers..................................................................................
Supervisory Committee ............................................................................................................
Employee Matters.....................................................................................................................

i

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ITEM 7. Major Shareholders and Related Party Transactions.................................................
Share Purchase Agreement and Related Financing Agreements .............................................
Option Agreements...................................................................................................................
Shareholders’ Agreement..........................................................................................................
Registration Rights and Related Agreements ..........................................................................
Related Party Transactions ......................................................................................................
Argentine Law Concerning Related Party Transactions..........................................................
ITEM 8. Financial Information ...................................................................................................
Financial Statements.................................................................................................................
Legal Proceedings .....................................................................................................................
Dividend Policy ........................................................................................................................
ITEM 9. The Offer and Listing ...................................................................................................
Shares and ADSs......................................................................................................................
Argentine Securities Market .....................................................................................................
ITEM 10. Additional Information...............................................................................................
Capital Stock ............................................................................................................................
Memorandum and Articles of Association ..............................................................................
Directors ...................................................................................................................................
Foreign Investment Legislation ................................................................................................
Dividends..................................................................................................................................
Amount Available for Distribution..........................................................................................
Preemptive and Accretion Rights.............................................................................................
Voting of the Underlying Class D Shares ................................................................................
Certain Provisions Relating to Acquisitions of Shares ............................................................
Material Contracts....................................................................................................................
Exchange Controls....................................................................................................................
Taxation....................................................................................................................................
Argentine Tax Considerations..................................................................................................
United States Federal Income Tax Considerations..................................................................
Available Information ..............................................................................................................
ITEM 11. Quantitative and Qualitative Disclosures about Market Risk....................................
ITEM 12. Description of Securities Other than Equity Securities ..............................................
PART II .......................................................................................................................................
ITEM 13. Defaults, Dividend Arrearages and Delinquencies .....................................................
ITEM 14. Material Modiﬁcations to the Rights of Security Holders and Use of Proceeds .......
ITEM 15. Controls and Procedures.............................................................................................
ITEM 16.......................................................................................................................................
ITEM 16A. Audit Committee Financial Expert..........................................................................
ITEM 16B. Code of Ethics ..........................................................................................................
ITEM 16C. Principal Accountant Fees and Services...................................................................
ITEM 16D. Exemptions from the Listing Standards for Audit Committees..............................
ITEM 16E. Purchases of Equity Securities by the Issuer and Afﬁliated Purchasers ..................
ITEM 16F. Change in Registrant’s Certifying Accountant.........................................................
ITEM 16G. Corporate Governance.............................................................................................
PART III......................................................................................................................................
ITEM 17. Financial Statements ...................................................................................................
ITEM 18. Financial Statements ...................................................................................................
ITEM 19. Exhibits .......................................................................................................................
SIGNATURES ............................................................................................................................

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ii

Conversion Table
1 ton = 1 metric ton = 1,000 kilograms = 2,204 pounds

1 barrel = 42 U.S. gallons

1 ton of oil = approximately 7.3 barrels (assuming a speciﬁc gravity of 34 degrees API (American
Petroleum Institute))

1 barrel of oil equivalent = 5,615 cubic feet of gas = 1 barrel of oil, condensate or natural gas liquids

1 kilometer = 0.63 miles

1 million Btu = 252 termies

1 cubic meter of gas = 35.3147 cubic feet of gas

1 cubic meter of gas = 10 termies

1,000 acres = approximately 4 square kilometers

References

YPF Sociedad Ano´ nima is a stock corporation organized under the laws of the Republic of
Argentina (‘‘Argentina’’). As used in this annual report, ‘‘YPF,’’ ‘‘the company,’’ ‘‘we,’’ ‘‘our’’ and
‘‘us’’ refer to YPF Sociedad Ano´ nima and its controlled and jointly controlled companies or, if the
context requires,
‘‘YPF Sociedad Ano´ nima’’ refers to YPF Sociedad
Ano´ nima only. ‘‘Repsol YPF’’ refers to Repsol YPF, S.A. and its consolidated companies, including
YPF, unless otherwise speciﬁed. We maintain our ﬁnancial books and records and publish our
ﬁnancial statements in Argentine pesos. In this annual report, references to ‘‘pesos’’ or ‘‘Ps.’’ are to
Argentine pesos, and references to ‘‘dollars,’’ ‘‘U.S. dollars’’ or ‘‘U.S.$’’ are to United States dollars.

its predecessor companies.

Disclosure of Certain Information

In this annual report, references to ‘‘Audited Consolidated Financial Statements’’ are to YPF’s
audited consolidated balance sheets as of December 31, 2010, 2009 and 2008, YPF’s audited
consolidated statements of income for the years ended December 31, 2010, 2009 and 2008, YPF’s
audited consolidated statements of cash ﬂows for the years ended December 31, 2010, 2009 and 2008,
YPF’s audited consolidated statements of changes in shareholders’ equity for the years ended
December 31, 2010, 2009 and 2008, and the related notes and schedules thereto.

Unless otherwise indicated, the information contained in this annual report reﬂects:

*

*

for the subsidiaries that were consolidated using the global integration method at the date
or for the periods indicated, 100% of the assets, liabilities and results of operations of such
subsidiaries without excluding minority interests, and

for those subsidiaries whose results were consolidated using the proportional
method, a pro rata amount of the assets,
subsidiaries at
consolidation, see Note 1(a) to the Audited Consolidated Financial Statements.

integration
liabilities and results of operations for such
information regarding

indicated. For

the date or

the periods

for

The Audited Consolidated Financial Statements and other amounts derived from such Audited
Consolidated Financial Statements included in this annual report reﬂect the effect of changes in the
purchasing power of money by the application of the method for remeasurement in constant pesos
through February 28, 2003. See Note 1(a) to the Audited Consolidated Financial Statements.

Certain monetary amounts and other ﬁgures included in this annual report have been subject to
the

rounding adjustments. Any discrepancies in any tables between the totals and the sums of
amounts are due to rounding.

Forward-Looking Statements

This annual report, including any documents incorporated by reference, contains statements that
we believe constitute forward-looking statements within the meaning of
the Private Securities
Litigation Reform Act of 1995. These forward-looking statements may include statements regarding
the intent, belief or current expectations of us and our management, including statements with respect

1

to trends affecting our ﬁnancial condition, ﬁnancial ratios, results of operations, business, strategy,
geographic concentration, reserves, future hydrocarbon production volumes and the company’s ability
to satisfy its long-term sales commitments from future supplies available to the company, dates or
periods in which production is scheduled or expected to come onstream, as well as our plans with
respect to capital expenditures, business strategy, geographic concentration, cost savings, investments
and dividends payout policies. These statements are not a guarantee of future performance and are
subject to material risks, uncertainties, changes and other factors which may be beyond our control
or may be difﬁcult to predict. Accordingly, our future ﬁnancial condition, prices, ﬁnancial ratios,
results of operations, business, strategy, geographic concentration, production volumes, reserves,
capital expenditures, cost savings, investments and dividend policies could differ materially from those
expressed or implied in any such forward-looking statements. Such factors include, but are not limited
to, currency ﬂuctuations,
the ability to realize cost
reductions and operating efﬁciencies without unduly disrupting business operations, replacement of
hydrocarbon reserves, environmental, regulatory and legal considerations and general economic and
business conditions in Argentina, as well as those factors described in the ﬁlings made by YPF and
its afﬁliates with the Securities and Exchange Commission, in particular, those described in ‘‘Item 3.
Key Information—Risk Factors’’ below and ‘‘Item 5. Operating and Financial Review and
Prospects.’’ YPF does not undertake to publicly update or revise these forward-looking statements
even if experience or future changes make it clear that the projected results or condition expressed or
implied therein will not be realized.

the price of petroleum products,

inﬂation,

Oil and Gas Terms

Oil and gas reserves deﬁnitions used in this annual report are in accordance with Regulations S-
X and S-K, as amended by the U.S. Securities and Exchange Commission’s (‘‘SEC’’) ﬁnal rule,
Modernization of Oil and Gas Reporting (Release Nos. 33-8995; 34-59192; FR-78; File No. S7-15-08;
December 31, 2008) and relevant guidance notes and letters issued by the SEC’s Staff.

The reported reserves contained in this annual report include only our proved reserves and do
not include probable reserves, possible reserves or reserves from nontraditional or unconventional
sources.

The following terms have the meanings shown below unless the context indicates otherwise:
‘‘acreage’’: The total area, expressed in acres or km2, over which YPF has interests in
exploration or production. Net acreage is YPF’s interest in the relevant exploration or production
area.

‘‘concession contracts’’: A grant of access for a deﬁned area and time period that transfers
certain entitlements to produce hydrocarbons from the host country to an enterprise. The company
holding the concession generally has rights and responsibilities for the exploration, development,
production and sale of hydrocarbon, and typically, an obligation to make payments at the signing of
the concession and once production begins pursuant to applicable laws and regulations.

‘‘crude oil’’: Crude oil with respect to YPF’s production and reserves includes condensate and

natural gas liquids (‘‘NGL’’).

‘‘gas’’: Natural gas.

‘‘hydrocarbons’’: Crude oil and natural gas.

‘‘surface conditions’’: Represents the pressure and temperature conditions at which volumes of
oil, gas, condensate and natural gas liquids are measured for report purpose. It is also referred to as
standard conditions. For YPF these conditions are 14.7 psi for pressure and 60˚F for temperature.
All volume units expressed in this report are at surface conditions.

2

Abbreviations:

‘‘bbl’’................................................ Barrels.

‘‘bcf’’................................................ Billion cubic feet.

‘‘bcm’’ .............................................. Billion cubic meters.

‘‘boe’’ ............................................... Barrels of oil equivalent.

‘‘boe/d’’ ............................................ Barrels of oil equivalent per day.

‘‘GWh’’ ............................................ Gigawatt hours.

‘‘HP’’ ............................................... Horse Power.

‘‘km’’................................................ Kilometers.

‘‘km2’’ ..............................................

Square kilometers.

‘‘liquids’’ .......................................... Crude oil, condensate and natural gas liquids.

‘‘LNG’’ ............................................ Liqueﬁed natural gas.

‘‘LPG’’ ............................................. Liqueﬁed petroleum gas.

‘‘m’’.................................................. Thousand.

‘‘mbbl/d’’.......................................... Thousand barrels per day.

‘‘mcf’’............................................... Thousand cubic feet.

‘‘mcm’’ ............................................. Thousand cubic meters.

‘‘mboe/d’’ ......................................... Thousand barrels of oil equivalent per day.

‘‘mm’’............................................... Million.

‘‘mmbbl’’.......................................... Million barrels.

‘‘mmboe’’ ......................................... Million barrels of oil equivalent.

‘‘mmboe/d’’ ...................................... Million barrels of oil equivalent per day.

‘‘mmBtu’’ ......................................... Million British thermal units.

‘‘mmcf’’............................................ Million cubic feet.

‘‘mmcf/d’’......................................... Million cubic feet per day.

‘‘mmcm/d’’ ....................................... Million cubic meters per day.

‘‘mtn’’ .............................................. Thousand tons.

‘‘MW’’ ............................................. Megawatts.

‘‘psi’’ ................................................

Pound per square inch.

‘‘WTI’’ ............................................. West Texas Intermediate.

3

PART I

ITEM 1. Identity of Directors, Senior Managers and Advisers

Not applicable.

ITEM 2. Offer Statistics and Expected Timetable

Not applicable.

ITEM 3. Key Information
Selected Financial Data

The following tables present our selected ﬁnancial and operating data. You should read this
information in conjunction with our Audited Consolidated Financial Statements and related notes,
and the information under ‘‘Item 5. Operating and Financial Review and Prospects’’
included
elsewhere in this annual report.

income tax expense, net

The ﬁnancial data as of December 31, 2010, 2009 and 2008 and for the years then ended is
derived from our Audited Consolidated Financial Statements, which are included in this annual
report. The ﬁnancial data as of and for the year ended December 31, 2007 is derived from our
audited ﬁnancial statements as of December 31, 2009, 2008 and 2007 (the ‘‘Restated Audited
Consolidated Financial Statements’’), included in our report on Form 6-K furnished to the SEC on
March 14, 2011 (SEC Accession No. 0001208646-11-000114), which are not included in this annual
report. The ﬁnancial data as of December 31, 2009, 2008 and 2007 and for the years then ended
included in this annual report reﬂects the effect of the restatement of our Argentine GAAP (as
income, earnings per ADS, accounts payable (when
deﬁned below)
applicable), investments, other receivables, taxes payable and shareholders’ equity from the amounts
originally presented to give retroactive effect to a change in Argentine GAAP introduced in 2010
requiring that a formerly off-balance sheet Ps.1,180 million as of December 31, 2009, deferred tax
liability be recognized in our ﬁnancial statements, which had the effect of increasing Argentine GAAP
net income by Ps.203 million, Ps.261 million and Ps.290 million in 2009, 2008 and 2007, respectively,
and decreasing shareholders’ equity by Ps 1,180 million, Ps.1,383 million and Ps.1,644 million at
December 31, 2009, 2008 and 2007, respectively. Our net income and shareholders’ equity under U.S.
GAAP were unaffected by this change in Argentine GAAP. For a discussion of this change, see Note
1(b) to our Audited Consolidated Financial Statements. The ﬁnancial data as of and for the year
ended December 31, 2006, is derived from our audited ﬁnancial statements which are not included in
this annual report. Amounts at and for the year ended December 31, 2006 were not required to be
restated under Argentine GAAP and have not been restated. Our audited ﬁnancial statements have
been prepared in accordance with generally accepted accounting principles in Argentina, which we
refer to as Argentine GAAP and which differ in certain signiﬁcant respects from generally accepted
accounting principles in the United States, which we refer to as U.S. GAAP. Notes 12, 13 and 14 to
our Audited Consolidated Financial Statements provide a description of the signiﬁcant differences
between Argentine GAAP and U.S. GAAP, as they relate to us, and a reconciliation to U.S. GAAP
of net income and shareholders’ equity as of December 31, 2010, 2009 and 2008 and for the years
then ended.

In this annual report, except as otherwise speciﬁed, references to ‘‘$,’’ ‘‘U.S.$’’ and ‘‘dollars’’ are
to U.S. dollars, and references to ‘‘Ps.’’ and ‘‘pesos’’ are to Argentine pesos. Solely for the
convenience of the reader, peso amounts as of and for the year ended December 31, 2010 have been
translated into U.S. dollars at the exchange rate quoted by the Argentine Central Bank (Banco
Central de la Repu´blica Argentina or Central Bank) on December 31, 2010 of Ps.3.98 to U.S.$1.00,
unless otherwise speciﬁed. The exchange rate quoted by Central Bank on April 8, 2011 was Ps.4.05 to
U.S.$1.00. The U.S. dollar equivalent information should not be construed to imply that the peso
amounts represent, or could have been or could be converted into U.S. dollars at such rates or any
other rate. See ‘‘—Exchange Rates.’’

4

As of and for Year Ended December 31,

2010

2010

2009(1)

2008(1)

2007(1)

2006

(in millions of
U.S.$, except
for per share
and per ADS
data)

(in millions of pesos, except for per share and per ADS data)

11,096
3,584
(359)
(758)
(86)
2,381

20
(39)
(234)

138

—

—
2,266
(811)
1,455

3.70

n.a.

n.a.

10,668
1,932
1,177

n.a.

143
(1,080)
11,706
1,957
4,784

13,506
6,807

1,325

2,193

44,162
14,263
(1,429)
(3,015)
(344)
9,475

79
(155)
(931)

552

—

—
9,020
(3,230)
5,790

14.72

11.30

2.88

42,459
7,690
4,686

11.91

570
(4,299)
46,589
7,789
19,040

53,753
27,092

5,273

8,729

34,320
11,143
(1,102)
(2,490)
(552)
6,999

(9)
159
(958)

(284)

—

—
5,907
(2,218)
3,689

9.38

12.45

3.31

32,931
4,385
2,605

6.62

669
(2,086)
39,747
6,819
17,701

46,544
25,717

4,832

5,636

34,875
10,862
(1,053)
(2,460)
(684)
6,665

97
(376)
(492)

318

—

—
6,212
(2,311)
3,901

9.92

23.61

7.37

33,103
5,230
3,014

7.66

391
(2,758)
38,418
4,479
18,973

44,251
25,492

4,775

7,035

29,104
10,104
(805)
(2,120)
(522)
6,657

48
(439)
(292)

810

5

69
6,858
(2,482)
4,376

25,635
9,814
(674)
(1,797)
(460)
6,883

183
(204)
(213)

667

11

(69)
7,258
(2,801)
4,457

11.13

11.33

6.00

1.93

27,746
5,176
3,325

8.45

196
4,077
37,468
994
24,416

40,746
29,067

4,139

6,163

6.00

1.97

24,204
5,626
3,667

9.32

118
4,905
35,394
1,425
24,345

37,046
26,241

3,718

5,002

Consolidated Income Statement

Data:

Argentine GAAP(2)(5)
Net sales(3)(4) ...............................
Gross proﬁt.................................
Administrative expenses .............
Selling expenses...........................
Exploration expenses ..................
Operating income .......................
(Loss)/Income on long-term

investments............................
Other income/(expense), net .......
Interest expense ..........................
Other ﬁnancial income/(expense)
and holding gains/(losses),
net .........................................

Income from sale of long-term

investments............................

Reversal/(impairment) of other

current assets.........................
Income before income tax ..........
Income tax ..................................
Net income .................................
Earnings per share and per

ADS(6) ...................................

Dividends per share and per

ADS(6) (in pesos)...................

Dividends per share and per

ADS(6)(7) (in U.S. dollars) .....

U.S. GAAP
Net sales .....................................
Operating income .......................
Net income .................................
Earnings per share and per

ADS(6) (in pesos)...................
Consolidated Balance Sheet Data:
Argentine GAAP(1)(5)
Cash ............................................
Working capital ..........................
Total assets .................................
Total debt(8) ................................
Shareholders’ equity(9) ................
U.S. GAAP
Total assets .................................
Shareholders’ equity ...................
Other Consolidated Financial

Data:

Argentine GAAP
Fixed assets depreciation ............
Cash used in ﬁxed asset

acquisitions............................

(1) As restated.

(2) The ﬁnancial statements reﬂect the effect of changes in the purchasing power of money by the application of the method for
remeasurement in constant Argentine pesos set forth in Technical Resolution No. 6 of the Argentine Federation of Professional
Councils in Economic Sciences (‘‘F.A.C.P.C.E.’’) and taking into consideration General Resolution No. 441 of the National

5

Securities Commission (‘‘CNV’’), which established the discontinuation of the remeasurement of ﬁnancial statements in constant
Argentine pesos as from March 1, 2003. See Note 1(a) to the Audited Consolidated Financial Statements.

(3) Includes Ps.1,684 million for the year ended December 31, 2010, Ps.1,433 million for the year ended December 31, 2009, Ps.1,770
million for the year ended December 31, 2008, Ps.1,350 million for the year ended December 31, 2007 and Ps.1,451 million for the
year ended December 31, 2006 corresponding to the proportional consolidation of the net sales of investees in which we hold joint
control with third parties.

(4) Net sales are net to us after payment of a fuel transfer tax, turnover tax and customs duties on hydrocarbon exports. Royalty
payments required to be made to a third party, whether payable in cash or in kind, which are a ﬁnancial obligation, or are
substantially equivalent to a production or similar tax, are accounted for as a cost of production and are not deducted in
determining net sales. See Note 2(f) to the Audited Consolidated Financial Statements.

(5) Argentine GAAP income tax expense, net income, earnings per ADS, accounts payable (when applicable), investments, other
receivables, taxes payable and shareholders’ equity at and for the years ended December 31, 2009, 2008 and 2007 have been
restated as set forth in our Audited Consolidated Financial Statements to give retroactive effect to a change in Argentine GAAP
introduced in 2010 requiring that a formerly off-balance sheet Ps.1,180 million deferred tax liability as of December 31, 2009, be
recognized in our ﬁnancial statements. This change had the effect of decreasing Argentine GAAP income tax expense and
increasing Argentine GAAP net income by Ps.203 million, Ps.261 million and Ps.290 million in 2009, 2008 and 2007, respectively,
and decreasing shareholders’ equity by Ps.1,180 million, Ps.1,383 million and Ps.1,644 million at December 31, 2009, 2008 and
2007, respectively. Our net income and shareholders’ equity under U.S. GAAP were unaffected by this change in Argentine
GAAP. For a discussion of this change, see Note 1(b) to our Audited Consolidated Financial Statements. Amounts at and for the
year ended December 31, 2006 were not required to be restated under Argentine GAAP and have not been restated.

(6) Information has been calculated based on outstanding capital stock of 393,312,793 shares. Each ADS represents one Class D

share. There were no differences between basic and diluted earnings per share and ADS for any of the years disclosed.

(7) Amounts expressed in U.S. dollars are based on the exchange rate as of the date of payment.
(8) Total debt under Argentine GAAP includes nominal amounts of long-term debt of Ps.1,613 million as of December 31, 2010,
Ps.2,140 million as of December 31, 2009, Ps.1,260 million as of December 31, 2008, Ps.523 million as of December 31, 2007 and
Ps.510 million as of December 31, 2006.

(9) Our subscribed capital as of December 31, 2010 is represented by 393,312,793 shares of common stock and divided into four
classes of shares, with a par value of Ps.10 and one vote per share. These shares are fully subscribed, paid-in and authorized for
stock exchange listing.

Exchange Rates

From April 1, 1991 until the end of 2001, the Convertibility Law (Law No. 23,928) established
a ﬁxed exchange rate under which the Central Bank was obligated to sell U.S. dollars at one peso per
U.S. dollar. On January 6, 2002, the Argentine Congress enacted the Public Emergency Law (Law
No. 25,561, the Public Emergency and Foreign Exchange System Reform Law), formally putting an
end to the Convertibility Law regime and abandoning over 10 years of U.S. dollar-peso parity. The
Public Emergency Law, which has been extended until December 31, 2011 by Law 26,563, grants the
executive branch of the Argentine government the power to set the exchange rate between the peso
and foreign currencies and to issue regulations related to the foreign exchange market. Following a
brief period during which the Argentine government established a temporary dual exchange rate
system pursuant to the Public Emergency Law, the peso has been allowed to ﬂoat freely against other
currencies since February 2002 although the government has the power to intervene by buying and
selling foreign currency for its own account, a practice in which it engages on a regular basis.

6

The following table sets forth the annual high, low, average and period-end exchange rates for
U.S. dollars for the periods indicated, expressed in nominal pesos per U.S. dollar, based on rates
quoted by the Central Bank. The Federal Reserve Bank of New York does not report a noon buying
rate for Argentine pesos.

Year ended December 31,
2006 .......................................................................
2007 .......................................................................
2008 .......................................................................
2009 .......................................................................
2010 .......................................................................
Month
October 2010 .........................................................
November 2010......................................................
December 2010 ......................................................
January 2011..........................................................
February 2011........................................................
March 2011............................................................
April 2011(2)...........................................................

Low

High

Average

Period End

(pesos per U.S. dollar)

3.03
3.05
3.01
3.45
3.79

3.95
3.96
3.97
3.97
4.01
3.94
4.05

3.10
3.18
3.45
3.85
3.99

3.96
3.99
3.98
4.01
4.03
3.97
4.05

3.07(1)
3.12(1)
3.18(1)
3.75(1)
3.92(1)

3.96
3.97
3.98
3.98
4.02
3.95
4.05

3.06
3.15
3.45
3.80
3.98

3.96
3.99
3.98
4.01
4.03
3.96
4.05

Source: Central Bank
(1) Represents the average of the exchange rates on the last day of each month during the period.
(2) Through April 8, 2011.

No representation is made that peso amounts have been, could have been or could be converted

into U.S. dollars at the foregoing rates on any of the dates indicated.

Exchange Controls

Prior to December 1989,

the Argentine foreign exchange market was subject

to exchange
controls. From December 1989 until April 1991, Argentina had a freely ﬂoating exchange rate for all
foreign currency transactions, and the transfer of dividend payments in foreign currency abroad and
the repatriation of capital were permitted without prior approval of the Central Bank. From April 1,
1991, when the Convertibility Law became effective, until December 21, 2001, when the Central Bank
closed the foreign exchange market, the Argentine currency was freely convertible into U.S. dollars.

On December 3, 2001, the Argentine government imposed a number of monetary and currency
exchange control measures through Decree 1570/01, which included restrictions on the free disposition
of funds deposited with banks and tight restrictions on transferring funds abroad (including the
transfer of funds to pay dividends) without the Central Bank’s prior authorization subject to speciﬁc
exceptions for transfers related to foreign trade. Since January 2003, the Central Bank has gradually
eased these restrictions and expanded the list of transfers of funds abroad that do not require its
prior authorization (including the transfer of funds to pay dividends). In June 2003, the Argentine
government set restrictions on capital ﬂows into Argentina, which mainly consisted of a prohibition
against the transfer abroad of any funds until 180 days after their entry into the country. In June
2005,
including
increasing the period that certain incoming funds must remain in Argentina to 365 calendar days and
requiring that 30% of incoming funds be deposited with a bank in Argentina in a non-assignable,
non-interest-bearing account for 365 calendar days. Under the exchange regulations currently in force,
restrictions exist in respect of the repatriation of funds or investments by non-Argentine residents. For
instance, subject only to limited exceptions, the repatriation by non-Argentine residents of funds
received as a result of the sale of the Class D shares in the secondary market is subject to a limit of
U.S.$500,000 per person per calendar month. In order to repatriate such funds abroad, non-Argentine
residents also are required to demonstrate that the funds used to make the investment in the Class D
shares were transferred to Argentina at least 365 days before the proposed repatriation. The transfer

the government established further restrictions on capital ﬂows into Argentina,

7

abroad of dividend payments is currently authorized by applicable regulations to the extent that such
dividend payments are made in connection with audited ﬁnancial statements and are approved by a
shareholders’ meeting.

Risk Factors

YPF’s operations and earnings are subject to risks as a result of changes in competitive, economic,
political, legal, regulatory, social, industrial, business and ﬁnancial conditions. Investors should carefully
consider these risks.

As a result of the recent global ﬁnancial crisis and the continuing uncertain economic environment,
certain risks may gain more prominence either individually or when taken together. Certain oil and gas
prices and margins may be lower than in recent years due to reduced demand and certain other factors.

Risks Relating to Argentina

Our business is largely dependent upon economic conditions in Argentina

Substantially all of our operations, properties and customers are located in Argentina, and, as a
result, our business is to a large extent dependent upon economic conditions prevailing in Argentina.
The Argentine economy has experienced signiﬁcant volatility in recent decades,
including numerous
periods of low or negative growth and high and variable levels of inﬂation and devaluation. Since the
most recent crisis of 2001 and 2002, the Argentine economy has grown at a rapid pace during recent
years, with real GDP increasing at an average cumulative rate of 8.5% between 2003 and 2008. As a
result of the crisis in the global economy, Argentina’s GDP growth rate decelerated to 0.9% in 2009,
but recovered in 2010 growing by approximately 9%, according to preliminary ofﬁcial data. No
assurances can be given that the current rate of growth will continue in 2011 or subsequent years or
that the economy will not contract. Continued high or increased rates of inﬂation in Argentina could
increase our costs of operation, in particular labor costs, and may negatively impact our results of
operations and ﬁnancial condition.

The Argentine economy, including the ﬁnancial and securities markets, is particularly sensitive to
local political developments. Argentina’s national election for President and Vice President will take
place in October 2011, and other relevant local and federal elections will also take place in 2011.

See

‘‘Item 5. Operating and Financial Review and Prospects—Factors Affecting Our
Operations—Macroeconomic Conditions.’’ If economic conditions in Argentina were to deteriorate, it
would likely have an adverse effect on our ﬁnancial condition and results of operations.

Our domestic operations are subject to extensive regulation.

The oil and gas industry is subject to extensive government regulation and control. As a result,
our business is to a large extent dependent upon regulatory and political conditions prevailing in
Argentina and our results of operations may be materially and adversely affected by regulatory and
political changes in Argentina. We currently face risks and challenges relating to government
regulation and control of the energy sector, including those set forth below and elsewhere in these
risk factors:

*

*

*

*

*

limitations on our ability to pass higher domestic taxes, increases in production costs, or
increases in international prices of crude oil and other hydrocarbon fuels and exchange
rate ﬂuctuations through to domestic prices, or to increase local prices of natural gas (in
particular for residential customers);

higher taxes on exports of hydrocarbons;

restrictions on hydrocarbon export volumes driven mainly by the requirement to satisfy
domestic demand;

in connection with the Argentine government’s policy to provide absolute priority to
domestic demand, regulatory orders to supply natural gas and other hydrocarbon products
to the domestic retail market in excess of previously contracted amounts; and

the implementation or imposition of stricter quality requirements for petroleum products in
Argentina.

8

The Argentine government has made certain changes in regulations and policies governing the
energy sector to give absolute priority to domestic supply at low, stable prices in order to sustain
economic recovery. As a result of the above-mentioned changes, for example, on days during which a
gas shortage occurs, exports of natural gas (which are also affected by other government curtailment
orders) and the provision of gas supplies to industries, electricity generation plants and service
stations
selling compressed natural gas are interrupted for priority to be given to residential
consumers at lower prices. We cannot assure you that changes in applicable laws and regulations, or
adverse judicial or administrative interpretations of such laws and regulations, will not adversely
affect our results of operations. See ‘‘Item 4. Information on the Company—Regulatory Framework
and Relationship with the Argentine Government.’’ Similarly, we cannot assure you that
future
government policies aimed at sustaining economic growth or in response to domestic needs will not
adversely affect the oil and gas industry.

In January 2007, Law No. 26,197 was enacted, which, in accordance with Article 124 of the
National Constitution, provided that Argentine provinces shall be the owners of the hydrocarbon
reservoirs located within their territories. Pursuant to the law, the Argentine Congress is charged with
enacting laws and regulations aimed at developing mineral resources within Argentina, while the
provincial governments are responsible for enforcing these laws and administering hydrocarbon ﬁelds
that fall within the territories of their respective provinces. Certain provincial governments, however,
have construed the provisions of Law No. 26,197 and Article 124 to empower the provinces to enact
their own regulations concerning exploration and production of oil and gas within their territories.
There can be no assurance that regulations or taxes (including royalties) enacted or administered by
the provinces will not conﬂict with federal law, and such taxes or regulations may adversely affect
our operations and ﬁnancial condition.

Limitations on local pricing in Argentina may adversely affect our results of operations

fuel prices have

In recent years, due to regulatory, economic and government policy factors, our domestic
frequently lagged substantially behind prevailing
gasoline, diesel and other
international and regional market prices for such products, and our ability to increase prices has been
limited. Likewise, the prices at which we sell natural gas in Argentina (particularly to the residential
sector) are subject to government regulations and currently are substantially below regional market
prices for natural gas. For additional information on domestic pricing for our products, see ‘‘Item 5.
Operating and Financial Review and Prospects’’ and ‘‘Item 4. Information on the Company—
Regulatory Framework and Relationship with the Argentine Government—Market Regulation.’’ We
cannot assure you that we will be able to increase the domestic prices of our products, and
limitations on our ability to do so would continue to adversely affect our ﬁnancial condition and
results of operations. Similarly, we cannot assure you that hydrocarbon prices in Argentina will
match the increases or decreases in hydrocarbon prices at the international or regional levels.

We are subject to direct and indirect export restrictions, which have affected our results of operations and
caused us to declare force majeure under certain of our export contracts

The Argentine Hydrocarbons Law (Law No. 17,319) allows for hydrocarbon exports as long as
they are not required for the domestic market and are sold at reasonable prices. In the case of
natural gas, Law 24,076 and related regulations require that the needs of the domestic market be
taken into account when authorizing long term natural gas exports.

During the last several years, the Argentine authorities have adopted a number of measures that
have resulted in extensive restrictions on exports of natural gas from Argentina. Due to the foregoing,
we have been obliged to sell a part of our natural gas production previously destined for the export
market in the local Argentine market and have not been able to meet our contractual gas export
commitments in whole or,
leading to disputes with our export clients and
forcing us to declare force majeure under our export sales agreements. We believe that the measures
mentioned above constitute force majeure events that relieve us from any contingent liability for the
failure to comply with our contractual obligations, although no assurance can be given that this
position will prevail. See ‘‘Item 4. Information on the Company—Exploration and Production—
‘‘Item 4. Information on the Company—
Delivery commitments—Natural gas supply contracts,’’

in some cases,

in part,

9

Exploration and Production—The Argentine natural gas market,’’ and ‘‘Item 8. Financial
Information—Legal Proceedings.’’

In addition, the effectiveness of certain of our natural gas export authorizations is subject to an
analysis by the Argentine Secretariat of Energy of natural gas reserves in the Noroeste basin. The
result of such analysis is uncertain and may have an adverse impact upon our performance of the
export gas sales agreements related to such export authorizations should the Argentine Secretariat of
Energy determine
Information—Legal
that
Proceedings—Argentina.’’

‘‘Item 8. Financial

inadequate. See

reserves are

Crude oil exports, as well as the export of most of our hydrocarbon products, currently require
prior authorization from the Argentine Secretariat of Energy (pursuant to the regime established
under Resolution S.E. No. 1679/04 as amended and supplemented by other regulation). Oil companies
seeking to export crude oil or LPG must ﬁrst demonstrate that the local demand for such product is
satisﬁed or that an offer to sell the product to local purchasers has been made and rejected. Oil
reﬁneries seeking to export diesel fuel must also ﬁrst demonstrate that the local demand of diesel is
duly satisﬁed. Because domestic diesel production does not currently satisfy Argentine domestic
consumption needs, we have been prevented since 2005 from selling diesel production in the export
market, and thereby obliged to sell in the local market at prevailing domestic prices.

We are unable to predict how long these export restrictions will be in place, or whether any
further measures will be adopted that adversely affect our ability to export gas, crude oil and diesel
fuel or other products and, accordingly, our results of operations.

The imposition of new export duties and other taxes could adversely affect our results

Since 2002, new duties have been imposed on exports, and have been progressively increased
over the years. Resolution 394/2007 of the Ministry of Economy and Production, published on
November 16, 2007, amended the export duties on crude oil and other crude derivative products
imposed in previous years. The new regime provides that when the WTI international price exceeds
the reference price, which is ﬁxed at U.S.$60.9/barrel, the producer shall be allowed to collect at
U.S.$42/barrel, with the remainder being withheld by the Argentine government as an export tax. If
the WTI international price is under the reference price but over U.S.$45/barrel, a 45% withholding
rate will apply. If such price is under U.S.$45/barrel, the applicable export tax is to be determined by
the Argentine government within a term of 90 business days. The withholding rate determined as
indicated above also currently applies to diesel, gasoline and other crude derivative products. In
addition, the calculation procedure described above also applies to other petroleum products and
lubricants based upon different withholding rates, reference prices and prices allowed to producers.
See ‘‘Item 4. Information on the Company—Regulatory Framework and Relationship with the
Argentine Government—Market Regulation.’’

With respect to natural gas products, Resolution No. 127/2008 of the Ministry of Economy and
Production increased export duties applicable to natural gas exports from 45% to 100%, mandating a
valuation basis for the calculation of the duty as the highest price established in any contract of any
Argentine importer for the import of gas. Resolution No. 127/2008 provides with respect to LPG
products (including butane, propane and blends thereof) that if the international price of the relevant
LPG product, as notiﬁed daily by the Argentine Secretariat of Energy, is under the reference price
established for such product in the Resolution (U.S.$338/m3 for propane, U.S.$393/m3 for butane
and U.S.$363/m3 for blends of the two), the applicable export duty for such product will be 45%. If
the international price exceeds the reference price,
the
maximum amount established by the Resolution for the relevant product (U.S.$233/m3 for propane,
U.S.$271/m3 for butane and U.S.$250/m3 for blends of the two), with the remainder being withheld
by the Argentine government as an export tax.

the producer shall be allowed to collect

As a result of the aforementioned export tax increases, we may be and, in certain cases, have
already been forced to seek the renegotiation of our export contracts, despite, in most cases, the prior
authorization of such contracts by the Argentine government. We cannot provide assurances that we
will be able to renegotiate such contracts on terms acceptable to us.

10

The imposition of these export taxes has adversely affected our results of operations. We cannot
assure you that these taxes will not continue or be increased in the future or that other new taxes
will not be imposed.

We may be exposed to ﬂuctuations in foreign exchange rates

Our results of operations are exposed to currency ﬂuctuation and any devaluation of the peso
against the U.S. dollar and other hard currencies may adversely affect our business and results of
operations. The value of the peso has ﬂuctuated signiﬁcantly in the past and may do so in the future.
We are unable to predict whether, and to what extent, the value of the peso may further depreciate
or appreciate against the U.S. dollar and how any such ﬂuctuations would affect our business.

We may be subject to exchange and capital controls

In 2001 and 2002, as a result of the economic crisis, Argentina imposed exchange controls and
transfer restrictions substantially limiting the ability of companies to retain foreign currency or make
payments abroad. Under current Argentine law, exporters are required to convert proceeds from
export operations into domestic currency, subject to certain exceptions applicable to the oil and gas
industry that permit us to retain abroad 70% of export proceeds. See ‘‘Item 4. Information on the
Company—Regulatory Framework and Relationship with the Argentine Government—Repatriation
of Foreign Currency.’’ There can be no assurances regarding future modiﬁcations to exchange and
capital controls. The imposition of stricter exchange and capital controls could adversely affect our
ﬁnancial condition or results of operations and our ability to meet our foreign currency obligations
and execute our ﬁnancing plans.

Our access to international capital markets is inﬂuenced by the perception of risk in Argentina and other
emerging economies, which may affect our ability to ﬁnance our operations and the trading values of our
securities

International

investors consider Argentina to be an emerging market. Economic and market
conditions in other emerging market countries, especially those in Latin America, inﬂuence the market
for securities issued by Argentine companies. Volatility in securities markets in Latin America and in
other emerging market countries may have a negative impact on the trading value of our securities
and on our ability and the terms on which we are able to access international capital markets.

Risks Relating to the Argentine Oil and Gas Business and Our Business

Oil and gas prices could affect our level of capital expenditures

The prices that we are able to obtain for our hydrocarbon products affect the viability of
investments in new exploration, development and reﬁning, and as a result the timing and amount of
our projected capital expenditures for such purposes. We budget capital expenditures related to
exploration, development, reﬁning and distribution activities by taking into account, among other
things, market prices for our hydrocarbon products. In the event that current domestic prices for
certain products prevail or decrease, our ability to improve our hydrocarbon recovery rates, ﬁnd new
reserves and carry out certain of our other capital expenditure plans is likely to be adversely affected,
which in turn would have an adverse effect on our results of operations.

Our reserves and production are likely to decline

Argentina’s oil and gas ﬁelds are mature and our reserves and production are likely to decline
as reserves are depleted. Despite our efforts to replace our reserves, in the last two years our proved
reserves declined by approximately 13.3%, and we replaced approximately 83.6% of our production
with new proved reserves during 2010; average daily production in 2010, on a boe basis, declined by
approximately 5.3% from 2009. We are engaged in efforts to mitigate these declines by adding
reserves through technological enhancements aimed at improving our recovery factors as well as
through deepwater offshore exploration and development of tight gas. These efforts are subject to
material risks and may prove unsuccessful due to risks inherent to the oil and gas industry.

11

Our oil and natural gas reserves are estimates

Our oil and gas proved reserves are estimated using geological and engineering data to
determine with reasonable certainty whether the crude oil or natural gas in known reservoirs is
recoverable under existing economic and operating conditions. The accuracy of proved reserve
estimates depends on a number of factors, assumptions and variables, some of which are beyond our
control. Factors susceptible to our control include drilling, testing and production after the date of
the estimates, which may require substantial revisions to reserves estimates; the quality of available
geological, technical and economic data used by us and our interpretation thereof; the production
performance of our reservoirs and our recovery rates, both of which depend in signiﬁcant part on
available technologies as well as our ability to implement such technologies and the relevant know-
how; the selection of third parties with which we enter into business; and the accuracy of our
estimates of initial hydrocarbons in place, which may prove to be incorrect or require substantial
revisions. Factors mainly beyond our control include changes in prevailing oil and natural gas prices,
which could have an effect on the quantities of our proved reserves (since the estimates of reserves
are calculated under existing economic conditions when such estimates are made); changes in the
prevailing tax rules, other government regulations and contractual conditions after the date estimates
are made (which could make reserves no longer economically viable to exploit); and certain actions of
third parties, including the operators of ﬁelds in which we have an interest.

As a result of the foregoing, measures of reserves are not precise and are subject to revision.
Any downward revision in our estimated quantities of proved reserves could adversely impact our
ﬁnancial results by leading to increased depreciation, depletion and amortization charges and/or
impairment charges, which would reduce earnings and shareholders’ equity.

The oil and gas industry is subject to particular economic and operational risks

Oil and gas exploration and production activities are subject

to particular economic and
industry-speciﬁc operational risks, some of which are beyond our control, such as production,
including those
equipment and transportation risks, and natural hazards and other uncertainties,
relating to the physical characteristics of onshore and offshore oil or natural gas ﬁelds. Our
operations may be curtailed, delayed or cancelled due to bad weather conditions, mechanical
difﬁculties, oil or natural gas spills or leaks, shortages or delays in the delivery of equipment,
compliance with governmental requirements, ﬁre, explosions, blow-outs, pipe failure, abnormally
pressured formations, and environmental hazards, such as oil spills, gas leaks, ruptures or discharges
of toxic gases. If these risks materialize, we may suffer substantial operational losses and disruptions
to our operations and harm to our reputation. Drilling may be unproﬁtable, not only with respect to
dry wells, but also with respect to wells that are productive but do not produce sufﬁcient net
revenues to return a proﬁt after drilling, operating and other costs are taken into account.

We may not have sufﬁcient insurance to cover all the operating hazards that we are subject to

subject

industry is

As discussed under

‘‘—The oil and gas

to particular economic and
operational risks’’ and ‘‘—We may incur signiﬁcant costs and liabilities related to environmental,
health and safety matters,’’ our exploration and production operations are subject
to extensive
economic, operational, regulatory and legal risks. We maintain insurance covering us against certain
risks inherent in the oil and gas industry in line with industry practice, including loss of or damage to
property and equipment, control-of well incidents, loss of production or income incidents, removal of
debris, sudden and accidental seepage pollution, contamination and clean up and third-party liability
claims, including personal injury and loss of life, among other business risks. However, our insurance
coverage is subject to deductibles and limits that in certain cases may be materially exceeded by our
liabilities. In addition, certain of our insurance policies contain exclusions that could leave us with
limited coverage in certain events. See ‘‘Item 4. Information on the Company—Insurance’’. In
addition, we may not be able to maintain adequate insurance at rates or on terms that we consider
reasonable or acceptable or be able to obtain insurance against certain risks that materialize in the
future. If we experience an incident against which we are not insured, or the costs of which materially
exceed our coverage, it could have a material adverse effect on our business, ﬁnancial condition and
results of operations.

12

Argentine oil and gas production concessions and exploration permits are subject to certain conditions and
may not be renewed

The Hydrocarbons Law provides for oil and gas concessions to remain in effect for 25 years as
from the date of their award, and further provides for the concession term to be extended for up to
10 additional years, subject to terms and conditions approved by the grantor at the time of the
extension. The expiration of part of our and other Argentine oil companies’ concessions occurs in
2017. The authority to extend the terms of current and new permits, concessions and contracts has
been vested in the governments of the provinces in which the relevant area is located (and the federal
government in respect of offshore areas beyond 12 nautical miles). In order to be eligible for the
extension, any concessionaire and permit holder must have complied with its obligations under the
including evidence of
Hydrocarbons Law and the terms of
payment of taxes and royalties, the supply of the necessary technology, equipment and labor force
and compliance with various environmental,
investment and development obligations. Under the
Hydrocarbons Law, non-compliance with these obligations and standards may also result in the
imposition of ﬁnes and in the case of material breaches, following the expiration of applicable cure
periods, the revocation of the concession or permit. Concessions representing approximately 48% of
our proved reserves as of December 31, 2010 have been extended prior to the date of this annual
report
to our Audited Consolidated Financial Statements). We cannot provide
assurances that concessions that have not yet been renewed will be extended or that additional
investment, royalty payment or other requirements will not be imposed on us in order to obtain
extensions. The termination of, or failure to obtain the extension of, a concession or permit could
have a material adverse effect on our business and results of operations.

the particular concession or permit,

(see Note 10(c)

Our acquisition of exploratory acreage and crude oil and natural gas reserves is subject to heavy competition
We face intense competition in bidding for crude oil and natural gas production areas, which
are typically auctioned by governmental authorities, especially those areas with the most attractive
crude oil and natural gas reserves. Some provinces of Argentina, including La Pampa, Neuque´n and
Chubut, have created provincial government-owned companies to develop activities in the oil and gas
industry. Energı´a Argentina S.A. (ENARSA), the Argentine state-owned energy company, has also
entered the market, particularly in the context of offshore exploration. As a result, the conditions
under which we are able to access new exploratory or productive areas could be adversely affected.

We may incur signiﬁcant costs and liabilities related to environmental, health and safety matters

Our operations, like those of other companies in the oil and gas industry, are subject to a wide
range of environmental, health and safety laws and regulations in the countries in which we operate.
These laws and regulations have a substantial impact on our operations and those of our subsidiaries,
and could result in material adverse effects on our ﬁnancial position and results of operation. A
number of events related to environmental, health and safety matters, including changes in applicable
laws and regulations, adverse judicial or administrative interpretations of such laws and regulations,
changes in enforcement policy, the occurrence of new litigation or development of pending litigation,
and the development of information concerning these matters, could result
in new or increased
liabilities, capital expenditures, reserves, losses and other impacts that could have a material adverse
effect on our ﬁnancial condition and results of operations. See ‘‘Item 8. Financial Information—Legal
Proceedings,’’ ‘‘Item 4. Information on the Company—Regulatory Framework and Relationship with
the Argentine Government—Argentine Environmental Regulations’’ and ‘‘Item 4. Information on the
Company—Regulatory Framework and Relationship with the Argentine Government—U.S.
Environmental Regulations.’’ Environmental, health and safety regulation and jurisprudence in
Argentina is developing at a rapid pace and no assurance can be provided that such developments
will not increase our cost of doing business and liabilities. In addition, due to concern over the risk
of climate change, a number of countries have adopted, or are considering the adoption of, new
regulatory requirements to reduce greenhouse gas emissions, such as carbon taxes, increased efﬁciency
standards, or the adoption of cap and trade regimes. If adopted in Argentina, these requirements
could make our products more expensive as well as shift hydrocarbon demand toward relatively
lower-carbon sources such as renewable energies.

13

We are party to a number of legal proceedings

As described under ‘‘Item 8. Financial Information—Legal Proceedings,’’ we are party to a
number of labor, commercial, civil, tax, criminal, environmental and administrative proceedings that,
either alone or in combination with other proceedings, could, if resolved in whole or in part adversely
to us, result in the imposition of material costs, ﬁnes, judgments or other losses. While we believe
that we have provisioned such risks appropriately based on the opinions and advice of our external
legal advisors and in accordance with applicable accounting rules, certain loss contingencies,
particularly those relating to environmental matters, are subject
to change as new information
develops and it is possible that losses resulting from such risks, if proceedings are decided in whole or
in part adversely to us, could signiﬁcantly exceed any accruals we have provided.

Our business depends to a signiﬁcant extent on our production and reﬁning facilities and logistics network
Our oil and natural gas ﬁeld facilities, reﬁneries and logistics network are our principal
production facilities and distribution network on which a signiﬁcant portion of our revenues depends.
Although we insure our properties on terms we consider prudent and have adopted and maintain
safety measures, any signiﬁcant damage to, accident or other production stoppage at our facilities or
network could materially and adversely affect our production capabilities, ﬁnancial condition and
results of operations.

We could be subject to organized labor action

Although we consider our current relations with our workforce to be good, we have experienced
organized work disruptions and stoppages in the past and we cannot assure you that we will not
experience them in the future, which could adversely affect our business and revenues. Labor
demands are commonplace in Argentina’s energy sector and unionized workers have blocked access to
and damaged our plants in the recent past. Our operations were affected occasionally by labor strikes
in recent years. See ‘‘Item 5. Operating and Financing Review and Prospects—Factors Affecting Our
Operations—Macroeconomic Conditions.’’

Risks Relating to Our Class D Shares and ADSs

Our principal shareholders can exercise control over the company

As of March 28, 2011 Repsol YPF controlled approximately 68.23% of our capital stock and
voting rights and Petersen Energı´a S.A. (‘‘Petersen Energı´a’’) and Petersen Energı´a Inversora S.A.
(‘‘PEISA’’, and together with Petersen Energı´a, the ‘‘Petersen Group’’) controlled 15.46% of our
shares and voting rights,
in each case subject to the shareholders’ agreement described below. In
addition, Repsol YPF has granted certain afﬁliates of Petersen Energı´a (in particular, Enrique
Eskenazi, Sebastia´ n Eskenazi, Ezequiel Eskenazi Storey and Matı´as Eskenazi Storey, shareholders of
Petersen Energı´a, or to companies that are, directly or indirectly, wholly-controlled by any of them)
an option to purchase an additional 10% of our capital stock held by Repsol YPF. A number of
YPF corporate matters are subject to the voting and other procedures set forth in a shareholders’
agreement entered into between Repsol YPF, certain afﬁliates of Repsol YPF and Petersen Energı´a.
Repsol YPF will be able to determine substantially all other matters requiring approval by a majority
of our shareholders, including the election of a majority of our directors. Subject to the terms of the
shareholders’ agreement, Repsol YPF will also direct our operations and may be able to cause or
prevent a change in our control. See ‘‘Item 7. Major Shareholders and Related Party Transactions—
Shareholders’ Agreement.’’ Repsol YPF’s and the Petersen Group’s interests may differ from those of
our other shareholders.

Certain strategic transactions require the approval of the holder of our Class A shares or may entail a cash
tender offer for all of our outstanding capital stock

Under our by-laws, the approval of the holder of our Class A shares is required to undertake
certain strategic transactions, including a merger, an acquisition that results in the purchaser holding
15% or more of our capital stock or an acquisition that results in the purchaser holding a majority of
our capital stock. The interests of our Class A shareholder, the Argentine government, may differ
from those of our other shareholders and, as result, we may not be able to undertake certain
transactions on terms that are advantageous to our other shareholders or at all.

14

In addition, under our by-laws, an acquisition that results in the purchaser holding 15% or more
of our capital stock would require such purchaser to make a public cash tender offer for all of our
outstanding shares and convertible securities, which could discourage certain investors from acquiring
signiﬁcant stakes in our capital stock. See ‘‘Item 10. Additional Information—Certain Provisions
Relating to Acquisitions of Shares.’’

Active markets may not develop for our Class D shares or the ADSs

As of the date of this annual report, approximately 16.31% of our capital stock is held by non-
afﬁliates (less than 0.5% of our capital stock was held by non-afﬁliates as of September 30, 2010). As
a result, the public markets for our Class D shares and ADSs have had limited trading volume.
Although the ADSs will continue to be listed on the NYSE and the underlying Class D shares will
continue to be listed on the BASE, we cannot assure you that more active and liquid markets will
develop or of the price at which the Class D shares or the ADSs may be sold.

Restrictions on the movement of capital out of Argentina may impair your ability to receive dividends and
distributions on, and the proceeds of any sale of, the Class D shares underlying the ADSs

Argentine law currently permits the government to impose temporary restrictions on capital
movements in circumstances where a serious imbalance develops in Argentina’s balance of payments
or where there are reasons to foresee such an imbalance. Although the transfer of funds abroad in
order to pay dividends currently does not require Central Bank approval, restrictions on the
movement of capital to and from Argentina such as those that previously existed during the recent
economic crisis could, if reinstated, impair or prevent the conversion of dividends, distributions, or
the proceeds from any sale of Class D shares, as the case may be, from pesos into U.S. dollars and
the remittance of the U.S. dollars abroad. We cannot assure you that the Argentine government will
not take such measures in the future.

Under the terms of our deposit agreement with the depositary for the ADSs, the depositary will
convert any cash dividend or other cash distribution we pay on the shares underlying the ADSs into
U.S. dollars, if it can do so on a reasonable basis and can transfer the U.S. dollars to the United
States. If this conversion is not possible for any reason, including restrictions of the type described in
the preceding paragraph,
the deposit agreement allows the depositary to distribute the foreign
currency only to those ADR holders to whom it is possible to do so. If the exchange rate ﬂuctuates
signiﬁcantly during a time when the depositary cannot convert the foreign currency, you may lose
some or all of the value of the dividend distribution.

Under Argentine law, shareholder rights may be different from other jurisdictions

Our corporate affairs are governed by our by-laws and by Argentine corporate law, which differ
from the legal principles that would apply if we were incorporated in a jurisdiction in the United
States or in other jurisdictions outside Argentina. In addition, rules governing the Argentine securities
markets are different and may be subject
in Argentina than in other
jurisdictions.

to different enforcement

Actual or anticipated sales of a substantial number of Class D shares could decrease the market prices of our
Class D shares and the ADSs

Repsol YPF owns Class D shares and ADSs representing a signiﬁcant majority of our capital
stock (which may be reduced by 10% if the Second Petersen Option described under ‘‘Item 7. Major
Shareholders and Related Party Transactions—Option Agreements’’). The Petersen Group owns ADSs
representing up to approximately 15.46% of our capital stock (which may be increased up to
approximately 25.46% if the Second Petersen Option is exercised). In addition, as described in greater
detail under ‘‘Item 7. Major Shareholders and Related Party Transactions—Registration Rights and
Related Agreements,’’ we have ﬁled and undertaken to maintain an effective shelf registration
statement for the beneﬁt of the lenders under the senior secured term loan facility provided to
Petersen Energı´a to enable it to enter into the Petersen Transaction (as deﬁned in ‘‘Item 7. Major
Shareholders and Related Party Transactions’’). The lenders under the senior secured term loan
facility, upon the acceleration of such facility following the occurrence and continuation of an event
of default under such facility, will be able to freely sell up to approximately 15% of our outstanding

15

capital stock (which may be increased to approximately 25% if
the Second Petersen Option is
exercised) under the shelf registration statement. Sales of a substantial number of Class D shares or
ADSs by Repsol YPF, the Petersen Group, such lenders or any other future signiﬁcant shareholder,
or the anticipation of such sales, could decrease the trading price of our Class D shares and the
ADSs. See ‘‘Item 7. Major Shareholders and Related Party Transactions.’’

You may be unable to exercise preemptive, accretion or other rights with respect to the Class D shares
underlying your ADSs

You may not be able to exercise the preemptive or accretion rights relating to the shares
underlying your ADSs (see ‘‘Item 10. Additional Information—Preemptive and Accretion Rights’’)
unless a registration statement under the U.S. Securities Act of 1933 (the ‘‘Securities Act’’) is effective
with respect to those rights or an exemption from the registration requirements of the Securities Act
is available. We are not obligated to ﬁle a registration statement with respect to the shares relating to
these preemptive rights, and we cannot assure you that we will ﬁle any such registration statement.
Unless we ﬁle a registration statement or an exemption from registration is available, you may receive
only the net proceeds from the sale of your preemptive rights by the depositary or, if the preemptive
rights cannot be sold, they will be allowed to lapse. As a result, U.S. holders of Class D shares or
ADSs may suffer dilution of their interest in our company upon future capital increases.

In addition, under the Argentine Corporations Law, foreign companies that own shares in an
Argentine corporation are required to register with the Superintendency of Corporations (Inspeccio´n
General de Justicia, or ‘‘IGJ’’) in order to exercise certain shareholder rights, including voting rights.
If you own our Class D shares directly (rather than in the form of ADSs) and you are a non-
Argentine company and you fail to register with IGJ, your ability to exercise your rights as a holder
of our Class D shares may be limited.

You may be unable to exercise voting rights with respect to the Class D shares underlying your ADSs at our
shareholders’ meetings

The depositary will be treated by us for all purposes as the shareholder with respect to the
shares underlying your ADSs. As a holder of ADRs representing the ADSs being held by the
depositary in your name, you will not have direct shareholder rights and may exercise voting rights
with respect to the Class D shares represented by the ADSs only in accordance with the deposit
agreement relating to the ADSs. There are no provisions under Argentine law or under our by-laws
that limit the exercise by ADS holders of their voting rights through the depositary with respect to
the underlying Class D shares. However, there are practical limitations on the ability of ADS holders
to exercise their voting rights due to the additional procedural steps involved in communicating with
these holders. For example, holders of our shares will receive notice of shareholders’ meetings through
publication of a notice in an ofﬁcial gazette in Argentina, an Argentine newspaper of general
circulation and the bulletin of the BASE, and will be able to exercise their voting rights by either
attending the meeting in person or voting by proxy. ADS holders, by comparison, will not receive
notice directly from us. Instead, in accordance with the deposit agreement, we will provide the notice
to the depositary. If we ask it to do so, the depositary will mail to holders of ADSs the notice of the
meeting and a statement as to the manner in which instructions may be given by holders. To exercise
their voting rights, ADS holders must then instruct the depositary as to voting the Class D shares
represented by their ADSs. Due to these procedural steps involving the depositary, the process for
exercising voting rights may take longer for ADS holders than for holders of Class D shares, and
Class D shares represented by ADSs may not be voted as you desire. Class D shares represented by
ADSs for which the depositary fails to receive timely voting instructions may, if requested by us, be
voted as we instruct at the corresponding meeting.

Shareholders outside of Argentina may face additional investment risk from currency exchange rate
ﬂuctuations in connection with their holding of our Class D shares or the ADSs

We are an Argentine company and any future payments of dividends on our Class D shares will
be denominated in pesos. The peso has historically ﬂuctuated signiﬁcantly against many major world
currencies, including the U.S. dollar. A depreciation of the peso would likely adversely affect the U.S.

16

dollar or other currency equivalent of any dividends paid on our Class D shares and could result in a
decline in the value of our Class D shares and the ADSs as measured in U.S. dollars.

ITEM 4. Information on the Company

History and Development of YPF

Overview

YPF is a limited liability company (sociedad ano´nima), incorporated under the laws of Argentina
for an unlimited term. Our address is Macacha Gu¨ emes 515, C1106BKK Ciudad Auto´ noma de
Buenos Aires, Argentina and our telephone number is (011-54-11) 5441-2000. Our legal name is YPF
Sociedad Ano´ nima and we conduct our business under the commercial name ‘‘YPF’’.

We are Argentina’s leading energy company, operating a fully integrated oil and gas chain with
leading market positions across the domestic upstream and downstream segments. Our upstream
operations consist of the exploration, development and production of crude oil, natural gas and LPG.
Our downstream operations include the reﬁning, marketing, transportation and distribution of oil and
a wide range of petroleum products, petroleum derivatives, petrochemicals, LPG and bio-fuels.
Additionally, we are active in the gas separation and natural gas distribution sectors both directly and
through our investments in several afﬁliated companies. In 2010, we had consolidated net sales of
Ps.44,162 million (U.S.$11,096 million) and consolidated net income of Ps.5,790 million (U.S.$1,455
million).

Most of our predecessors were state-owned companies with operations dating back to the 1920s.
In November 1992, the Argentine government enacted the Privatization Law (Law No. 24,145), which
established the procedures for our privatization. In accordance with the Privatization Law,
in July
1993, we completed a worldwide offering of 160 million Class D shares that had previously been
owned by the Argentine government. As a result of
the
Argentine government’s ownership interest
reduced from 100% to
approximately 20% by the end of 1993.

that offering and other transactions,

in our capital

stock was

Since 1999, we have been controlled by Repsol YPF, an integrated oil and gas company
headquartered in Spain with global operations. Repsol YPF owned approximately 99% of our capital
stock from 2000 until 2008, when the Petersen Group purchased,
shares
representing 15.46% of our capital stock. In addition, Repsol YPF granted certain afﬁliates of
Petersen Energı´a an option to purchase up to an additional 10% of our outstanding capital stock.
This option will expire on February 21, 2012. See ‘‘Item 7. Major Shareholders and Related Party
Transactions.’’ Since September 2010, Repsol YPF has sold approximately 15.78% of our capital
stock and granted an option to acquire from Repsol YPF additional shares representing 1.6% of our
capital stock. As of March 28, 2011, Repsol YPF controlled approximately 68.23% of our capital
stock and voting rights.

in different

stages,

Upstream Operations

* We hold interests in more than 90 oil and gas ﬁelds in Argentina, accounting for
approximately 39% of the country’s total production of crude oil, excluding natural gas
liquids, and approximately 37% of its total natural gas production, including natural gas
liquids, in 2010, according to information provided by the Argentine Secretariat of Energy.

* We had proved reserves, as estimated as of December 31, 2010, of approximately 531
mmbbl of oil, including condensates and natural gas liquids, and approximately 2,533 bcf
of gas, representing aggregate reserves of approximately 982 mmboe.

*

In 2010, we produced approximately 107 mmbbl of oil (293 mbbl/d), including condensates
and natural gas liquids, and approximately 491 bcf of gas (1,346 mmcf/d).

17

Downstream Operations

* We are Argentina’s leading reﬁner with operations conducted at

three wholly-owned
(319.5
reﬁneries with combined annual reﬁning capacity of approximately 116 mmbbl
mbbl/d). We also have a 50% interest in Reﬁnerı´a del Norte, S.A. (‘‘Reﬁnor’’), an entity
jointly controlled with and operated by Petrobras Energı´a S.A., which has a reﬁning
capacity of 26.1 mbbl/d.

*

Our retail distribution network for automotive petroleum products as of December 31,
2010 consisted of 1,622 YPF-branded service
estimate we held
approximately 31% of all gasoline service stations in Argentina.

stations, and we

* We are one of the leading petrochemical producers in Argentina and in the Southern Cone
of Latin America, with operations conducted through our Ensenada and Plaza Huincul
sites. In addition, Profertil S.A. (‘‘Profertil’’), a company that we jointly control with
Agrium Holdco Spain S.L. (‘‘Agrium’’),
is one of the leading producers of urea in the
Southern Cone.

The following chart illustrates our organizational structure, including our principal subsidiaries,

as of the date of this annual report.

YPF, S.A.
(Argentina)

99.91%

50%

45%

38%

42.86%

100%

A-EVANGELISTA 
S.A.
(Argentina)

PROFERTIL S.A.
(Argentina)

PLUSPETROL 
ENERGY S.A.
(Argentina)

COMPAÑÍA 
MEGA S.A.
(Argentina)

INVERSORA DOCK 
SUD S.A.
(Argentina)

YPF HOLDINGS 
INC.
(USA)

50%

30%

37%

10%

69.83%

99.99%

REFINERIA DEL 
NORTE S.A.
(Argentina)

OILTANKING 
EBYTEM S.A.
(Argentina)

OLEODUCTOS DEL 
VALLE S.A.
(Argentina)

GASODUCTO DEL 
PACÍFICO
(Argentina)

9.98%

CENTRAL 
DOCK SUD S.A.
(Argentina)

YPF 
INTERNATIONAL 
S.A.
(Bolivia)

99.99%

36%

OPERADORA DE
ESTACIONES DE
SERVICIOS S.A.
(Argentina)

OLEODUCTO 
TRASANDINO S.A.
(Argentina)

33.15%

TERMINALES 
MARITIMAS 
PATAGÓNICAS 
S.A.
(Argentina)

18

The map below illustrates the location of our productive basins, reﬁneries, storage facilities and

crude oil and multi-product pipeline networks.

For a description of our principal capital expenditures and divestitures, see ‘‘Item 5. Operating
investments,

and Financial Review and Prospects—Liquidity and Capital Resources—Capital
expenditures and divestitures.’’

19

The Argentine Market

Argentina is the largest producer of natural gas and the fourth largest producer of crude oil in

Central and South America, based on 2009 production, according to the BP Statistical Review.

In response to the economic crisis of 2001 and 2002, the Argentine government, pursuant to the
Public Emergency Law (Law No. 25,561), established export taxes on certain hydrocarbon products.
In subsequent years, in order to satisfy growing domestic demand and abate inﬂationary pressures,
this policy was supplemented by constraints on domestic prices, temporary export restrictions and
subsidies on imports of natural gas and diesel. As a result, until 2008, local prices for oil and natural
gas products had remained signiﬁcantly below those prevalent
in neighboring countries and
international commodity exchanges, heightening domestic demand for such products. In the case of
natural gas, the price at which Bolivia exports natural gas to Argentina was approximately U.S.$7.33/
mmBtu in December 2010, while our average sales price in Argentina during 2010 was approximately
U.S.$1.96/mmBtu.

After declining during the economic crisis of 2001 and 2002, Argentina’s gross domestic product,
or GDP, grew at an average annual real rate of approximately 8.5% from 2003 to 2008, although the
growth rate decelerated to 0.9% in 2009 as a result of the global ﬁnancial crisis, but recovered in
2010 growing by approximately 9%, according to preliminary ofﬁcial data. Driven by this economic
expansion and low domestic prices, energy demand has increased signiﬁcantly during the same period,
outpacing energy supply (which in the case of oil declined). For example, Argentine natural gas and
diesel consumption grew at average annual rates of approximately 6.7% and 4.7%, respectively, during
the period 2003-2008 (and declined by 2.6% and 8.3%, respectively,
in 2009), according to the BP
Statistical Review and the Argentine Secretariat of Energy. As a result of this increasing demand and
actions taken by the Argentine regulatory authorities to support domestic supply, exported volumes of
hydrocarbon products, especially natural gas, diesel and gasoline, declined steadily over this period.
At the same time, Argentina has increased hydrocarbon imports, becoming a net importer of certain
products, such as diesel, and increased imports of gas (including NGL). In 2003, Argentina’s net
exports of diesel amounted to approximately 1,349 mcm, while in 2010 its net imports of diesel
amounted to approximately 1,466 mcm, according to information provided by the Argentine
Secretariat of Energy. Signiﬁcant
investments in the energy sector are being carried out, and
additional investments are expected to be required in order to support continued economic growth, as
the industry is currently operating near capacity.

Demand for diesel in Argentina exceeds domestic production. In addition, the import prices of
reﬁned products have been in general substantially higher than the average domestic sales prices of
such products, rendering the import and resale of such products uneconomic. As a result, service
stations experience temporary shortages and are required to suspend or curtail diesel sales. While we
are engaged in efforts to operate our reﬁneries near their capacity, during peak demand periods we
are forced to prorate supplies among our service stations according to historical sales levels.

As the largest

integrated oil and gas company in Argentina, we believe that we are well
positioned to beneﬁt from potential reform in the energy sector, although we cannot assure that
reforms will be implemented or, if implemented, that they will be advantageous to our business.

History of YPF

Beginning in the 1920s and until 1990, both the upstream and downstream segments of the
Argentine oil and gas industry were effectively monopolies of the Argentine government. During this
period, we and our predecessors were owned by the state, which controlled the exploration and
production of oil and natural gas, as well as the reﬁning of crude oil and marketing of reﬁned
the deregulation of
petroleum products. In August 1989, Argentina enacted laws aimed at
the
economy and the privatization of Argentina’s state-owned companies,
including us. Following the
enactment of these laws, a series of presidential decrees were promulgated, which required, among
other things, us to sell majority interests in our production rights to certain major producing areas
and to undertake an internal management and operational restructuring program.

In November 1992, Law No. 24,145 (referred to as the Privatization Law), which established the
procedures by which we were to be privatized, was enacted. In accordance with the Privatization

20

in July 1993, we completed a worldwide offering of 160 million Class D shares that had
Law,
previously been owned by the Argentine government. As a result of
that offering and other
transactions, the Argentine government’s ownership percentage in our capital stock was reduced from
100% to approximately 20% by the end of 1993.

In January 1999, Repsol YPF acquired 52,914,700 Class A shares in block (14.99% of our
shares) which were converted to Class D shares. Additionally, on April 30, 1999, Repsol YPF
announced a tender offer to purchase all outstanding Class A, B, C and D shares (the ‘‘Offer’’).
Pursuant to the Offer, in June 1999, Repsol YPF acquired an additional 82.47% of our outstanding
capital stock. Repsol YPF acquired additional stakes in us from minority shareholders and other
transactions in 1999 and 2000.

Between 2004 and 2005 we made non-strategic asset divestitures totaling U.S.$239.5 million.

On February 21, 2008, Petersen Energı´a purchased 58,603,606 of our ADSs, representing 14.9%
of our capital stock, from Repsol YPF for U.S.$2,235 million. In addition, Repsol YPF granted
certain afﬁliates of Petersen Energı´a options
to purchase up to an additional 10.1% of our
outstanding capital stock within four years. On May 20, 2008, PEISA exercised an option to purchase
shares representing 0.1% of our capital stock. Additionally, PEISA launched a tender offer to
purchase all of the shares of YPF that were not already owned by them at a price of U.S.$49.45 per
share or ADS. Repsol YPF, pursuant to its ﬁrst option agreement with Petersen Energı´a, had stated
that it would not tender YPF shares to PEISA. A total of 1,816,879 shares (including Class D shares
and ADSs), representing approximately 0.462% of our total shares outstanding, were tendered. Repsol
YPF owns a majority of our capital stock and, subject to the shareholders’ agreement entered into
between Repsol YPF and Petersen Energı´a, is able to determine substantially all issues decided by our
shareholders. See ‘‘Item 7. Major Shareholders and Related Party Transactions.’’ Since September
2010, Repsol YPF has sold approximately 15.78% of our capital stock and granted an option to
acquire from Repsol YPF additional shares representing 1.6% of our capital stock. As of March 28,
2011, Repsol YPF controlled approximately 68.23% of our capital stock and voting rights.

Business Organization

We conduct our business according to the following organization:

*

*

*

Upstream, which consists of our ‘‘Exploration and Production’’ segment;

Downstream, which consists of our ‘‘Reﬁning and Marketing’’ and ‘‘Chemicals’’ segments;
and

Corporate and other, which consists of our ‘‘Corporate and Other’’ segment.

The Exploration and Production segment’s sales to third parties in Argentina and abroad
include sales of natural gas and services fees (primarily for the transportation, storage and treatment
of hydrocarbons and products). In addition, crude oil produced by us in Argentina, or received from
third parties
transferred from Exploration and
to service contracts,
Production to Reﬁning and Marketing at transfer prices established by us, which generally seek to
approximate Argentine market prices.

in Argentina pursuant

is

The Reﬁning and Marketing segment purchases crude oil from the Exploration and Production
segment and from third parties. Reﬁning and Marketing activities include crude oil reﬁning and
lubricants, LPG,
transportation, as well as the marketing and transportation of reﬁned fuels,
compressed natural gas and other reﬁned petroleum products in the domestic wholesale and retail
markets and the export markets.

The Chemicals segment sells petrochemical products both in the domestic and export markets.

Additionally, we record certain assets,

liabilities and costs under the Corporate and Other
segment, including corporate administration costs and assets and certain construction activities, mainly
related to the oil and gas industry, through our subsidiary A-Evangelista S.A. and its subsidiaries.

Substantially all of our operations, properties and customers are located in Argentina. However,
we carry out exploration activities in the United States and Guyana, and hold an interest in a
producing ﬁeld in the United States and in two exploratory areas in Uruguay (see ‘‘—Exploration
and Production—Principal properties—International properties’’). Additionally, since 2010 we market

21

lubricants and specialties in Brazil and carry out some construction activities related to the oil and
gas industry in Uruguay, Brazil and Peru, through our 100% owned company A-Evangelista S.A. and
its subsidiaries.

The following table sets forth net sales and operating income for each of our lines of business

for the years ended December 31, 2010, 2009 and 2008:

Net Sales(1)
Exploration and Production(2)

To unrelated parties .................................................................
To related parties .....................................................................
Intersegment sales and fees(3)...................................................

Total Exploration and Production.......................................

Reﬁning and Marketing(4)

To unrelated parties .................................................................
To related parties .....................................................................
Intersegment sales and fees ......................................................

Total Reﬁning and Marketing .............................................

Chemicals

To unrelated parties .................................................................
Intersegment sales and fees ......................................................

Total Chemicals....................................................................

Corporate and Other

To unrelated parties .................................................................
Intersegment sales and fees ......................................................

For the Year Ended December 31,

2010

2009

2008

(in millions of pesos)

4,611
981
17,428

23,020

34,209
917
1,668

36,794

2,445
1,871

4,316

999
358

4,757
751
14,473

19,981

25,733
627
1,202

27,562

1,932
1,105

3,037

520
350

870

4,016
939
12,663

17,618

25,364
1,508
1,145

28,017

2,829
1,094

3,923

219
461

680

Total Corporate and Others ................................................

1,357

Less intersegment sales and fees ..................................................

(21,235)

(17,130)

(15,363)

Total net sales(5) ..........................................................................

44,162

34,320

34,875

Operating Income (Loss)

Exploration and Production ....................................................
Reﬁning and Marketing...........................................................
Chemicals .................................................................................
Corporate and Other ...............................................................
Consolidation adjustments.......................................................

Total operating income ........................................................

6,210
3,313
874
(952)
30

9,475

5,379
1,896
559
(820)
(15)

6,999

3,315
3,089
1,178
(815)
(102)

6,665

(1) Net sales are net to us after payment of a fuel transfer tax, turnover tax and customs duties on exports. Royalty payments required
to be made to a third party, whether payable in cash or in kind, which are a ﬁnancial obligation, or are substantially equivalent to
a production or severance tax, are accounted for as a cost of production and are not deducted in determining net sales. See ‘‘—
Exploration and Production—Oil and gas production, production prices and production costs’’ and Note 2 (f) to the Audited
Consolidated Financial Statements.

(2) Includes exploration costs in Argentina, Guyana and the United States and production operations in Argentina and the United

States.

(3) Intersegment sales of crude oil to Reﬁning and Marketing are recorded at transfer prices established by us, which generally seek to

approximate Argentine market prices.

(4) Includes LPG activities.
(5) Total net sales include export sales of Ps.5,678 million, Ps.4,904 million, and Ps.7,228 million, for the years ended December 31,

2010, 2009 and 2008, respectively. The export sales were mainly to the United States and Brazil.

22

Exploration and Production

Principal properties

Our production is concentrated in Argentina and our domestic operations are subject

to

numerous risks. See ‘‘Item 3. Key Information–Risk Factors.’’

The following table sets forth information with regard to YPF’s developed and undeveloped

acreage by geographic area as of December 31, 2010:

South America.......................................................
Argentina ...........................................................
Rest of South America(5) ...................................
North America(6) ...................................................

Total ......................................................................

At December 31, 2010

Developed(1)

Undeveloped(2)

Gross(3)

Net(4)

Gross(3)

Net(4)

1,137
1,137
—
17

1,155

(thousands of acres)

803
803
—
3

806

39,756
35.581
4,176
299

40,056

19,258
17,795
1,463
167

19,425

(1) Developed acreage is spaced or assignable to productive wells.
(2) Undeveloped acreage encompasses those leased acres on which wells have not been drilled or completed to a point that would

permit the production of economic quantities of oil or gas regardless of whether such acreage contains proved reserves.

‘‘Net’’ acreage equals gross acreage after deducting third party interests.

(3) A ‘‘gross acre’’ is an acre in which YPF owns a working interest.
(4)
(5) Guyana and Uruguay.
(6) The United States only.

As of December 31, 2010 approximately 0.2% of our exploratory undeveloped acreage
corresponded to exploration permits which will expire in 2011 and which are not subject to renewal
in accordance with Law 17,319, since they are in the last year of their extension term. In addition, as
a result of the expiration in 2011 of the ﬁrst, second or third exploration terms of certain of our
exploration permits, we will be required to relinquish a ﬁxed portion of the acreage related to each
such expiring permit, as set forth in Law 17,319, as long as exploitable quantities of oil or gas are
not discovered in such areas (in which case we may seek to obtain a declaration of their commercial
viability from the relevant authorities, and the related areas would then be subject to exploitation
concessions). Provided no such discoveries are made in 2011, we will be required to relinquish
approximately 5.8 thousand square kilometers of exploratory undeveloped acreage (approximately
11.8% of our 48.9 thousand square kilometers of net exploratory undeveloped acreage as of
December 31, 2010) during 2011. We are entitled to decide, according to our best interest, which
portions of each of the exploration permits to keep, within the required relinquishment percentage.
Therefore, the areas to be relinquished consist usually of acreage were drilling has not been successful
and that are considered non-core lease acreage.

We do not have any material undeveloped acreage related to our production concessions

expiring in the near term.

Argentine properties

Argentina is the largest gas and fourth largest oil producing nation in Central and South
America according to the 2009 edition of BP Statistical Review of World Energy, published in June
2010 (the ‘‘BP Statistical Report’’). Oil has historically accounted for the majority of the country’s
hydrocarbon production and consumption, although the relative share of natural gas has increased
rapidly in recent years. As of the date of this annual report, a total of 24 sedimentary basins have
been identiﬁed in the country, according to the ‘‘Plan Exploratorio Argentina’’ (Argentine Exploration
Plan) described below. Six of these are combined onshore/offshore and three are entirely offshore.
Argentina’s total onshore acreage is composed of approximately 421 million acres, and total offshore

23

acreage consists of 176 million acres on the South Atlantic shelf within the 200-meter depth line. A
substantial portion of the country’s estimated 597 million acres in sedimentary basins has yet to be
evaluated by exploratory drilling. Commercial production is concentrated in ﬁve basins: Neuquina,
Cuyana and Golfo San Jorge in central Argentina, Austral
in southern Argentina (which includes
onshore and offshore ﬁelds), and the Noroeste basin in northern Argentina. The Neuquina and Golfo
San Jorge basins are the most signiﬁcant basins for our activities in Argentina.

The following table shows our gross and net

interests in productive oil and gas wells in

Argentina by basin, as of December 31, 2010:

Wells(1)(2)(3)

Oil

Gas

Basin

Gross

Net

Gross

Net

Onshore ..................................................................
Neuquina ...........................................................
Golfo San Jorge .................................................
Cuyana ...............................................................
Noroeste.............................................................
Austral ...............................................................
Offshore .................................................................

Total ......................................................................

11,036
3,610
6,477
799
19
131
—

11,036

9,378
3,033
5,576
725
6
39
—

9,378

822
678
40
—
51
53
9

831

534
465
40
—
13
16
4

538

(1) In addition to productive oil and gas wells located in Argentina, we have interests in oil wells located in the United States (7 gross

wells and 1 net well, as of December 31, 2010).

(2) A ‘‘gross well’’ is a well in which YPF owns a working interest. A ‘‘net well’’ is deemed to exist when the sum of fractional
ownership working interests in gross wells equals one. The number of net wells is the sum of the fractional working interests
owned in gross wells expressed as whole numbers and fractions of whole numbers.
(3) Gross and net wells include one oil well and three gas wells with multiple completions.

The table below provides certain information with respect to our net working interests in our

principal oil and gas ﬁelds in Argentina at December 31, 2010, all of which are mature:

Production 2010

Proved Reserves as of December 31, 2010

Areas(1)

Interest % Oil (mmbbl) Gas (mmcf) Oil (mmbbl) Gas (mmcf)

BOE
(mmboe)

Basin / Location

Development
Stage of the area

Loma La Lata
Los Perales

San Roque
Chihuido La Salina
Acambuco
Chihuido Sierra Negra
Manantiales Behr

El Porto´ n
Barranca Baya

Puesto Herna´ ndez
Seco Leo´ n

100%
100%

34%
100%
22%
100%
100%

100%
100%

75%
100%

16,099
5,799

200,909
14,366

62,614
37,308

1,151,971
54,461

267,774
47,007

2,059
5,282
429
7,337
6,280

2,366
4,286

3,529
3,435

43,207
12,443
19,252
1,506
4,185

14,470
803

—
3,143

9,827
22,306
2,774
29,066
27,852

10,859
26,552

27,330
23,567

180,767
103,859
156,953
7,788
14,226

102,573
4,618

—
17,920

42,021
40,803
30,726
30,453
30,386

29,127
27,374

27,330
26,758

Neuquina Mature Field
Mature Field
Golfo San
Jorge

Neuquina Mature Field
Neuquina Mature Field
Noroeste Mature Field
Neuquina Mature Field
Mature Field
Golfo San
Jorge

Neuquina Mature Field
Mature Field
Golfo San
Jorge

Neuquina Mature Field
Mature Field
Golfo San
Jorge

Aguada Toledo – Sierra

100%

780

29,191

8,075

103,580

26,522

Neuquina Mature Field

Barrosa
Magallanes
Aguada Pichana
Desﬁladero Bayo
CNQ 7A
Sen˜ al Picada

59%
27%
100%
50%
100%

626
1,397
3,348
4,699
2,339

9,416
36,022
62
—
351

4,187
5,291
17,884
17,230
16,095

113,980
96,899
1,495
—
1,844

24,487
22,548
18,150
17,230
16,423

Austral Mature Field
Noroeste Mature Field
Neuquina Mature Field
Neuquina Mature Field
Neuquina Mature Field

24

Production 2010

Proved Reserves as of December 31, 2010

Areas(1)

Interest % Oil (mmbbl) Gas (mmcf) Oil (mmbbl) Gas (mmcf)

BOE
(mmboe)

Basin / Location

Development
Stage of the area

Tierra del Fuego
Vizcacheras
Lomas del Cuy

30%
100%
100%

791
2,536
2,662

14,948
363
1,665

2,365
14,692
12,329

71,621
1,998
6,044

15,120
15,048
13,406

Austral Mature Field
Cuyana Mature Field
Mature Field

Golfo San
Jorge

Chihuido La Salina Sur

100%

1,764

11,426

5,496

40,999

12,798

Neuquina Mature Field

(1) Exploitation areas.

Approximately 87% of our proved crude oil reserves in Argentina are concentrated in the
Neuquina (53%) and Golfo San Jorge (34%) basins, and approximately 94% of our proved gas
reserves in Argentina are concentrated in the Neuquina (71%), Noroeste (16%) and Austral (7%)
basins.

As of December 31, 2010, YPF held 117 production concessions and exploration permits in
Argentina. YPF directly operates 83 of them, including 61 production concessions and 22 exploration
permits.

As of December 31, 2010, YPF held 26 exploration permits in Argentina, 21 of which are
onshore exploration permits and ﬁve of which are offshore exploration permits. YPF has 100%
ownership of three onshore permits, and its participating interests in the rest vary between 50% and
90%. YPF’s interests in the offshore permits vary between 30% and 35%.

As of December 31, 2010, YPF had 91 production concessions in Argentina. YPF has a 100%
ownership interest in 54 production concessions, and its participating interests in the remaining 37
production concessions vary between 12.2% and 98%.

Our production declines in recent periods are attributable mainly to the continuing maturity of
our ﬁelds, although work stoppages and pipeline issues have on occasion also contributed to
production declines and capital project delays. During the year 2010, a series of labor and community
conﬂicts resulted in lost production of approximately 3.2 mmboe in areas we operate.

Joint ventures and contractual arrangements in Argentina.

We participate in 23 exploration and 25 production joint ventures and contractual arrangements
(18 of them not operated by YPF) in Argentina. Our interests in these joint ventures and contractual
arrangements range from 12.2% to 98%, and our obligations to share exploration and development
costs vary under these agreements. In addition, under the terms of some of these joint ventures, we
have agreed to indemnify our joint venture partners in the event that our rights with respect to such
areas are restricted or affected in such a way that the purpose of the joint venture cannot be
achieved. For a list of the main exploration and production joint ventures in which we participate,
see Note 6 to the Audited Consolidated Financial Statements. We are also a party to a number of
other contractual arrangements that arose through the renegotiation of service contracts and risk
contracts.

International properties

As of December 31, 2010, we had mineral rights in 55 blocks in the United States, comprised of
50 exploratory blocks, with a net surface area of 670 square kilometers and ﬁve development blocks,
with a net surface area of 17 square kilometers. Our U.S. subsidiaries’ net proved reserves in these
properties in the United States as of December 31, 2010 were 1 mmboe. Our U.S. subsidiaries’ net
hydrocarbon production in these properties in the United States for 2010 was 0.6 mmboe.

The Neptune Field is located approximately 120 miles from the Louisiana coast within the
deepwater region of the Central Gulf of Mexico. The unitized ﬁeld area comprises Atwater Valley
Blocks 573, 574, 575, 617 and 618. Our indirect subsidiary, Maxus U.S. Exploration Company, has a
15% working interest in the ﬁeld. The other joint venture participants are BHP Billiton (35%),
Marathon Oil Corp. (30%) and Woodside Petroleum Ltd (20%). BHP Billiton is the operator of the
Neptune Field and the associated production facilities. The Neptune reserves are being produced

25

using a standalone, tension leg platform (TLP) located in Green Canyon Block 613 within 4,230 feet
of water. Production began on July 8, 2008. The platform supports seven sub-sea development wells
which are tied back to the TLP via a subsea gathering system.

In 2009, YPF Holdings Inc. (‘‘YPF Holdings’’) participated in the drilling of the Northwood
exploration prospect in the Gulf of Mexico with a net interest of 3.5%. YPF Holdings’ total net
investment was U.S.$11.5 million. No reserves were found.

In addition, YPF Holdings has entered into various operating agreements and capital
commitments associated with the exploration and development of its oil and gas properties. Such
contractual, ﬁnancial and/or performance commitments are not material, except for commitments
related to the Neptune Project located in the vicinity of the Atwater Valley Area, Blocks 573, 574,
575, 617 and 618. Total commitments remaining as of December 31, 2010 for the Neptune Project are
minimum pipeline transportation payment obligations of U.S.$12.1 million.

As of December 31, 2010, YPF held, through YPF Guyana Ltd., a wholly-owned subsidiary of
YPF International, S.A., a 30% working interest in a petroleum prospecting license (the ‘‘Petroleum
Prospecting License’’) as part of a petroleum agreement (the ‘‘Petroleum Agreement’’) in connection
with the Georgetown block, offshore Guyana. The surface exploratory area attributable to YPF
Guyana Ltd.’s working interest is 2,520 square kilometers, which represents approximately 622.7
thousand undeveloped acres. The Guyana government renewed the Petroleum Prospecting License on
November 25, 2009 for three years. In accordance with the Petroleum Agreement, the beginning of a
new renewal period implied the relinquishment of 930 square kilometers (according to YPF Guyana
Ltd.’s 30% working interest) of the original Georgetown exploration block area, as well as the drilling
of an exploratory well that must commence before May 25, 2011.

The main exploration activities performed during 2010 were related to the deﬁnition and
location of the Jaguar-1 exploration well. The 3D seismic data was re-processed to estimate geo-
pressures and to deﬁne the best seabed location for the drilling rig. In addition, the geological
for any potential hazard related to overpressures,
petroleum system was re-assessed to account
particularly, near the reservoir target.

As of December 31, 2010, the Georgetown block consortium had agreed on the location and the
drilling of the Jaguar-1 well, with a total depth of 21,450 ft. The Georgetown block consortium
agreed to contract a jackup drilling rig (Atwood Beacon, from Atwood Oceanics), and upgrade it for
a high pressure/high temperature well. As of such date,
the engineering well design had been
tubular material, etc.) had already been
completed and the long lead items (well head, special
ordered. The total estimated cost of
is approximately U.S.$110 million
(approximately U.S.$33.2 million, considering YPF Guyana Ltd.’s working interest). The well was
originally planned to be spud in April 2011. However, as a result of weather conditions, activity was
postponed and the well is currently planned to be spud in August 2011 and the entire operation is
expected to take approximately 180 days to complete,
including hydrocarbon appraisal, plug and
abandonment.

the exploratory well

Our operations

to certain
environmental claims. See ‘‘—Environmental Matters—YPF Holdings—Operations in the United
States.’’

through YPF Holdings, are

in the United States,

subject

Finally, as of December 31, 2010, we held a 40% working interest in A´ rea 3, operated by us,
and a 40% working interest in A´ rea 4, operated by Petrobras Uruguay, both of which are exploratory
areas located in the Punta del Este basin (Uruguay).

Oil and Gas Reserves

Proved oil and gas reserves are those quantities of oil and gas, which, by analysis of geoscience
and engineering data, can be estimated with reasonable certainty to be economically producible (from
a given date forward, from known reservoirs, and under existing economic conditions, operating
methods and government regulations) prior to the time at which contracts providing the right to
is reasonably certain, regardless of whether
operate expire, unless evidence indicates that renewal
the
deterministic or probabilistic methods are used for the estimation. The project
it will
hydrocarbons must have commenced or

the operator must be reasonably certain that

to extract

26

commence the project within reasonable time. In some cases, substantial investments in new wells and
related facilities may be required to recover proved reserves.

Information on net proved reserves as of December 31, 2010 and 2009 was calculated in
accordance with the SEC rules and FASB’s ASC 932, as amended. Accordingly, crude oil prices used
to determine reserves were calculated at the beginning of each month, for crude oils of different
quality produced by the company, considering the realized prices for crude oils of such quality in the
domestic market until 2011 (taking into account the effects of export taxes according to Law 26,217
which are enforceable until such year) and, for the following years, we considered the unweighted
average price of the ﬁrst-day-of-the-month price for each month within the twelve-month period
ended December 31, 2010 and 2009, respectively, which refers to the WTI prices adjusted by each
different quality produced by the company. Additionally, since there are no benchmark market
natural gas prices available in Argentina, the company used average realized gas prices during the
relevant year to determine its gas reserves. Information on net proved reserves as of December 31,
2008 was calculated using year-end prices and costs, respectively.

Net reserves are deﬁned as that portion of the gross reserves attributable to the interest of YPF
after deducting interests owned by third parties. In determining net reserves, we exclude from our
reported reserves royalties due to others, whether payable in cash or in kind, where the royalty owner
has a direct interest in the underlying production and is able to make lifting and sales arrangements
independently. By contrast, to the extent that royalty payments required to be made to a third party,
whether payable in cash or in kind, are a ﬁnancial obligation, or are substantially equivalent to a
production or severance tax, the related reserves are not excluded from our reported reserves despite
the fact that such payments are referred to as ‘‘royalties’’ under local rules. We follow the same
methodology in reporting our production amounts.

Gas reserves exclude the gaseous equivalent of liquids expected to be removed from the gas on
concessions and leases, at ﬁeld facilities and at gas processing plants. These liquids are included in net
proved reserves of crude oil and natural gas liquids.

Technology used in establishing proved reserves additions

YPF’s estimated proved reserves as of December 31, 2010 are based on estimates generated
through the integration of available and appropriate data, utilizing well-established technologies that
have been demonstrated in the ﬁeld to yield repeatable and consistent results. Data used in these
integrated assessments include information obtained directly from the subsurface via wellbore, such as
well logs, reservoir core samples, ﬂuid samples, static and dynamic pressure information, production
test data, and surveillance and performance information. The data utilized also include subsurface
including high quality 2-D and 3-D seismic
information obtained through indirect measurements,
data, calibrated with available well control. Where applicable, surface geological information was also
utilized. The tools used to interpret and integrate all
these data included both proprietary and
commercial software for reservoir modeling, simulation and data analysis. In some circumstances,
where appropriate analog reservoir models are available, reservoir parameters from these analog
models were used to increase the reliability of our reserves estimates.

For further information on the estimation process of our proved reserves, see ‘‘—Internal

controls on reserves and reserves audits.’’

27

Net Proved Developed and Undeveloped Reserves as of December 31, 2010

The following table sets forth our estimated net proved developed and undeveloped reserves of

crude oil and natural gas at December 31, 2010.

Proved Developed Reserves

Consolidated Entities
South America

Argentina..............................................................................

North America

United States ........................................................................

Total Consolidated Entities .....................................................

Equity-Accounted Entities

South America

Argentina..............................................................................

North America

United States ........................................................................

Total Equity-Accounted Entities .............................................

Oil(1)

Natural
Gas

Total(2)

(mmbbl)

(bcf)

(mmboe)

403

1

404

1

—

1

1,946

2

1,948

48

—

48

750

1

751

10

—

10

Total Proved Developed Reserves.................................................

405

1,996

761

Proved Undeveloped Reserves

Consolidated Entities
South America

Argentina..............................................................................

North America

United States ........................................................................

Total Consolidated Entities .....................................................

Equity-Accounted Entities

South America

Argentina..............................................................................

North America

United States ........................................................................

Total Equity-Accounted Entities .............................................

Oil(1)

Natural
Gas

Total(2)

(mmbbl)

(bcf)

(mmboe)

127

*

127

—

—

—

585

*

585

—

—

—

231

*

231

—

—

—

Total Proved Undeveloped Reserves .............................................

127

585

231

28

Total Proved Reserves(2)(3)

Oil(1)

Natural
Gas

(mmboe)

Total

Consolidated Entities

Developed Reserves..............................................................
Undeveloped Reserves..........................................................
Total Consolidated Entities .....................................................

Equity-accounted entities

Developed Reserves..............................................................
Undeveloped Reserves..........................................................

Total Equity-Accounted Entities .............................................

404
127
531

1
—

1

1,948
585
2,533

48
—

48

Total Proved Reserves ..................................................................

532

2,581

751
231
982

10
—

10

992

* Not material
(1) Includes crude oil, condensate and natural gas liquids.
(2) Volumes of natural gas in the table above and elsewhere in this annual report have been converted to boe at 5.615 mcf per barrel.
(3) Proved oil reserves of consolidated entities include an estimated approximately 66 mmbbl of crude oil, condensate and natural gas
liquids in respect of royalty payments which, as described above, are a ﬁnancial obligation, or are substantially equivalent to a
production or similar tax. Proved reserves of natural gas of consolidated entities include an estimated approximately 257 bcf of
natural gas in respect of such payments. Equity-accounted entities’ reserves in respect of royalty payments which are a ﬁnancial
obligation, or are substantially equivalent to a production or similar tax, are not material.

Changes in our proved undeveloped reserves during 2010

YPF had estimated net proved undeveloped reserves of 231 mmboe at December 31, 2010,
which represented approximately 24% of the 982 mmboe total reported proved reserves as of such
date. This compares to estimated net proved undeveloped reserves of 211 mmboe at December 31,
2009 (approximately 21% of the 1,013 mmboe total reported proved reserves as of such date).

The 10% increase in net proved undeveloped reserves in 2010 is mainly attributable to the
addition of new proved undeveloped reserves related to new development studies (30 mmboe),
improved recovery projects in Argentina (30 mmboe) and extensions of existing developments (6
mmboe), which exceeded reductions of our proved undeveloped reserves in 2010, which primarily
relate to the transfer from proved undeveloped to proved developed reserves resulting from our
development activity and revisions to previous estimates. The largest transfers were associated with
the drilling of new wells (16 mmboe) and the production response of certain improved recovery
projects (4 mmboe).

YPF’s total expenditure to advance the development of reserves was approximately U.S.$1,222
related to proved

million during 2010, of which U.S.$340 million was allocated to projects
undeveloped reserves.

As at December 31, 2010, we did not have material amounts of proved undeveloped reserves in
individual ﬁelds or countries that have remained undeveloped for ﬁve years or more after being
disclosed as proved undeveloped reserves.

Internal controls on reserves and reserves audits

All of our oil and gas reserves held in consolidated companies have been estimated by our
petroleum engineers. In order to meet the high standard of ‘‘reasonable certainty,’’ reserves estimates
are stated taking into consideration additional guidance as to reservoir economic producibility
requirements, acceptable proved area extensions, drive mechanisms and improved recovery methods,
marketability under existing economic and operating conditions and project maturity.

Where applicable,

the volumetric method is used to determine the original quantities of
petroleum in place. Estimates are made by using various types of logs, core analysis and other
available data. Formation tops, gross thickness, and representative values for net pay thickness,
porosity and interstitial ﬂuid saturations are used to prepare structural maps to delineate each

29

reservoir and isopachous maps to determine reservoir volume. Where adequate data is available and
where circumstances are justiﬁed, material-balance and other engineering methods are used to estimate
the original hydrocarbon in place.

Estimates of ultimate recovery are obtained by applying recovery factors to the original
quantities of petroleum in place. These factors are based on the drive mechanisms inherent in the
reservoir, analysis of the ﬂuid and rock properties, the structural position of the reservoir and its
production history. In some instances, comparisons are made with similar production reservoirs in the
areas where more complete data is available.

Where adequate data is available and where circumstances are justiﬁed, material-balance and
other engineering methods are used to estimate ultimate recovery. In these instances, reservoir
performance parameters such as cumulative production, production rate, reservoir pressure, gas oil
ratio behavior and water production are considered in estimating ultimate recovery.

In certain cases where the above methods could not be used, proved reserves are estimated by

analogy to similar reservoirs where more complete data are available.

To control the quality of reserves booking, a process has been established that is integrated into
the internal control system of YPF. This process to manage reserves booking is centrally controlled
and has the following components:

(a) The Reserves Control Direction (RCD) is separate and independent from the Exploration
and Production segment. RCD’s activity is overseen by YPF’s Audit Committee, which is
also responsible for supervising the procedures and systems used in the recording of and
internal control over the company’s hydrocarbon reserves. The primary objectives of the
RCD are to ensure that YPF’s proved reserves estimates and disclosure are in compliance
with the rules of the SEC, the Financial Accounting Standard Board (FASB), and the
Sarbanes-Oxley Act, and to review annual changes in reserves estimates and the reporting
of YPF’s proved reserves. The RCD is responsible for preparing the information to be
publicly disclosed concerning YPF’s reported proved reserves of crude oil and natural gas.
In addition, the RCD is also responsible for providing training to personnel involved in
the reserves estimation and reporting process within YPF. The RCD is managed by and
staffed with individuals that have an average of more than 20 years of technical experience
in the petroleum industry,
including in the classiﬁcation and categorization of reserves
under the SEC guidelines. The RCD staff includes several individuals who hold advanced
degrees in either engineering or geology, as well as individuals who hold bachelor’s degrees
in various technical studies. Several members of the RCD are registered with or afﬁliated
to the relevant professional bodies in their ﬁelds of expertise.

(b) The Reserves Control Director, head of the RCD, who is responsible for overseeing the
the reserves estimates and reserves audits conducted by third party
preparation of
engineers. The current director has over 30 years of experience in reservoir-engineering,
geology and geophysics,
reserves estimates, project development, ﬁnance and general
accounting regulation and with well-rounded exposure to international operations. Over the
past three years, he has been responsible for supervision over YPF’s governance and
compliance procedures in respect of reserves estimates. He is an active member of the
Society of Petroleum Engineers (SPE) and serves on its Editorial Committee for Reservoir
Engineering and Evaluation. In addition, he holds a petroleum engineering degree from
Universidad Central de Venezuela, MSc and PhD degrees in petroleum engineering from
Pennsylvania State University in the United States, and an MBA from Instituto de
Estudios Superiores de Administracio´ n in Venezuela. Consistent with our internal control
system requirements,
the Reserves Control Director’s compensation is not affected by
changes in reported reserves.

(c) A quarterly internal review by the RCD of changes in proved reserves submitted by the
Exploration and Production business unit and associated with properties where technical,
operational or commercial issues have arisen.

30

(d) The Quality Reserve Coordinator

(QRC), who is a professional assigned at each
Exploration and Production business unit of YPF to ensure that
there are effective
controls in the proved reserves estimation and approval process of the estimates of YPF
and the timely reporting of the related ﬁnancial impact of proved reserves changes. Our
QRCs are responsible for reviewing proved reserves estimates. The qualiﬁcation of each
QRC is made on a case-by-case basis with reference to the recognition and respect of such
QRC’s peers. YPF would normally consider a QRC to be qualiﬁed if such person (i) has a
minimum of 10 years of practical experience in petroleum engineering or petroleum
production geology, with at least ﬁve years of such experience in charge of the estimate
and evaluation of reserves information, and (ii) has either (A) obtained, from a college or
university of recognized stature, a bachelor’s or advanced degree in petroleum engineering,
geology or other related discipline of engineering or physical science, or (B) received, and
is maintaining in good standing, a registered or certiﬁed professional engineer’s license or a
registered or certiﬁed professional geologist’s license, or the equivalent thereof, from an
appropriate governmental authority or professional organization.

(e) A formal review through technical review committees to ensure that both technical and

commercial criteria are met prior to the commitment of capital to projects.

(f) Our internal audit team, which examines the effectiveness of YPF’s ﬁnancial controls,
the assets and

designed to ensure the reliability of reporting and safeguarding of all
examining YPF’s compliance with the law, regulations and internal standards.

(g) All volumes booked are submitted to a third party reserves audit on a periodic basis. The
properties selected for a third party reserves audit in any given year are selected on the
following basis:

i.

ii.

all properties on a three year cycle, and

recently acquired properties not submitted to a third party reserves audit in the
previous cycle and properties with respect to which there is new information which
could materially affect prior reserves estimates.

For those areas submitted to third party reserves audit, YPF’s proved reserves ﬁgures have to
be within 7% of the third party reserves audit ﬁgures for YPF to declare that the volumes have been
ratiﬁed by a third party reserves audit. In the event that the difference is greater than the tolerance,
YPF will reestimate its proved reserves to achieve this tolerance level or should disclose the third
party ﬁgures.

In 2010, DeGolyer & MacNaughton audited areas operated by YPF in the Golfo San Jorge and
Neuquina basins in Argentina and Gaffney, Cline & Associates Inc audited non-operated areas in the
Gulf of Mexico and Oklahoma basins in the United States. All
these third party audits were
performed, as of September 30, 2010 on ﬁelds which,
in our estimates as of such date, contained
proved reserves of 462 mmboe in the aggregate, and cumulatively covered approximately 47% of our
that date. The 2010 third party reserves audits covered
proved reserves
approximately 138 mmboe of our proved undeveloped reserves, which represented approximately 59%
of our aggregate proved undeveloped reserves as of September 30, 2010. A copy of the related
reserves audit reports are ﬁled as Exhibits to this annual report.

in Argentina as of

We are required, in accordance with Resolution S.E. No. 324/06 of the Argentine Secretariat of
Energy, to ﬁle annually and by March 31 of every year details of our estimates of our oil and gas
reserves and resources with the Argentine Secretariat of Energy, as deﬁned in that resolution and
certiﬁed by an external auditor. The aforementioned certiﬁcation and external audit only have the
meaning established by Resolution S.E. No. 324/06, and are not to be interpreted as a certiﬁcation or
external audit of oil and gas reserves under SEC rules. We last ﬁled such a report for the year ended
December 31, 2010 and the estimates of our proved oil and gas reserves ﬁled with the Argentine
Secretariat of Energy are materially higher than the estimates of our proved oil and gas reserves
contained in this annual report mainly because: (i) information ﬁled with the Argentine Secretariat of
Energy includes all properties of which we are operators, irrespective of the level of our ownership
interests in such properties; (ii) information ﬁled with the Argentine Secretariat of Energy includes
other categories of reserves and resources different to proved reserves that are not included in this

31

annual report, which contains estimates of proved reserves consistent with the SEC’s guidance; and
(iii) the deﬁnition of proved reserves under Resolution S.E. No. 324/06 is different from the deﬁnition
of ‘‘proved oil and gas reserves’’ established in Rule 4-10(a) of Regulation S-X. Accordingly, all
proved oil and gas reserve estimates included in this annual report reﬂect only proved oil and gas
reserves consistent with the rules and disclosure requirements of the SEC.

Oil and gas production, production prices and production costs

The following table shows our oil (including crude oil, condensate and natural gas liquids) and
gas production on an as sold and daily basis for the years indicated. In determining net production,
we exclude royalties due to others, whether payable in cash or in kind, where the royalty owner has a
direct interest in such production and is able to make lifting and sales arrangements independently.
By contrast, to the extent that royalty payments required to be made to a third party, whether
payable in cash or in kind, are a ﬁnancial obligation, or are substantially equivalent to a production
or severance tax, they are not excluded from our net production amounts despite the fact that such
payments are referred to as ‘‘royalties’’ under local rules. This is the case for our production in
Argentina, where royalty expense is accounted for as a production cost.

Oil production(1)(2)

2010

2009

2008

Consolidated Entities
South America

Argentina..............................................................................

North America

United States ........................................................................

Total Consolidated Entities .....................................................

Equity-Accounted Entities

South America

Argentina..............................................................................

Total Equity-Accounted Entities .............................................

(mbbl/d)

300

2

302

1

1

291

2

293

1

1

312

2

314

2

2

Total Oil Production(3).................................................................

294

303

316

Natural gas production(2)

2010

2009

2008

(mmcf/d)

Consolidated Entities
South America

Argentina..............................................................................

1,170

1,289

1,517

North America

United States ........................................................................

2

2

2

Total Consolidated Entities .....................................................

1,172

1,291

1,519

Equity-Accounted Entities

South America

Argentina..............................................................................

Total Equity-Accounted Entities .............................................

39

39

43

43

49

49

Total Natural Gas Production(4)(5) ...............................................

1,211

1,335

1,569

32

Oil equivalent production(2)(6)

2010

2009

2008

Consolidated Entities

Oil ............................................................................................
Natural gas ..............................................................................

Equity-Accounted Entities

Oil ............................................................................................
Natural gas ..............................................................................

Total Oil Equivalent Production...................................................

(mmboe/d)

302
230

1
8

541

293
209

1
7

510

314
271

2
9

596

(1) Includes crude oil, condensate and natural gas liquids.
(2) Loma La Lata ﬁeld in Argentina contains over 15% of our total proved reserves expressed on an oil equivalent barrel basis. Oil
production in this ﬁeld was 16, 17 and 16 mbbl for the years ended December 31, 2010, 2009 and 2008 respectively. Natural gas
production in the Loma La Lata ﬁeld was 194, 207 and 238 bcf for the years ended December 31, 2010, 2009 and 2008 respectively.
(3) Oil production for the years 2010, 2009 and 2008 includes an estimated approximately 13, 12 and 14 mmbbl, respectively, of crude
oil, condensate and natural gas liquids in respect of royalty payments which are a ﬁnancial obligation, or are substantially
equivalent to a production or similar tax. Equity-accounted entities’ production of crude oil, condensate and natural gas liquids in
respect of royalty payment which are a ﬁnancial obligation, or are substantially equivalent to a production or similar tax, is not
material.

(4) Natural gas production for the years 2010, 2009 and 2008 includes an estimated approximately 50, 54 and 69 bcf, respectively, of
natural gas in respect of royalty payments which are a ﬁnancial obligation, or are substantially equivalent to a production or
similar tax. Equity-accounted entities production of natural gas in respect of royalty payments which are a ﬁnancial obligation, or
are substantially equivalent to a production or similar tax, is not material.

(5) Does not include volumes consumed or ﬂared in operation and inventory changes (whereas sale volumes shown in the reserves
table included in ‘‘Supplemental Information on Oil and Gas Exploration and Production Activities-Oil and Gas Reserves’’
include such amounts).

(6) Volumes of natural gas been converted to an oil equivalent basis at 5.615 mcf per barrel

The composition of the crude oil produced by us in Argentina varies by geographic area.
Almost all crude oil produced by us in Argentina has very low or no sulfur content. We sell
substantially all the crude oil we produce in Argentina to our Reﬁning and Marketing business
segment. Most of the natural gas produced by us is of pipeline quality. All of our gas ﬁelds produce
commercial quantities of condensate, and substantially all of our oil ﬁelds produce associated gas.

The following table sets

forth the average production costs and average sales price by

geographic area for 2010, 2009 and 2008:

Production costs and sales price

Total

Argentina

Year ended December 31, 2010
Lifting costs .................................................................................
Local taxes and similar payments(1) ............................................
Transportation and other costs ...................................................

Average production costs ............................................................

Average oil sales price .................................................................
Average natural gas sales price ...................................................

Year ended December 31, 2009
Lifting costs .................................................................................
Local taxes and similar payments(1) ............................................
Transportation and other costs ...................................................

Average production costs ............................................................

(Ps./boe)

32.85
1.43
11.27

45.56

193.53
50.50

24.42
1.05
6.96

32.43

32.94
1.42
11.32

45.68

193.62
50.54

24.48
1.05
7.02

32.55

United
States

54.89
—
21.29

76.18

289.59
113.26

37.17
—
19.07

56.24

Average oil sales price .................................................................

157.28

157.05

201.12

33

Production costs and sales price

Total

Argentina

Average natural gas sales price ...................................................
Year ended December 31, 2008
Lifting costs .................................................................................
Local taxes and similar payments(1) ............................................
Transportation and other costs ...................................................

Average production costs ............................................................

46.49

21.58
1.02
5.38

27.98

(Ps./boe)

46.18

21.64
1.03
5.37

28.04

Average oil sales price .................................................................
Average natural gas sales price ...................................................

133.59
41.54

132.98
40.93

United
States

109.22

10.69
—
7.16

17.85

243.74
151.56

(1) Does not include ad valorem and severance taxes, including the effect of royalty payments which are a ﬁnancial obligation or are
substantially equivalent to such taxes, in an amount of approximately Ps.15.40 per boe, Ps.12.97 per boe, and Ps.11.23 per boe for
the years ended December 31, 2010, 2009 and 2008, respectively.

Drilling and other exploratory and development activities

The following table shows the number of wells drilled by us or consortiums in which we had a

working interest in Argentina during the periods indicated.

Wells Drilled in Argentina(1)

For the Year Ended December 31,

2010

2009

2008

Gross wells drilled(2)

Exploratory

Productive ............................................................................
Oil .....................................................................................
Gas....................................................................................
Dry .......................................................................................

Total .................................................................................

Development

Productive ............................................................................
Oil .....................................................................................
Gas....................................................................................
Dry .......................................................................................

Total .................................................................................

Net wells drilled(2)
Exploratory

Productive ............................................................................
Oil .....................................................................................
Gas....................................................................................
Dry .......................................................................................

Total .................................................................................

Development

Productive ............................................................................
Oil .....................................................................................
Gas....................................................................................
Dry .......................................................................................

Total .................................................................................

34

6
5
1
8

14

709
680
29
8

717

6
5
1
6

12

616
601
15
7

623

3
2
1
12

15

494
456
38
18

512

1
1
—
8

9

402
380
22
18

420

4
3
1
13

17

590
529
61
12

602

3
2
1
7

10

439
396
43
12

451

(1) In addition to wells drilled in Argentina, we participated in the drilling of the following ‘‘gross’’ wells in North America: one dry
exploratory well in 2009 and nine development wells during the last three years, seven of which were productive. ‘‘Net’’ wells
drilled in North America round to one well.
‘‘Gross’’ wells include all wells in which we have an interest. ‘‘Net’’ wells equals gross wells after deducting third party interests.

(2)

Drilling and other activities in Argentina

Our project portfolio, updated in May 2010,

included more than 1,400 projects to develop
proved, probable and possible reserves,
in addition to exploration and development resources, all
focused mainly on crude oil and the measuring of unconventional resources in the Neuquina basin.
The ﬁnancial viability of these investments and reserves recovery efforts, however, will generally
depend on the prevailing economic and regulatory conditions in Argentina, as well as the market
prices of hydrocarbon products.

We are fully dedicated to identifying new opportunities in both inﬁll potential and improved
sweep efﬁciency in our mature ﬁelds. These efforts are guided by subsurface modeling conducted by
in-house multidisciplinary teams. Furthermore a strong emphasis is being placed in surveillance
activities to improve water injection utilization. Tertiary recovery is being pursued with polymer
injection in the Golfo San Jorge basin.

During the past three years our main exploratory activities in Argentina have had the following

principal focuses:

Offshore:
*

Shallow water. After the drilling campaign carried out during 2008-2009 in Block GSJM-1
(operated by YPF with a 67.0% working interest, and in which Petrobras Energı´a S.A.
(‘‘PESA’’) has a 33.0% working interest), it was decided to relinquish the block. During
2009, YPF also drilled the Helix x-1, x-2 and x-3 wells in Block E2 (operated by ENAP
Sipetrol with a 33.0% working interest, and in which YPF and ENARSA have a 33.0%
working interest each). All three wells were abandoned as dry holes. During 2010, YPF
has re-evaluated the remaining area, looking for new exploratory well opportunities. As a
result of
this re-evaluation, YPF has identiﬁed new lead opportunities and currently
expects to enter a new exploratory term, after the relinquishment of 50% of the block.

*

Deep water. YPF currently operates four blocks:

–

–

–

CAA-40 and CAA-46, where YPF holds a 33.5% working interest, and Pan American
Energy and Petrobras Argentina hold a 33.0 % and 33.5 % working interest,
respectively,
located in the Malvinas basin (Argentina). The project is anticipating
that a well will be spud in the second quarter of 2011 (water depth 480 meters).

E-1 (where YPF holds a 35% working interest, ENARSA 35%, Petrobras Argentina
25%, and Petrouruguay 5%)
in the Colorado basin (Argentina), where the well
planning is in an initial stage (water depth 1,600 meters).
A´ rea 3 in Punta del Este basin (Uruguay), where YPF holds a 40% working interest,
Petrobras Uruguay 40%, and Galp 20%, and in which exploration has not begun.

YPF has also a 30% working interest in the block E-3 located in the Colorado basin (where
Petrobras Argentina, the operator, holds a 35% working interest, and ENARSA 35%) and a 40%
working interest in the Block A´ rea 4 located in the Punta del Este basin (where Petrobras Uruguay,
the operator, holds a 40% working interest, and GALP 20%).

Onshore: YPF continued its near-ﬁeld exploration activity in its concession blocks, explored for
deep gas in the Noroeste and Neuquina basins and embarked on six new exploratory fronts in during
2010:

*

Shale gas. The Shale Gas Project, started at the end of 2009 with the PSG x-2 well in the
Loma La Lata Block, resulted in a discovery at the Quintuco Formation, though this did
not extend to the Vaca Muerta Formation. This well was followed by ﬁve further wells.
LLLK.x-1 (Loma La Lata Karst.x-1 in LLL block), was drilled and completed in the Vaca
Muerta Formation, with a rich gas and condensate discovery. Vaca Muerta, LLL-479
(Loma La Lata-479 in the same block), was drilled and completed, resulting in oil and gas

35

*

*

*

*

*

discovery. LLL-482 was drilled and produced oil and gas in the same formation. LLL.x-
475 was drilled and is due for completion in early 2011. Finally, a horizontal well,
LLLK.x-2, is being drilled close to LLLK.x-1, to prove productivity in a horizontal well

Shale oil. The ﬁrst shale oil well ever drilled in Argentina (SOil.x-1 in the Loma Campana
Block) was started in October 2010 and is expected to be completed in 2011. This well is
the ﬁrst of a three-well project in this block which includes two vertical wells and a
horizontal well. The objective of this project is to prove the productivity of the source rock
Vaca Muerta as a liquid hydrocarbon non-conventional reservoir, using state-of-the-art
technology such as microseismic and massive hydraulic stimulation.

Quintuco formation. YPF continued with new exploratory techniques developed for this
traditional reservoir (Quintuco formation carbonates). During 2010, ﬁve discovery wells
were drilled (PSG.x-2, La Caverna x-5, Loma Campana a-3, Los Gusanos x-1 and Los
Gusanos x-2). PSG x-2 was a shale gas project, located in the Loma La Lata block. La
Caverna x-5 (in which we have a 54.54% working interest) is located in the Bandurria
block and is operated by us. Los Gusanos x-1 and Los Gusanos x-2 (in which we have a
100% working interest) are located in the Loma La Lata block. Currently, the well Los
Gusanos.x-2 is being tested. During 2010, YPF drilled one dry well (La Caverna x-3)
located in the Bandurria block. During 2011, YPF plans to continue with this program
with ﬁve additional wells.

Lia´sico Inferior. We have launched a new exploratory campaign in mature blocks. As a
result of this campaign, we are shooting 55 km of 2D seismic in Valle del Rı´o Grande
Block, where we have a 100% working interest.

Ramos xp-1012. During 2009, the UTE Ramos (operated by Pluspetrol Energy) completed
the drilling stage, reaching a ﬁnal total depth of 5,826 meters. During 2010, we evaluated
the Tarija and Tupambi formations in the lower block, conﬁrming poor petrophysical
conditions. Given these results,
it was decided to charge the corresponding drilling and
completion costs to expense. We are currently evaluating the exploration targets in Santa
Rosa formation. YPF holds a 42% working interest in this project.

Frontier areas. 386 square kilometers of 3D seismic are being shot by YPF in Los
Tordillos Oeste Block, Mendoza, where Occidental Argentina Exploration and Production,
Inc.
is our partner with a 50% working interest. Two wells are being drilled during the
ﬁrst quarter of 2011 in the Tamberı´as Block (San Juan Province) and the Gan Gan Block
(Chubut Province). Wintershall is our partner in Chubut. A second exploration period in
Bolson del Oeste Block (La Rioja Province) was requested in November 2010, and the
commitments for this new period are to record 200 km of 2D seismic and to drill one well.
Additionally, in Rı´o Barrancas Block, we ﬁnalized the drilling of the Quebrada Butaco.x-1
well, which was dry, at a ﬁnal depth of 2,374 meters. A total of 3,100 km of seismic
(terrestrial gravity and magnetometry) were acquired.

In December 2009, YPF invited the provincial governments to take part in ‘‘Plan Exploratorio
Argentina.’’ The objective of such program is to complete a national survey of all potential
exploration opportunities, especially in non-traditional basins. At the date of this annual report,
twelve provinces have signed agreements with YPF.

During 2010, YPF completed fourteen exploratory wells in Argentina, thirteen of them in the

Neuquina basin and one in Noroeste basin. Six out of the fourteen wells were discoveries.

During 2010,

in the Loma La Lata Field,

facilities we continued the improvement and
optimization of our oil and gas production facilities (by interconnecting our primary separation units
with the low pressure gas pipe line). With respect to the Sixth Stage low pressure compression project
at the Loma La Lata natural gas ﬁeld, gas production and wellhead pressure were above our initial
forecast so new reservoir and facilities simulations were made during this year in order to continue
the optimization of compression and surface facilities in 2011. Additionally, we successfully continued
with the Sierras Blancas formation inﬁll drilling (in gas development wells), and began the Quintuco
formation evaluation with appraisal drilling (with oil development wells), to be continued through
2011.

36

In the El Medanito oilﬁeld (100% owned by YPF) after an aggressive delineation drilling
campaign and a second generation waterﬂooding pilot during 2010, the drilling activity planned for
2011 includes the beginning of a massive re-development in the whole area, and the continuation of
new facilities construction started last year. Moreover a new waterﬂooding pilot in the southwest
region of the ﬁeld is planned for this year in order to promote, if successful, the incorporation of
proved reserves from secondary recovery following the incorporation of primary reserves in 2010. In
2012, we plan to continue with the massive drilling project in south area and some activities to assess
the remaining potential in the north.

In 2010, we promoted the Llancanelo development project in the province of Mendoza, with the
drilling of two vertical and two horizontal wells. Currently, the project is at a stage of production
testing to continue the activity during 2011. This project will require a total investment of U.S.$55
million for the next triennium. We further maintained the development of the Barrancas and Loma
de la Mina ﬁelds with the drilling of 19 and 11 wells respectively. Additionally,
the Integral
Development of the Cerro Fortunoso ﬁeld began with the drilling of 5 wells in the so called North
Plunge and 10 additional wells in the main area. Five wells were also drilled at the Vizcacheras ﬁeld
which allowed the expansion of the productive area. With respect to the Can˜ ado´ n Amarillo project,
we drilled 10 wells, (9 of which are horizontal), at the main structural area, as scheduled in the ﬁeld
development plan.

includes

The Manantiales Behr

Integral Development project

the El Alba, La Carolina,
Grimbeek and Sur Manantiales projects. Currently, the area has 700 oil production wells and 12 gas
production wells. In 2010, we drilled 162 wells across various projects, which represented a total
estimated investment of U.S.$180 million for this period. The overall objective of this new project is
to achieve the comprehensive development of new areas, to facilitate the construction of new wells,
the implementation of new enhanced oil recovery projects and to provide developmental support with
the relevant surface facilities. We have identiﬁed our greatest development potential at our Grimbeek,
El Alba and La Carolina projects, our pilot polymer injection project at Grimbeek II, our surfactant
inﬁll drilling opportunities that we
injection project at Sur Manantiales Behr and further potential
have detected in some areas. The development group is formed of 18 experts and includes geologists,
geophysicists, engineers, petrophysicists, technicians and a team leader.

At Santa Cruz in 2010, we implemented 10 integral development projects across 4 development
areas (Las Heras, El Guadal, Los Perales and Can˜ ado´ n Seco), comprising a total portfolio of 82
projects. The principal integral projects include Cerro Grande, Maurek, Seco Leo´ n and Los Perales.
161 wells have been drilled in connection with these projects, which, inclusive of associated facilities
costs, represent a total estimated investment of U.S.$296 million. The main objective of these integral
projects is the comprehensive development of such areas through the construction of new wells,
implementation of new enhanced oil recovery projects and to provide development support with the
appropriate surface facilities. We will maintain these projects through 2011.

Non-operated areas

In block CNQ7A, operated by Petro Andina Resources Argentina S.A. (PAR) in which we have
a 50% working interest, the delineation of the El Corcobo Norte, Jagu¨ el Casa de Piedra, Cerro
Huanul Sur and Puesto Pinto Reservoirs was completed in 2009 and development of these reservoirs
has begun. In 2009, a water injection pilot project in Cerro Huanul Sur was completed with better
results than expected.

During 2010, exploratory wells Lo-x-1 and Lo-x-2 were drilled. Lo-x-2 was tested and is

currently under evaluation. Lo-x-1 is currently close to completion.

On September 8, 2010, there was a ﬁre at the platform site AM-2, Magallanes ﬁeld, operated by
Sipetrol and located offshore off the Strait of Magellan. There was no environmental damage or
serious injuries. As a consequence of the incident, the ﬁeld was out of production until December
2010, when conditions returned to normal operation in the damaged platform. Production is expected
to be completely normalized through the ﬁrst half of 2011. The deferred production is 900 m3/d of
oil and 2.1 MMm3/d of gas (gross value).

In the Tierra del Fuego area, operated by Apache Corp, where YPF holds a 30% working
interest, some brownﬁeld exploration activity was performed. The 3D seismic interpretation supplied

37

tools to generate many drilling projects, mainly in the block’s southern area. During 2010, the Bajo
Guadaloso (BGO-x-2001 and BGO-a-2002), Entre Lagos
(EL-x-2001) and Bodega (BO-x-2001)
projects in the Los Chorrillos reserve area were performed with success in Bajo Guadaloso and Entre
Lagos. The operator’s strategy is to continue with exploration activity in small geological structures in
Los Chorrillos and to start other exploration activities in the southernmost extreme, called the Uribe
section.

Activities in the Unites States, Guyana and Uruguay

For information regarding our exploration and development activities in the United States,

Guyana and Uruguay, see ‘‘—Principal properties—International properties’’.

Additional information on our present activities

The following table shows the number of wells in the process of being drilled as of December

31, 2010.

Number of wells in the process of being drilled

Argentina ...........................................................................................................
Rest of South America ......................................................................................
North America...................................................................................................

Total ..................................................................................................................

As of December 2010

Gross

Net

65
—
—

65

60
—
—

60

Delivery commitments

We are committed to providing ﬁxed and determinable quantities of crude oil and natural gas in

the near future under a variety of contractual arrangements.

With respect to crude oil, we sell substantially all of our Argentine production to our Reﬁning
and Marketing business segment to satisfy our reﬁning requirements. As of December 31, 2010, we
were contractually committed to deliver 74 mbbl of crude oil in the future, generally under short term
delivery contracts. According to our estimates as of December 31, 2010, crude oil commitments could
be met with our own production.

As of December 31, 2010, we were contractually committed to deliver 47,549 mmcm of natural
gas in the future, of which approximately 20,819 mmcm will have to be delivered in the period from
2011 through 2013. According to our estimates as of December 31, 2010, our contractual delivery
commitments for the next three years could be met with our own production and, if necessary, with
purchases from third parties.

However, since 2004 the Argentine government has established regulations for both the export
and internal natural gas markets which have affected Argentine producers’ ability to export natural
gas. Consequently, since 2004 we have been forced in many instances to partially or fully suspend
natural gas export deliveries that are contemplated by our contracts with export customers. Provisions
totaling Ps.411 million, Ps.139 million and Ps.61 million have been recorded in 2010, 2009 and 2008,
respectively, in connection with our contractual commitments in the natural gas export market.

Among the regulations adopted by the Argentine government, on June 14, 2007, the Argentine
Secretariat of Energy passed Resolution No. 599/07, according to which we were compelled to enter
into an agreement with the Argentine government regarding the supply of natural gas to the domestic
market during the period 2007 through 2011 (the ‘‘Agreement 2007-2011’’). It must be noted that
YPF has not entered into any contractual commitment to supply natural gas to the domestic market.
The purpose of the Agreement 2007-2011 is to guarantee the supply of natural gas to the domestic
market at the demand levels registered in 2006, plus the growth in demand by residential and small
‘‘—Regulatory Framework and Relationship with the Argentine
commercial
Government—Market Regulation’’ and ‘‘Risk Factors—We are subject to direct and indirect export
restrictions, which have affected our results of operations and caused us to declare force majeure
under certain of our export contracts.’’ According to our estimates as of December 31, 2010, supply

customers. See

38

requirements under the Agreement 2007-2011 (which we were compelled to enter into and which was
approved by a resolution that has been challenged by us) could be met with our own production and,
if necessary, with purchases from third parties. Additionally, on October 4, 2010, ENARGAS issued
Resolution No. 1410/2010, which approves the ‘‘Procedimiento para Solicitudes, Conﬁrmaciones y
Control de Gas’’ setting new rules for natural gas dispatch applicable to all participants in the gas
industry and imposing new and more severe priority demand gas restrictions on producers. See ‘‘—
Regulatory Framework and Relationship with the Argentine Government—Market Regulation.’’

We have appealed the validity of

the aforementioned regulations and have invoked the
occurrence of a force majeure event (government action) under our export natural gas purchase and
sales agreements, although certain counterparties to such agreements have rejected our position. See
‘‘Item 8. Financial Information—Legal Proceedings—Argentina—Accrued, probable contingencies—
Alleged defaults under natural gas
Information—Legal
Proceedings—Argentina—Non-accrued, possible contingencies—Claims related to the gas market and
others’’ and ‘‘Item 8. Financial Information—Legal Proceedings—Argentina—Non-accrued, remote
contingencies—Arbitration with AES Uruguaiana Empreendimentos S.A. (AESU), Companhia de Ga´ s
do Estado do Rı´o Grande do Sul (Sulga´ s) and Transportadora de Gas del Mercosur S.A. (TGM).’’

‘‘Item 8. Financial

supply contracts’’,

Natural gas supply contracts

The Argentine government has established regulations for both the export and internal natural
gas markets which have affected Argentine producers’ ability to export natural gas under their
contracts. YPF’S principal supply contracts are brieﬂy described below.

We are currently committed to supply a daily quantity of 125 mmcf/d to the Methanex plant in
Cabo Negro, Punta Arenas, in Chile (under four agreements which expire between 2017 and 2025).
Pursuant to instructions from the Argentine government, deliveries were interrupted from 2007.

We have a 17-year contract (entered into in 1999 and subsequently modiﬁed) to supply 53
mmcf/d of natural gas to the Termoandes power plant located in Salta, Argentina. The natural gas
comes from the Noroeste basin. This power plant provides power to a high voltage line running from
Salta to Regio´ n II in Chile. We have recently renegotiated the terms of the contract, including the
possibility of terminating it in 2013.

We currently have several supply contracts with Chilean electricity producers (through the Gas
Andes pipeline linking Mendoza, Argentina to Santiago, Chile, which has a transportation capacity of
353 mmcf/d (designed capacity with compression plants)); including:

*

*

*

a 15-year contract (signed in 1998) to provide 63 mmcf/d to the San Isidro Electricity
Company (Endesa) in Quillota, Chile (all of this plant’s natural gas needs);

a 15-year contract (signed in 1999) to supply 20% of the natural gas requirements of the
electricity company, Colbun (approximately 11 mmcf/d); and

a 15-year contract (signed in 2003) to supply 35 mmcf/d to Gas Valpo, a distributor of
natural gas in Chile. This contract has been recently modiﬁed, becoming an interruptible
supply contract.

We also have a 21-year contract (entered into in 1999) to deliver 93 mmcf/d of natural gas to a
Chilean distribution company (Innergy) that distributes natural gas to residential and industrial clients
through a natural gas pipeline (with a capacity of 318 mmcf/d) connecting Loma La Lata (Neuque´n,
Argentina) with Chile.

Finally, in Chile we also have natural gas supply contracts with certain thermal power plants in
northern Chile (Edelnor, Electroandina, Nopel and Endesa) utilizing two natural gas pipelines (with a
carrying capacity of 300 mmcf/d each) connecting Salta, Argentina, to Northern Chile (Regio´ n II).
The contracts with Edelnor and Electroandina have been recently modiﬁed, becoming interruptible
supply contracts.

In Brazil, we had entered into a 20-year supply contract (signed in 2000) to provide 99 mmcf/d
of natural gas to the thermal power plant of AES Uruguaiana Empreendimentos S.A. (AESU)
through a pipeline linking Aldea Brasilera, Argentina, to Uruguayana, Brazil (with a capacity of 560
mmcf/d). See ‘‘Item 8. Financial Information—Legal Proceedings—Argentina—Accrued, probable

39

supply contracts’’ and ‘‘Item 8. Financial
contingencies—Alleged defaults under natural gas
Information—Legal Proceedings—Argentina—Non-accrued,
remote contingencies—Arbitration with
AES Uruguaiana Empreendimentos S.A. (AESU), Companhia de Ga´ s do Estado do Rı´o Grande do
Sul (Sulga´ s) and Transportadora de Gas del Mercosur S.A. (TGM).’’ At the moment, YPF and
Sulga´ s are in arbitration according to the Rules of Arbitration and Conciliation of the International
Chamber of Commerce (ICC).

Because of certain restrictions imposed by the Argentine government (see ‘‘—The Argentine
natural gas market,’’ below), we could not meet our export commitments and were forced to declare
force majeure under our natural gas export sales agreements, although certain counterparties have
rejected our position (see ‘‘Item 8. Financial Information—Legal Proceedings’’). As a result of actions
taken by the Argentine authorities, through measures described in greater detail under ‘‘Item 4.
Information on the Company-Regulatory Framework and Relationship with the Argentine
Government—Market Regulation—Natural gas’’, we have been forced to reduce the export volumes
authorized to be provided under the relevant agreements and permits as shown in the chart below:

Year

2008............................................
2009............................................
2010............................................

Maximum Contracted
Volumes (MCV)(1)

Restricted Volumes(2)

Percentage of
Restricted Volumes
vs. MCV

(mmcm)
5,995.5
5,920.0
6,120.4

(mmcm)
4,460.8
2,835.5
3,842.2

74.4%
47.9%
62.8%

(1) Reﬂects the maximum quantities committed under our natural gas export contracts. Includes all of our natural gas export

contracts pursuant to which natural gas is exported to Chile and Brazil.

(2) Reﬂects the volume of contracted quantities of natural gas for export that were not delivered.

The Argentine natural gas market

We estimate (based on preliminary reports of amounts delivered by transport companies) that
natural gas consumption in Argentina totaled approximately 1,555 bcf in 2010. We estimate that the
number of users connected to distribution systems throughout Argentina amounted to approximately
7.6 million as of December 31, 2010. The domestic natural gas market has grown signiﬁcantly over
recent years, driven by the forces of economic growth and domestic price constraints; we believe that
the natural gas market will continue to grow, though not at the same rate as it has recently done.

In 2010, we sold approximately 36% of our natural gas to local residential distribution
companies, 10% to NGV (Natural Gas Vehicle), approximately 52% to industrial users (including
Mega and Profertil) and power plants, and approximately 2% in exports to foreign markets
(principally Chile). Sales are affected by increased consumption by residential consumers during winter
months (June-August). During 2010, approximately 80% of our natural gas sales were produced in
the Neuquina basin. In 2010, our domestic natural gas sales volumes were 10% less than those in
2009, primarily as a result of the decrease in our purchases from Bolivia (in particular, during those
months of 2010 in which a new purchase contract was been negotiated with resulted in a decrease of
our sales of natural gas purchased from Bolivia).

The Argentine government has taken a number of steps aimed at satisfying domestic natural gas
demand, including pricing regulations, export controls and higher export taxes and domestic market
injection requirements. These restrictions were imposed on all Argentine exporting producers, affecting
natural gas exports from every producing basin. See ‘‘—Delivery commitments—Natural gas supply
contracts’’. Exporting producers, such as us, have no choice but to comply with the Argentine
government’s directions to curtail exports in order to supply gas to the domestic market, whether
such directions are issued pursuant to resolutions or otherwise. The above-mentioned Resolutions
provide penalties for non-compliance. Rule SSC No. 27/2004 issued by the Undersecretary of Fuels
(‘‘Rule 27’’), for example, punishes the violation of any order issued thereunder by suspending or
revoking the production concession. Resolutions No. 659 and No. 752 also provide that producers
not complying with injection orders will have their concessions and export permits suspended or

40

revoked and state that pipeline operators are prohibited from shipping any natural gas injected by a
non-complying exporting producer.

The Argentine government began suspending natural gas export permits pursuant to Rule 27 in
April 2004, and in June 2004 the Argentine government began issuing injection orders to us under
Resolution No. 659. Thereafter, the volumes of natural gas required to be provided to the domestic
market under the different mechanisms described above have continued to increase substantially. The
regulations pursuant to which the Argentine government has restricted natural gas export volumes in
most cases do not have an express expiration date. Likewise, we have not received any documentation
indicating that the Argentine government will suspend or withdraw these actions. Accordingly, we are
unable to predict how long these measures will be in place, or whether such measures or any further
measures adopted will affect additional volumes of natural gas.

See ‘‘—Regulatory Framework and Relationship with the Argentine Government’’ for additional

information on these and other related regulations.

Argentine natural gas supplies

Most of our proved natural gas reserves in Argentina are situated in the Neuquina basin
(approximately 72% as of December 31, 2010), which is strategically located in relation to the
principal market of Buenos Aires and is supported by sufﬁcient pipeline capacity during most of the
year. Accordingly, we believe that natural gas from this region has a competitive advantage compared
to natural gas from other regions. The capacity of the natural gas pipelines in Argentina has proven
in the past to be inadequate at times to meet peak-day winter demand, and there is no meaningful
storage capacity in Argentina. Since privatization,
local pipeline companies have added capacity,
improving their ability to satisfy peak-day winter demand but no assurances can be given that this
additional capacity will be sufﬁcient to meet demand.

In order to bridge the gap between supply and demand, especially with respect to peak-day
winter demand, the Argentine government has entered into gas import agreements. The Framework
Agreement between the Bolivian and the Argentine governments (executed on June 29, 2006) provides
for natural gas imports from Bolivia to Argentina to be managed by ENARSA. In May 2010, we
accepted the offer made by ENARSA for the sale to us of a minimum amount of 2.5 mmcm/d of
natural gas obtained by ENARSA from the Republic of Bolivia through May 1, 2011.

YPF provides regasiﬁcation services to ENARSA. YPF has executed a Charter Party Agreement
to provide and operate a regasiﬁcation vessel, which is moored at the Bahı´a Blanca Port facilities.
Using the vessel for the conversion of liqueﬁed natural gas (LNG) into its gaseous state (which allows
for the supply of up to 8 additional mmcm/d of natural gas), a volume of approximately 1,801
mmcm of natural gas has been injected into the pipeline linking to the national network, most of
which was supplied during the peak demand period, i.e., winter. The contractual regasiﬁcation period
was extended, since 2009, to the rest of the year at the request of ENARSA. In accordance with the
Extension Agreement, the 2010 regasiﬁcation season began on May 1 and ended on October 30.
During October, the contract that YPF signed with Excelerate Energy SRL, Excelerate Energy LP
and ENARSA was extended, with the objective of continuing to give services of regasiﬁcation from
November 1, 2010 until April 30, 2011. The current success of the Bahı´a Blanca project in addition
to the continued growth of the domestic demand encourages YPF and ENARSA to further analyze
new alternatives to consolidate the position of LNG in the Argentina energy matrix. Both companies
have agreed to constitute a joint venture (in which each company will hold a 50% working interest)
to operate in Parana´ de las Palmas river, near Escobar,
in the Province of Buenos Aires, a new
regasiﬁcation project similar to the one operating in Bahı´a Blanca. Start up is expected by May 2011.

Natural gas transportation and storage capacity

Decree No. 180/2004 created two trust funds to help ﬁnance an expansion of the North Pipeline
operated by Transportadora Gas del Norte S.A. (TGN), whose capacity increased by 1.8 mmcm/d
(63.6 mmcf/d) in 2005, and an expansion of the San Martı´n Pipeline operated by Transportadora Gas
del Sur S.A.
in 2005. Both
(TGS), whose capacity increased by 2.9 mmcm/d (102.4 mmcf/d)
expansions are currently operating. In 2008, there was an additional expansion of approximately 67
mmcf/d in the pipelines operated by TGS, and additional works were completed in 2009.

41

Additionally, during 2010, a new expansion of the San Martı´n pipeline (located in the Strait of
Magellan and connected to compression plants in the mainland) with an increase in capacity of 5
mmcm/d (176.6 mmcf/d) was completed and is currently in operation.

Natural gas is delivered by us through our own gathering systems to the trunk lines from each
of the major basins. The capacity of the natural gas transportation pipelines in Argentina is mainly
used by distribution companies. A major portion of the available capacity of the transportation
leaving capacity available for
pipelines is booked by ﬁrm customers, mainly during the winter,
interruptible customers to varying extents throughout the rest of the year.

We have utilized natural underground structures

located close to consuming markets as
underground natural gas storage facilities, with the objective of storing natural gas during periods of
low demand and selling the natural gas stored during periods of high demand. Our principal gas
storage facility, ‘‘Diadema,’’ is located in the Patagonia region, near Comodoro Rivadavia City. The
injection of natural gas into the reservoir started in January 2001.

Other investments and activities

Natural gas liquids
We participated in the development of Mega to increase its ability to separate liquid petroleum
products from natural gas. Mega allowed YPF, through the fractionation of gas liquids, to increase
production at the Loma La Lata gas ﬁeld by approximately 5.0 mmcm/d in 2001.

We own 38% of Mega, while Petrobras and Dow Chemical have stakes of 34% and 28%,

respectively.

Mega operates:

*

*

*

*

A separation plant, which is located in the Loma La Lata, in the province of Neuque´n.

A natural gas liquids fractionation plant, which produces ethane, propane, butane and
natural gasoline. This plant is located in the city of Bahı´a Blanca in the province of
Buenos Aires.

A pipeline that links both plants and that transports natural gas liquids.

Transportation, storage and port facilities in the proximity of the fractionation plant.

Mega commenced operations at the beginning of 2001. Mega’s maximum annual production
capacity is 1.35 million tons of natural gasoline, LPG and ethane. YPF is Mega’s main supplier of
natural gas. The production of the fractionation plant is used mainly in the petrochemical operations
of Petroquı´mica Bahı´a Blanca (‘‘PBB’’) and is also exported by tanker to Petrobras’ facilities in
Brazil.

Electricity market – generation
We participate in three power stations with an aggregate installed capacity of 1,622 megawatts

(‘‘MW’’):

*

*

*

a 45% interest in Central Te´rmica Tucuma´ n (410 MW combined cycle)
Pluspetrol Energy Sociedad Ano´ nima (‘‘Pluspetrol Energy’’);

through

a 45% interest in Central Te´rmica San Miguel de Tucuma´ n (370 MW combined
cycle) through Pluspetrol Energy; and

a 40% interest in Central Dock Sud (775 MW combined cycle and 67 MW gas
turbines), directly and through Inversora Dock Sud S.A.

In 2010, these plants collectively generated approximately 8,960 GWh in the aggregate.

Additionally, we own assets that are part of Filo Morado, which has an installed capacity of 63

MW. However the relevant facilities have not been in operation since November 2008.

We also own and operate power plants supplied with natural gas produced by us, which

produce power for use by us in other business units:

*

Los Perales power plant (74 MW), which is located in the Los Perales natural gas
ﬁeld;

42

*

*

Chihuido de la Sierra Negra power plant (40 MW); and

the power plant located at the Plaza Huincul reﬁnery (40 MW).

Natural gas distribution
We currently hold through our subsidiary YPF Inversora Energe´tica S.A. (‘‘YPF Inversora
Energe´tica’’) a 45.33% stake in Gas Argentino S.A. (‘‘GASA’’), which in turn holds a 70% stake in
Metrogas S.A. (‘‘Metrogas’’), which is a natural gas distributor in southern Buenos Aires and one of
the main distributors in Argentina. During 2010, Metrogas distributed approximately 19.6 mmcm of
natural gas per day to 2 million customers in comparison with approximately 20.5 mmcm of natural
gas per day distributed to 2 million customers in 2009.

GASA’s debt issues. The economic crisis that affected the country at the end of 2001 and
beginning of 2002 caused a severe deterioration of the ﬁnancial and operational situation of GASA.
Thus the decision was made on March 25, 2002 to suspend payment of principal and interest on its
entire ﬁnancial debt. From then on, Metrogas’ management has focused on an efﬁcient and rational
use of its cash ﬂow in order to be able to comply with all of the legal requirements agreed with the
Argentine government with respect to its services. After negotiating a restructuring of the outstanding
debt with its creditors, GASA reached and executed on December 7, 2005 an agreement (the Master
Restructuring Agreement, or ‘‘MRA’’) with its creditors, by which they would exchange debt for
equity in GASA and/or Metrogas. The MRA was presented to the Argentine National Antitrust
Protection Board (Comisio´n Nacional de Defensa de la Competencia or ‘‘CNDC’’) and ENARGAS,
and was subject to their approval as a condition precedent to the closing of the MRA. The MRA
included a creditors’ option to terminate the agreement if the closing of the debt restructuring had
not occurred by December 7, 2006. The MRA obtained ENARGAS’ approval but the CNDC’s
approval was pending. On May 15, 2008, certain holders of
the bonds communicated to YPF
Inversora Energe´tica that they were terminating the MRA. After the termination of the MRA, three
different entities claiming to be holders of GASA bonds commenced four different
judicial
proceedings against GASA aiming to collect a total of U.S.$46 million, including interest and fees,
them, Coolbrand LLC, started a separate proceeding (‘‘Coolbrand c/Gasa s/accio´n
and one of
subrogatoria’’). On May 11, 2009, GASA was notiﬁed of a bankruptcy petition brought by
Continental Energy Investment LLC, and on May 19, 2009, GASA ﬁled a voluntary reorganization
petition (‘‘concurso preventivo’’), which was approved on June 8, 2009. The period to verify credits
ended on October 7, 2009. On February 10, 2010, the judge declared all the credits veriﬁed but for
one presented by one of GASA’s advisors. GASA now has an exclusivity period to negotiate with the
veriﬁed creditors. On March 12, 2010, GASA ﬁled motions for review (‘‘incidentes de revisio´n’’) of
credits veriﬁed by Coolbrand LLC, Amanda Venture, Latam Energy and Continental Energy. The
ﬁling of these motions does not suspend the voluntary reorganization petition.

On August 9, 2010 the judge decided, taking into consideration Metrogas S.A.’s voluntary
reorganization petition, to modify and extend the date to present GASA’s proposal to the creditors to
March 9, 2012. The Court of Appeals has conﬁrmed such decision.

Metrogas’ debt issues. In 2006, Metrogas reached an agreement with its main creditors in order
to restructure its ﬁnancial debt and align its future ﬁnancial commitments to the expected generation
of funds. The main objective of the restructuring process was to modify certain terms and conditions
included in its outstanding loans and negotiable agreements by adjusting interest rates and the
amortization period so as to align them with the expected cash ﬂow required for repayment of the
indebtedness. Accordingly, on April 20, 2006, Metrogas entered into an out-of-court preventive
agreement with creditors representing approximately 95% of its unsecured indebtedness, which became
(Acuerdo
effective in May 2006.
Transitorio) with the Unit for the Renegotiation and Analysis of Public Service Contracts (Unidad de
Renegociacio´n y Ana´lisis de Contratos de Servicios Pu´blicos, or ‘‘UNIREN’’), including a limited tariff
increase that
is intended to fund certain projects that Metrogas is required to undertake. The
government approved this agreement and it has been published in the Ofﬁcial Gazette on April 14,
2009 but it has not been implemented since the new tariff chart has not yet been issued. The
negotiation of the general tariff of Metrogas (Acta Acuerdo de Renegociacio´n Contractual Integral)
with the UNIREN remains pending.

In October 2008, Metrogas executed an interim agreement

43

Metrogas’ ﬁnancial condition continued to deteriorate in 2009. On June 17, 2010, the board of
legal advisors and considering
inability to fulﬁll certain payment obligations, decided that Metrogas should ﬁle a

directors of Metrogas, following the advice of Metrogas’ external
Metrogas’
voluntary reorganization petition (‘‘concurso preventivo’’), which was ﬁled on such date.

On the same date, Metrogas was notiﬁed of the Resolution No. I-1260 dictated by ENARGAS,
which determined the judicial intervention of the company for a 120 days term. Antonio Go´ mez was
named Interventor of Metrogas. The resolution justiﬁes the intervention decision on the ﬁlling of a
voluntary reorganization petition by Metrogas, and states
the intervention shall control
administration and disposition acts of Metrogas which can in any manner affect the regular gas
distribution. Moreover, it orders the execution of due diligence and the determination of the value of
all Metrogas assets. Metrogas appealed such resolution and asked for a preliminary order to cease the
effects of the intervention. The request for a preliminary order was rejected on September 8, 2010.

that

15,

2010,

On July

voluntary
reorganization proceedings. The period to provide evidence on claimed credits ended on November
10, 2010 and Metrogas may recognize categories of creditors through April 20, 2011. The judge also
established March 9, 2012 as the date to formally present Metrogas’s proposal to creditors.

commencement of Metrogas’s

approved the

judge

the

The period to verify credits as well as the period to ﬁle any responses has ended, and the
ofﬁcial receiver has presented its report regarding the admission of the veriﬁed credits. The judge shall
make a decision regarding the acceptance or rejection of the creditors suggested by the ofﬁcial
receiver in his report in April 2011.

On October 18, 2010, Metrogas was notiﬁed of

I-1431 dictated by
intervention of the company for 120 additional days and
ENARGAS, which extended the judicial
ratiﬁed Mr. Antonio Go´ mez as its interventor (‘‘interventor’’). Moreover, on February 14, 2011,
Resolution No. 1612 of ENARGAS extended the intervention for 120 additional days.

the Resolution No.

As of both December 31, 2010 and December 31, 2009, YPF had an allowance for the total

value of its investment in YPF Inversora Energe´tica.

Reﬁning and Marketing

During 2010, our Reﬁning and Marketing activities
reﬁning and
lubricants, LPG, compressed
transportation, and the marketing and transportation of reﬁned fuels,
natural gas and other reﬁned petroleum products in the domestic wholesale and retail markets and
certain export markets.

included crude oil

The Reﬁning and Marketing segment is organized into the following divisions:

*

Reﬁning and Logistic Division;

*

*

*

Reﬁning Division

Logistic Division

Trading Division

*

*

Domestic Marketing Division; and

LPG General Division.

We market a wide range of reﬁned petroleum products throughout Argentina through an
extensive network of sales personnel, YPF-owned and independent distributors, and a broad retail
distribution system. In addition, we export reﬁned products, mainly from the port at La Plata. The
reﬁned petroleum products marketed by us include gasoline, diesel, jet fuel, kerosene, heavy fuel oil
and other crude oil products, such as motor oils, industrial lubricants, LPG and asphalts.

Reﬁning division

We wholly own and operate three reﬁneries in Argentina:

*

*

La Plata reﬁnery, located in the province of Buenos Aires;

Luja´ n de Cuyo reﬁnery, located in the province of Mendoza; and

44

*

Plaza Huincul reﬁnery,
‘‘reﬁneries’’).

located in the province of Neuque´n (together referred as the

Our three wholly-owned reﬁneries have an aggregate reﬁning capacity of approximately 319,500
barrels per calendar day. The reﬁneries are strategically located along our crude oil pipeline and
product pipeline distribution systems. In 2010, our crude oil production, substantially all of which
was destined to our reﬁneries, represented approximately 81% of the total crude oil processed by our
reﬁneries. Through our stake in Reﬁnor, we also own a 50% interest in a 26,100 barrel-per-calendar-
day reﬁnery located in the province of Salta, known as Campo Dura´ n.

The following table sets forth the throughputs and production yields for our three wholly-owned

reﬁneries for each of the three years ended December 31, 2010, 2009 and 2008:

For the Year Ended December 31,

2010

2009

2008

Throughput crude/Feedstock(1) ...................................................
Production
Diesel fuel ....................................................................................
Gasoline .......................................................................................
Jet fuel .........................................................................................
Base oils .......................................................................................

112.4

44.1
31.8
6.9
1.3

(mmboe)

114.0

46.0
32.5
6.5
1.1

(thousands of tons)

Fuel oil.........................................................................................
Coke.............................................................................................
LPG .............................................................................................
Asphalt.........................................................................................

1,440
906
586
205

1,214
875
550
228

120.6

46.1
31.4
6.1
1.5

2,163
875
554
148

(1) Does not include throughput for Reﬁnor. During 2010, 2009 and 2008, Reﬁnor processed approximately 4.5, 5.2 and 5.5 mmbbl,

respectively (2.2, 2.6 and 2.7 mmbbl, respectively, attributable to YPF’s interest in Reﬁnor).

During 2010, overall volumes of crude oil/feedstock processed decreased by 1.8% compared with
2009 (our reﬁnery capacity utilization was 93.2%, compared to 94.9% in 2009) due mainly to
overhauls at our reﬁneries, as well as the lower availability in the market of some speciﬁc crude oil
(Medanito) used by our reﬁneries as well as for lubricants production in our La Plata reﬁnery.
Additionally, union conﬂicts with ﬁshing workers affected the operations of Puerto Rosales, resulting
in limited crude oil availability from the Golfo San Jorge basin. In 2009, overall volumes of crude oil/
feedstock processed decreased by 5.5% compared with 2008 due mainly to scheduled maintenance
overhauls at our La Plata reﬁnery, as well as our production optimization efforts in response to
market conditions and the decrease in sales volumes in foreign markets (which decreased 37%
compared with 2008).

The La Plata reﬁnery is the largest reﬁnery in Argentina, with a nominal capacity of 189,000
barrels of crude oil per calendar day. The reﬁnery includes three distillation units, two vacuum
distillation units, two catalytic cracking units, two coking units, a coker naphtha hydrotreater unit, a
platforming unit, a gasoline hydrotreater, a diesel fuel hydroﬁnishing unit, an isomerization unit, an
FCC (ﬂuid cracking catalysts) naphtha splitter and desulfuration unit, and a lubricants complex. The
reﬁnery is located at the port in the city of La Plata, in the province of Buenos Aires, approximately
60 kilometers from the City of Buenos Aires. During 2010, the reﬁnery processed approximately 175
thousand barrels of crude oil per calendar day. The capacity utilization rate at the La Plata reﬁnery
for 2010 was 92.7%. As mentioned above, capacity utilization was affected by maintenance overhauls,
lack of Medanito oil and union conﬂicts with ﬁshing workers affecting availability of crude oil from
the Golfo San Jorge basin. In 2009, the reﬁnery processed approximately 172 thousand barrels of
crude oil per calendar day. The capacity utilization rate at the La Plata reﬁnery for 2009 was 91.2%.
The crude oil processed at the La Plata reﬁnery comes mainly from our own production in the
Neuquina and Golfo San Jorge basins. Crude oil supplies for the La Plata reﬁnery are transported

45

from the Neuquina basin by pipeline and from the Golfo San Jorge basin by vessel, in each case to
Puerto Rosales, and then by pipeline from Puerto Rosales to the reﬁnery.

In October 2009, we commenced developing a detailed engineering project for a new Gasoil
Hydrotreater Unit (HTG ‘‘B’’), seeking to comply with Resolution 478/09, which requires companies
to produce diesel fuel with a maximum level of sulfur of 500 parts per million, to be sold in large
cities. The construction of the reactor and columns has commenced, and the compressor, feed pumps,
vacuum system, ejectors, and additional equipment have been bought. The civil work in the reﬁnery
began in September 2010. Start up is expected by the ﬁrst half of 2012.

The construction of a new coker unit in La Plata Reﬁnery has been approved to increase the
coking capacity by 30% and to replace an old unit. This will allow higher utilization rates of reﬁnery.
The development of detailed engineering began in June 2010. Start up is expected by 2014.

The Luja´ n de Cuyo reﬁnery has a nominal capacity of 105,500 barrels per calendar day, the
third largest capacity among Argentine reﬁneries. The reﬁnery includes two distillation units, a
vacuum distillation unit, two coking units, one catalytic cracking unit, a platforming unit, a Methyl
TerButil Eter (‘‘MTBE’’) unit, an isomerization unit, an alkylation unit, a naphtha splitter, and
hydrocracking and hydrotreating units. During 2010,
the reﬁnery processed approximately 101
thousand barrels of crude oil per calendar day. During 2010 the capacity utilization rate was 6.3%
lower than in 2009, reaching a rate of 95.6%. The maintenance overhaul performed at the FCC
caused a reduction in the processing of crude for more than 30 days. The utilization rate was also
affected by the lack of Medanito crude oil mentioned above. In 2009,
the reﬁnery processed
approximately 107 thousand barrels of crude oil per calendar day. Because of its location in the
western province of Mendoza and its proximity to signiﬁcant distribution terminals owned by us, the
Luja´ n de Cuyo reﬁnery has become the primary facility responsible for providing the central
provinces of Argentina with petroleum products for domestic consumption. The Luja´ n de Cuyo
reﬁnery receives crude supplies from the Neuquina and Cuyana basins by pipeline directly into the
facility. Approximately 87.0% of the crude oil processed at the Luja´ n de Cuyo reﬁnery in 2010 (and
83.1% of the crude oil processed in this reﬁnery in 2009) was produced by us. Most of the crude oil
purchased from third parties comes from oil ﬁelds in Neuque´n or in Mendoza.

In November 2010, we started up a new furnace in Topping III (in the Luja´ n de Cuyo reﬁnery)
replacing the three furnaces previously in operation. Provided other upgrades are made in certain
installations, this will allow us to increase the nominal capacity of the unit by 2,500 barrels per
calendar day. In order to comply with government regulations on sulfur speciﬁcations for fuels, which
will become effective in the middle of 2012, the Luja´ n de Cuyo reﬁnery is developing two projects: a
naphtha Hydrotreater Unit (HTN II) and a gasoil Hydrotreater Unit (HDS III). The developing basic
engineering stage with respect to the ﬁrst project has been completed, while the second consists in
buying a used unit located in the Philippines.

The Plaza Huincul reﬁnery, located near the town of Plaza Huincul in the province of Neuque´n,
has an installed capacity of 25,000 barrels per calendar day. During 2010, the reﬁnery processed
approximately 22 thousand barrels of crude oil per calendar day. In this period,
the capacity
utilization rate was 7.1% lower than in 2009, reaching a rate of 86.5%. This decrease was mainly due
to the maintenance overhaul of the distillation unit in January 2010. In 2009, the reﬁnery processed
approximately 23 thousand barrels of crude oil per calendar day. The only products currently
produced commercially at the reﬁnery are gasoline, diesel fuel and jet fuel, which are sold primarily
in nearby areas and in the southern regions of Argentina. Heavier products, to the extent production
exceeds local demand, are blended with crude oil and transported by pipeline from the reﬁnery to La
Plata reﬁnery for further processing. The Plaza Huincul reﬁnery receives its crude supplies from the
Neuquina basin by pipeline. Crude oil processed at the Plaza Huincul reﬁnery is mostly produced by
us. In 2010, 23.7% of the reﬁnery’s crude supplies were purchased from third parties, while in 2009,
such purchases reached 26.4% of the reﬁnery’s crude supplies.

At the end of 2009, we completed the construction of tanks and facilities for the reception and
blending of biodiesel in order to facilitate compliance in the future with new speciﬁcations for diesel
fuel as established pursuant to Law 26,093. See ‘‘—Domestic Marketing Division.’’ At the end of
March 2010, the facility started to blend biodiesel in gasoil at 5% by volume.

46

During 1997 and 1998,

ISO (International
Organization for Standardization) 9001 (quality performance) and ISO 14001 (environmental
performance). The Luja´ n de Cuyo and Plaza Huincul reﬁneries were also certiﬁed under OHSAS
18001 (security performance) in 1999 and 2009, respectively. Between 2007 and 2010, our reﬁneries
were recertiﬁed under ISO 9001:2000, ISO 14001:2004 and OHSAS 18001:2007.

reﬁneries were certiﬁed under

each of our

Logistic division

Crude oil and products transportation and storage

We have available for our use a network of ﬁve major pipelines, two of which are wholly-owned
by us. The crude oil transportation network includes nearly 2,700 kilometers of crude oil pipelines
with approximately 640,000 barrels of aggregate daily transportation capacity of reﬁned products. We
have total crude oil
tankage of approximately 7 mmbbl and maintain terminal facilities at ﬁve
Argentine ports.

Information with respect to YPF’s interests in its network of crude oil pipelines is set forth in

the table below:

From

To

YPF
Interest

Length (km)

Daily
Capacity
(barrels per
day)

Puesto Herna´ ndez............................ Luja´ n de Cuyo reﬁnery
Puerto Rosales................................. La Plata reﬁnery
La Plata reﬁnery.............................. Dock Sud
Brandsen.......................................... Campana
Puesto Herna´ ndez/ P. Huincul/Allen Puerto Rosales
Puesto Herna´ ndez............................ Concepcio´ n (Chile)

100%
100%
100%
30%
37%
(2)

528
585
52
168
888(1)
428(3)

85,200
316,000
106,000
120,700
232,000
114,000

(1) Includes two parallel pipelines of 513 kilometers each from Allen to Puerto Rosales, with a combined daily throughput of 232,000

barrels.

(2) We hold a 36% interest in Oleoducto Transandino Argentina S.A., which operated the Argentine portion of the pipeline, and a

18% interest in Oleoducto Transandino Chile S.A., which operated the Chilean portion of the pipeline.

(3) This pipeline ceased operating on December 29, 2005.

We own two crude oil pipelines in Argentina. One connects Puesto Herna´ ndez to the Luja´ n de
Cuyo reﬁnery (528 kilometers), and the other connects Puerto Rosales to the La Plata reﬁnery (585
kilometers) and extends to Shell’s reﬁnery in Dock Sud at
(another 52
in the northern
kilometers). We also own a plant for the storage and distribution of crude oil
province of Formosa with an operating capacity of 19,000 cubic meters, and two tanks in the city of
Berisso,
in the province of Buenos Aires, with 60,000 cubic meters of capacity. We own 37% of
Oleoductos del Valle S.A., operator of an 888-kilometer pipeline network, its main pipeline being a
double 513 kilometer pipeline that connects the Neuquina basin and Puerto Rosales.

the Buenos Aires port

We hold, through Oleoducto Transandino Argentina S.A. and Oleoducto Transandino Chile
S.A., an interest
from
Argentina to Concepcio´ n in Chile. This pipeline ceased operating on December 29, 2005, as a
consequence of the interruption of oil exports resulting from decreased production in the north of the
province of Neuque´n. The assets related to this pipeline were reduced to their recovery value.

in the 428-kilometer Transandean pipeline, which transported crude oil

We also own 33.15% of Terminales Marı´timas Patago´ nicas S.A., operator of two storage and
port facilities: Caleta Co´ rdova (province of Chubut), which has a capacity of 314,000 cubic meters,
and Caleta Olivia (province of Santa Cruz), which has a capacity of 246,000 cubic meters. We also
have a 30% interest in Oiltanking Ebytem S.A., operator of the maritime terminal of Puerto Rosales,
which has a capacity of 480,000 cubic meters, and of the crude oil pipeline that connects Brandsen
(60,000 cubic meters of storage capacity) to the ESSO reﬁnery in Campana (168 km), in the province
of Buenos Aires.

In Argentina, we also operate a network of multiple pipelines for the transportation of reﬁned
length of 1,801 kilometers. We also own 16 plants for the storage and

products with a total

47

distribution of reﬁned products with an approximate aggregate capacity of 1,251,593 cubic meters.
Three of these plants are annexed to the reﬁneries of Luja´ n de Cuyo, La Plata and Plaza Huincul.
Ten of these plants have maritime or river connections. We operate 54 airplane refueling facilities (40
of them are wholly-owned) with a capacity of 24,000 cubic meters, own 27 trucks, 116 suppliers and
16 dispensers. These facilities provide a ﬂexible countrywide distribution system and allow us to
facilitate exports to foreign markets,
to government regulations.
Products are shipped mainly by truck, ship or river barge.

to the extent allowed pursuant

In January 2010, we completed the construction of tanks and facilities for the reception and
blending of ethanol in the storage plants of Luja´ n de Cuyo, Montecristo and San Lorenzo, in order
to facilitate compliance with the new speciﬁcations for gasoline set forth by Law 26,093. YPF is
currently producing this blending in the storage plants of Luja´ n de Cuyo, Montecristo and San
Lorenzo. Similar construction work in the rest of our plants is expected to be ﬁnished during the year
2011.

In 1998, our

logistic activities were certiﬁed under

ISO (International Organization for
Standardization) 9001 (quality performance) and ISO 14001 (environmental performance), and
recertiﬁed in 2008 under ISO 9001:2008 and ISO 14001:2004. In 2010,
logistics activities were also
certiﬁed under OHSAS 18001 (security performance).

Trading division

Our Trading Division sells reﬁned products and crude oil to international customers and oil to
domestic oil companies. Exports include crude oil, unleaded gasoline, diesel fuel, fuel oil, LPG, light
naphtha and virgin naphtha. This Division’s export sales are made principally to Brazil and the
Netherlands Antilles. Sales to international customers for the years 2010 and 2009 totaled Ps.3,325
million and Ps.2,878 million, respectively, 69% and 79% of which, respectively, represented sales of
reﬁned products and 31% and 21% of which, respectively, represented sales of marine fuels. On a
volume basis,
in 2010 and 2009 sales to international customers consisted of 6.3 mmbbl and 11.2
respectively, and 3.32 mmbbl and 2.49 mmbbl of marine fuels,
mmbbl of
respectively. Domestic sales of crude oil totaled Ps.467 million and Ps.485 million and 2.3 mmbbl and
3.1 mmbbl in 2010 and 2009, respectively. Domestic sales of marine fuels totaled Ps.511 million and
Ps.380 million and 1.5 and 1.4 mmbbl in 2010 and 2009, respectively. In addition, since 2010 imports
have increased, principally of high and low sulfur diesel and gasoline, totaling 3.5 mmbbl and 0.9
mmbbl, respectively, in 2010.

reﬁned products,

Domestic marketing division

Through our Marketing Division, we market gasoline, diesel fuel, LPG and other petroleum

products to the retail, agricultural and industrial segments of the market.

As of December 31, 2010, the Marketing Division’s sales network in Argentina included 1,622
retail service stations (compared to 1,632 at December 31, 2009), of which 96 are directly owned by
us, and the remaining 1,526 are afﬁliated service stations. Operadora de Estaciones de Servicio S.A.
(‘‘OPESSA’’), our wholly-owned subsidiary, operates 168 of our retail service stations, 81 of which
are directly owned by us, 26 of which are leased to ACA (Automo´ vil Club Argentino), and 61 of
which are leased to independent owners. We will continue our efforts to improve our service stations
network through the incorporation of stations in premium locations. In addition, we have a 50%
interest in Reﬁnor, company dedicated to the reﬁning, processing of gas and which operates 69 retail
service stations.

During 2010, we have developed and implemented a new design image in service stations. We
will continue to deploy this new image during 2011. Fuel sales is complemented by a development of
convenience stores (‘‘Full YPF’’ or ‘‘Full Express YPF’’) and an oil change service (‘‘YPF Boxes’’).

According to our latest internal estimates, as of December 31, 2010, we were the main retailer
in Argentina, with 30.8% of the country’s gasoline service stations, followed by Shell, Petrobras and
ESSO (recently acquired by Bridas Corporation) with shares of 15.4%, 12.8% and 10.6%, respectively.
As of December 31, 2009, our points of sale accounted for 30.9% of the Argentine market. During
2010, our market share in diesel fuel and gasoline, marketed in all segments, slightly decreased from

48

57.4% as of December 31, 2009 to 57.3% as of December 31, 2010, according to our analysis of data
provided by the Argentine Secretariat of Energy.

‘‘Red XXI’’ marketing program, released in October 1997, has signiﬁcantly improved operational
efﬁciency. This program provides us performance data for each station online and connects most of
our network of service stations. As of December 31, 2010, 1,445 stations were linked to the Red XXI
network system.

Our commercial training program (Escuela Comercial YPF), one of the programs held by the
Know How Commercial area,
is focused on performance, employability, operational excellence and
customer satisfaction. Escuela Comercial YPF is aligned with our business strategy to promote a
sense of belonging and common vision shared by all the members of our business chain. During
2010, a total of 6,034 people attended over 197,800 hours of training, 26,900 hours of which were
dedicated to the formation of trainers in over 1,600 service stations of our network; and 1,823 people
belonging to the 170 independently operated service stations completed 76,000 hours of training.

Over 250 commercial representatives from the retail,

industrial and agro-industrial segments,
attended a new program focused on the development of skills needed to perform well under the new
market conditions. They received over 8,000 hours of formal training along with 8,500 hours of
practice training.

YPF-owned service stations have established a quality standard superior to the ISO standards.
This model was developed during 2008 and 2009, and was implemented during 2010. This model will
be adapted to be included in the afﬁliated service station operators guide in the future. YPF-owned
gas service stations have been certiﬁed under ISO 14000 standards for the past ten years, and a small
number of such service stations have been certiﬁed under OHSAS 18001 and ISO 22000 in the past
three years.

Our specialties unit has an integral management system, which is ISO 9001, TS16949, ISO14001
and OHSAS 18001 certiﬁed, and which includes design, production, storage, distribution and technical
support for lubricants, asphalts and parafﬁn. It is responsible for the distribution of a wide variety of
products, including lubricants, greases, asphalt, parafﬁn, base lubricants, decanted oil, carbon dioxide
and coke for the local and export markets.

Our sales to the agro-industrial sector are principally conducted through a network of 121
distribution bases, eight of which are owned by as and are identiﬁed as ‘‘YPF Directo’’. Through this
lubricants, agrochemicals, and ‘‘silobolsa’’ among other products,
network we sell
offering a comprehensive portfolio to the producer. Sales to transportation,
industrial, and mining
sectors are made primarily through our direct sales efforts. The main products sold in the domestic
wholesale market include diesel fuel, fuel oil, lubricants and specialties. Sales to the aviation sector
are made directly by us. The products sold in this market are jet fuel and aviation gasoline.

fertilizers, oil,

During 2010, our lubricants and specialties sales to domestic markets increased by approximately
30% compared to 2009. We export lubricants to eight countries. Sales to export markets decreased by
approximately 2% from Ps.202 million at December 31, 2009 to Ps.198 million in 2010. During 2010,
total lubricants sales increased by 20.6%, total asphalt sales increased by 10.2% and total specialties
sales increased by 42.3%. Our lubricants and specialties unit followed a strategy of differentiation
allowing it to achieve and maintain the leading position in the Argentinean market. Our market share
as of December 31, 2010 was 38%, compared to 36.9% as of December 31, 2009, according to our
latest internal estimates. Lead domestic automotive manufacturers Ford, Grupo Volkswagen (VW,
Audi, Seat), Scania, Porsche, Subaru and General Motors, exclusively use and recommend YPF-
branded lubricant products.

Continuing with our commitment to the environment and the development of alternative fuels,
we completed the bioenergy program 2007-2010. This program of research and development at a
national
level was developed together with the ‘‘Universidad Nacional de Cuyo’’ and other
governmental entities, growing experimental crops for the production of biofuels, aimed at promoting
development in Argentina’s regional economies, and is currently still in a phase of deﬁnition of the
future lines of work. Our main objective in the ﬁeld of biofuels is to ensure the needs of biofuel for
the domestic market and to build partnerships for the research and development of alternative energy
sources including second generation biofuels. Pursuant to law 26,093, effective since the ﬁrst quarter

49

of 2010, we began to supply the market with fossil fuels mixed with biodiesel and bioethanol in the
proportions determined by the relevant authority throughout the country.

LPG general division

Production

We are one of the largest LPG producers in Argentina, with a yearly production of 530,929

tons in 2010 (not including production of LPG destined for petrochemical usage).

We also have a 50% interest in Reﬁnor, a jointly-controlled company, which produced 248,979

tons of LPG in 2010.

The LPG division obtains LPG from natural gas processing plants and from its reﬁneries and

petrochemical plant. It also purchases LPG from third parties as detailed in the following table:

LPG from Natural Gas Processing Plants:(1)
General Cerri ...........................................................................................................................
El Porto´ n .................................................................................................................................
San Sebastia´ n ...........................................................................................................................

Purchase
(tons)

2010

27,429
130,640
17,855

Total Upstream ....................................................................................................................

175,925

LPG from Reﬁneries and Petrochemical Plants:
La Plata Reﬁnery.....................................................................................................................
Luja´ n de Cuyo Reﬁnery ..........................................................................................................
Ensenada Petrochemical Plant.................................................................................................

Total Reﬁneries & Petrochemical Plants(2) ..........................................................................

LPG purchased from jointly controlled companies:(3) ...............................................................

LPG purchased from unrelated parties .....................................................................................

203,010
130,668
21,326

355,004

76,531

32,250

Total .....................................................................................................................................

639,710

(1) The San Sebastian plant is a joint-venture in which we own a 30% interest; El Porto´ n is 100% owned by us; General Cerri belongs

to a third party with which we have a processing agreement.

(2) This production does not include LPG used as petrochemical feedstock (oleﬁns derivatives, polybutenes and maleic).
(3) Purchased from Reﬁnor.

LPG marketing

We sell LPG to the foreign market, the domestic wholesale market and to distributors that
supply the domestic retail market. The LPG general division does not directly supply the retail
market and such market is supplied by Repsol YPF Gas, which is not a YPF company.

50

Our LPG sales for the years 2010 and 2009 can be broken down by market as follows:
Sales

Domestic market
Retail to related parties under common control ...............................................
Other bottlers/propane network distributors.....................................................
Other wholesales ................................................................................................
Foreign market/exports
Exports...............................................................................................................

2010

2009

(tons)

273,642
126,432
72,619

257,156
112,252
101,034

162,333

212,053

Total sales ..........................................................................................................

635,026

682,494

Total sales of LPG (excluding LPG used as petrochemical feedstock) to all markets (domestic
and foreign markets combined) were Ps.1,006 million and Ps.699 million in 2010 and 2009,
respectively.

Chemicals

Petrochemicals are produced at our petrochemical complexes in Ensenada and Plaza Huincul, as

well as in Bahı´a Blanca, where Profertil’s petrochemical complex is located.

Our petrochemical production operations in Ensenada are closely integrated with our reﬁning
activities (La Plata reﬁnery). This close integration allows for a ﬂexible supply of feedstock, the
efﬁcient use of byproducts (such as hydrogen) and the supply of aromatics to increase gasoline octane
levels.

The main petrochemical products and production capacity per year are as follows:

Ensenada:

Aromatics

BTX (Benzene, Toluene, Mixed Xylenes)..................................................................
Paraxylene..................................................................................................................
Orthoxylene................................................................................................................
Cyclohexane ...............................................................................................................
Solvents ......................................................................................................................

Oleﬁns Derivatives

MTBE ........................................................................................................................
Butene I .....................................................................................................................
Oxoalcohols ...............................................................................................................
TAME........................................................................................................................

LAB/LAS

LAB ...........................................................................................................................
LAS............................................................................................................................

Polybutenes

PIB .............................................................................................................................

Maleic

Maleic Anhydride ......................................................................................................

Plaza Huincul:

Capacity

(tons per year)

244,000
38,000
25,000
95,000
66,100

60,000
25,000
35,000
105,000

52,000
25,000

26,000

17,500

Methanol....................................................................................................................

411,000

Bahı´a Blanca(1):

Ammonia/Urea ..........................................................................................................

933,000

(1) Corresponds to our 50% interest in Profertil.

51

Natural gas, the raw material for methanol,

is supplied by our Exploration and Production
business segment. The use of natural gas as a raw material allows us to monetize reserves,
demonstrating the integration between the chemical and the upstream units.

We also use high carbon dioxide-content natural gas in our methanol production, allowing us to

keep our methanol plant working at 50% of its production capacity during the winter period.

The raw materials for petrochemical production in Ensenada, including virgin naphtha, propane,

butane and kerosene, are supplied mainly by the La Plata reﬁnery.

In 2010 and 2009, 85.5% and 73%,

(including
propylene) were made in the domestic market. Petrochemicals exports are destined to Mercosur
countries, the rest of Latin America, Europe and the United States.

respectively, of our petrochemicals

sales

We also participate in the fertilizer business directly and through Profertil, our 50%-owned
is jointly controlled by us and Agrium (a worldwide leader in fertilizers), that

subsidiary. Profertil
produces urea and ammonia and started operations in 2001.

Our Ensenada petrochemical plant was certiﬁed under ISO 9001 in 1996 and recertiﬁed in June
2010 (version 2008). The La Plata petrochemical plant was certiﬁed under ISO 14001 in 2001 and
recertiﬁed (version 2004) in June 2010. The plant was also certiﬁed under OHSAS 18001 in 2005 and
recertiﬁed in June 2010 (version 2007). For the periods 2008 and 2009, the plant also certiﬁed the
inventory of CO2 emissions under ISO 14064:1. The laboratory of our Ensenada petrochemical plant
was certiﬁed under ISO 17025 (Version 2005) in 2005 and recertiﬁed in 2008.

Our Methanol plant was certiﬁed under ISO 9001 (version 2000)

in December 2001, and
recertiﬁed in June 2010 (version 2008), under ISO 14001 (Version 2000) in October 2007 and OHSAS
18001 in December 2008.

During 2010, we have initiated the construction of a new Continuous Catalytic Reforming unit
(CCR) in the Ensenada petrochemical complex. Total investment is estimated to be U.S.$348 million.
Start up is expected by the second half of 2012. New production is expected to meet the growing
demand of high octane gasoline in the local market, while at the same time the CCR is expected to
provide hydrogen to the new Hydrotreater Unit in our La Plata Reﬁnery.

Research and Development

We have a research and development facility located in La Plata, Argentina. Our R&D projects
and activities relate to the entire value chain of the business, including exploration of new sources of
oil or gas, extraction and conditioning for transportation,
transformation and manufacture of
products at industrial complexes, and distribution to the end customer. In 2010, our technology unit
allocated approximately U.S.$8 million to R&D activities, approximately 30% of which were allocated
to cooperation with external technology centers. In order to support these R&D activities, we invested
approximately U.S.$3 million in new laboratory equipment.

YPF pursues an active policy of cooperation with technology centers and universities in the
public and private sector, nationally and internationally. Our 2010 budget
for such cooperation
arrangements was approximately U.S.$2.9 million, U.S.$1.9 million more than the previous year. Four
important research and development projects are being subsidized in part by Fontar (one of the
Argentine Government’s technology funds), two of them since 2009 and the other two since their
technological projects were presented to the
adoption in late 2010. In addition,
Fonarsec program (a new Argentine Government’s fund), based on cross-industry partnerships,
in
which YPF participates for the ﬁrst time.

two important

Uncertainty about what will be the dominant technologies in the future, prospective R&D
results and business cycles have led us to develop a Strategic Technology Plan as part of our business
the company’s business: exploration and production of
strategy. The plan covers all parts of
hydrocarbons, the natural gas value chain, oil reﬁnery and its derivatives and petrochemicals,
in
addition to anticipating the future diversiﬁcation of the use of energy, production of biofuels and
electric transport.

R&D efforts are also focused on the development of enhanced oil recovery technologies (EOR),
to increase recovery of oil from mature ﬁelds, and the development of new processes and materials to

52

improve our facilities’ operation costs. In addition, the optimization and reuse of production water
and hydrocarbon exploration and exploitation of non-conventional resources, remain our most
important challenges, requiring the development and application of very speciﬁc technologies.

Regarding reﬁning and marketing of petroleum products, we apply our technological knowledge
to optimize reﬁnery operations and improve product quality, with a strong focus on achieving energy
efﬁciency and environmental improvements.

In the petrochemical business, our R&D activities are mainly directed towards the development
of new products with higher added value, such as special solvents, fertilizers and several agricultural
products. Sulphur extracted from fuels has proved useful
these new
petrochemical products.

in the development of

Our 2010 R&D project portfolio was comprised of a total of 56 projects, 20 of which were
under execution and 36 in respect of which a technical-economic feasibility analysis was being
conducted.

YPF works in cooperation with Repsol YPF’s R&D center, to carry out R&D programs of

mutual interest.

Competition

The deregulation and privatization process created a competitive environment in the Argentine
oil and gas industry. In our Exploration and Production business, we encounter competition from
major international oil companies and other domestic oil companies in acquiring exploration permits
and production concessions. Our Exploration and Production business may also encounter
competition from oil and gas companies created and owned by certain Argentine provinces, including
La Pampa, Neuque´n and Chubut, as well as from ENARSA, the Argentine state-owned energy
company, especially in light of the transfer of certain hydrocarbon properties to ENARSA and the
Argentine provinces in 2007. See ‘‘—Regulatory Framework and Relationship with the Argentine
Government—Overview’’ and ‘‘—Regulatory Framework and Relationship with the Argentine
Government—Law No. 26,197.’’ In our Reﬁning and Marketing and Chemicals businesses, we face
competition from several major international oil companies, such as ESSO (a former subsidiary of
ExxonMobil which was recently acquired by Bridas Corporation), Shell and Petrobras, as well as
several domestic oil companies. In our export markets, we compete with numerous oil companies and
trading companies in global markets.

We operate in a dynamic market in the Argentine downstream industry and the crude oil and
natural gas production industry. Crude oil and most
to
international supply and demand and Argentine regulations and, accordingly, may ﬂuctuate for a
variety of reasons. Some of the prices in the internal market are controlled by local authorities. See
‘‘—Regulatory Framework and Relationship with the Argentine Government.’’ Changes in the
domestic and international prices of crude oil and reﬁned products have a direct effect on our results
of operations and on our levels of capital expenditures. See ‘‘Item 3. Key Information—Risk
Factors—Risks Relating to the Argentine Oil and Gas Business and Our Business—Oil and gas prices
could affect our level of capital expenditures.’’

reﬁned products prices are subject

Environmental Matters

YPF—Argentine operations

remediation of

soil or water contaminated with hazardous or

Our operations are subject to a wide range of laws and regulations relating to the general
including air emissions and waste water, the
impact of industrial operations on the environment,
fuel
disposal or
speciﬁcations to address air emissions and the effect of the environment on health and safety. We
have made and will continue to make expenditures to comply with these laws and regulations. In
Argentina, local, provincial and national authorities are moving towards more stringent enforcement
of applicable laws. In addition, since 1997, Argentina has been implementing regulations that require
our operations to meet stricter environmental standards that are comparable in many respects to
those in effect
in the United States and in countries within the European Community. These
regulations establish the general framework for environmental protection requirements, including the

toxic waste,

53

establishment of ﬁnes and criminal penalties for their violation. We have undertaken measures to
achieve compliance with these standards and are undertaking various abatement and remediation
projects, the more signiﬁcant of which are discussed below. We cannot predict what environmental
legislation or regulation will be enacted in the future or how existing or future laws will be
administered or enforced. Compliance with more stringent
laws or regulations, as well as more
vigorous enforcement policies of regulatory agencies, could require additional expenditures in the
including for the installation and operation of systems and equipment for remedial
future by us,
measures, and could affect our operations generally. In addition, violations of
these laws and
regulations may result in the imposition of administrative or criminal ﬁnes or penalties and may lead
to personal injury claims or other liabilities.

In 2009 and 2010, we continued making investments in order to comply with new Argentine fuel
speciﬁcations that are scheduled to come into effect gradually through 2016, pursuant to Resolution
No. 1283/06 (amended by Resolution No. 478/2009) of the Argentine Secretariat of Energy (which
replaces Resolution No. 398/03) relating to, among other things,
fuels. In
addition, we have developed detailed engineering packages and have invested in equipment for the
construction of diesel fuel oil desulphuration units at La Plata and Luja´ n de Cuyo reﬁneries and FCC
naphtha desulphuration unit in Luja´ n de Cuyo reﬁnery, which construction has already begun. These
projects have been delayed due to the postponement of the implementation of the fuel speciﬁcation
regulations, but must be completed by July 2012. We have adopted construction strategies oriented to
meet the July 2012 deadline. Additionally, we are increasing the tankage capacity of several of our
terminals in order to optimize fuel distribution logistics.

the purity of diesel

First stage projects related to biofuels, such as the addition of bioethanol to gasoline and Fatty
Acid Methyl Esters (FAME) to diesel, were accomplished by the end of 2009 and were operational
by the beginning of 2010. During 2010, additional bioethanol facilities at several terminals were
installed and ready to operate by the end of the same year. Also in 2010, investments were made in
projects in other terminals to facilitate the addition of FAME to diesel. These projects are expected
to enable YPF to comply with governmental requirements and to enter into the renewable energy
sources market.

In 2010, we approved a plan to comply with the above-mentioned motor

fuels quality
environmental speciﬁcations. This plan contemplates investments of approximately U.S.$550 million
between 2011 and 2012.

At each of our reﬁneries, we are performing, on our own initiative, remedial

investigations,
feasibility studies and pollution abatement projects, which are designed to address potentially
contaminated sites and air
implemented an environmental
management system to assist our efforts to collect and analyze environmental data in our upstream
and downstream operations.

In addition, we have

emissions.

latest

technology available worldwide

Also, as part of our commitment to satisfying domestic demand for fuels and meeting high
environmental standards, we have initiated the construction of a Plant Continuous Catalytic Reformer
(CCR) which will imply an investment of approximately U.S.$348 million. The above plant will use
the
involve
improvements in productivity, safety and environmental standards. We expect that this project will be
accomplished by mid 2012. The production system will produce about 200,000 additional tons of
for gasoline and automotive applications.
enhancers
aromatics
Additionally, it will increase the hydrogen production in approximately 15,000 tons which will feed
the fuel hydrogenation processes for increasing the fuel quality and reduce the sulfur content, further
reducing the environmental impact of internal combustion engines. We also commenced construction
of a new Coke Unit at La Plata reﬁnery, replacing the one previously in operation. The new unit
design is expected to optimize energy efﬁciency and minimize particulate matter emissions.

to perform chemical processes which will

can be used as octane

that

In addition to the projects mentioned above, we have begun to implement a broad range of
environmental projects in the domestic Exploration and Production and Reﬁning and Marketing and
Chemicals segments.

Capital expenditures associated with domestic Exploration and Production environmental
projects during 2010 were approximately U.S.$189 million and included expenditures relating to

54

Health, Safety and Environment (HSE) management systems, waste management, energy efﬁciency,
biodiversity plans, remediation of well sites, tank batteries’ integrity and remediation of oil spills in
the gathering systems of ﬁelds. Expenditures will also be made to improve technical assistance and
training, and to establish environmental contamination remediation plans, air emissions monitoring
plans and ground water investigation and monitoring programs.

We and several other industrial companies operating in the La Plata area have entered into a
community emergency response agreement with three municipalities and local hospitals, ﬁreﬁghters
and other health and safety service providers to implement an emergency response program. This
program is intended to prevent damages and losses resulting from accidents and emergencies,
including environmental emergencies. Similar projects and agreements were developed at other
reﬁneries and harbor terminals as well.

In 1991, we entered into an agreement (Convenio de Cooperacio´n Interempresarial, or ‘‘CCI’’)
with certain other oil and gas companies to implement a plan to reduce and assess environmental
damage resulting from oil spills in Argentine surface waters to reduce the environmental impact of
potential oil spills offshore. This agreement involves consultation on technological matters and mutual
assistance in the event of any oil spills in rivers or at sea due to accidents involving tankers or
offshore
for our Offshore
Operations’’ below.

exploration and production facilities. See

‘‘—Remediation Plans

In respect to climate change, as part of Repsol YPF, YPF has actively contributed and adhered

to Repsol YPF’s climate change strategies and, as such we are committed to:

*

*

*

*

*

*

the active promotion of identiﬁcation and pursuit of opportunities to reduce greenhouse
gas emissions in our operations;

intensifying the execution of
internal projects for the obtention of credits under the
relevant clean development mechanisms through the efﬁcient use of resources, contributing
to the transfer of technology and to the sustainable development of Argentina;

in December 2010, YPF obtained the approval of United Nations for an industrial project
developed by YPF in Argentina deﬁned as a Clean Development Mechanism (CDM)
project, the ﬁrst one of its kind approved in the world. The project in the La Plata
reﬁnery reduces the emissions of greenhouse gases (GHG) from fossil fuels used for process
heating by replacing these fuels with recovered waste gases that were previously burned in
ﬂares. The project will increase energy efﬁciency by reducing the demand for fuel oil and
natural gas, allowing an annual emission reduction of approximately 200,000 tons of
carbon dioxide, ensuring La Plata reﬁnery is developed to operate in harmony with the
surrounding communities, to the beneﬁt the local environment;

to secure the approval of the CDM project, YPF developed a new methodology, which
was approved by United Nations in 2007 under the name of AM0055 ‘‘Baseline and
Monitoring Methodology for
in reﬁnery
facilities’’. At the moment, 4 projects in the world are being developed applying this
methodology designed by YPF. A similar investment in ﬂare gas recovery and utilization
at the Luja´ n de Cuyo reﬁnery is under development as a CDM project and was approved
by the Argentinean National Design Authority (DNA) on February 2010. YPF hopes to
achieve the approval of United Nations in the ﬁrst semester of 2011;

the recovery and utilization of waste gas

the undertaking and veriﬁcation of third-party CO2 emissions inventories for reﬁning and
chemical operations
in accordance with the ISO 14064 standard. The inventory at
Ensenada Industrial Complex has been veriﬁed since 2008, and veriﬁcation commenced at
La Plata and Luja´ n de Cuyo reﬁneries in 2010;

in addition to verifying third-party CO2 inventories, the La Plata and Luja´ n de Cuyo
reﬁneries have shown veriﬁed reductions in emissions in accordance with the ISO 14064
standard in both 2009 and 2010.

Our estimated capital expenditures and future investments are based on currently available
information and on current laws. Any future information or future changes in laws or technology
could cause a revision of such estimates. In addition, while we do not expect environmental

55

to have a signiﬁcant

expenditures
in
management’s business plans or in Argentine laws and regulations may cause expenditures to become
material to our ﬁnancial position, and may affect results of operations in any given year.

results of operations,

impact on our

changes

future

YPF Holdings—Operations in the United States

Laws and regulations relating to health and environmental quality in the United States affect
YPF Holdings’ operations in the United States. See ‘‘—Regulatory Framework and Relationship with
the Argentine Government—U.S. Environmental Regulations.’’

In connection with the sale of Diamond Shamrock Chemicals Company (‘‘Chemicals’’) to a
subsidiary of Occidental Petroleum Corporation (‘‘Occidental’’) in 1986, Maxus Energy Corporation
(‘‘Maxus’’) agreed to indemnify Chemicals and Occidental from and against certain liabilities relating
to the business and activities of Chemicals prior to the September 4, 1986 closing date (the ‘‘Closing
Date’’),
liabilities relating to certain chemical plants and waste
disposal sites used by Chemicals prior to the Closing Date.

including certain environmental

In addition, under the agreement pursuant

to which Maxus sold Chemicals to Occidental,
Maxus is obligated to indemnify Chemicals and Occidental for certain environmental costs incurred
on projects involving remedial activities relating to chemical plant sites or other property used to
conduct Chemicals’ business as of the Closing Date and for any period of time following the Closing
Date which relate to, result from or arise out of conditions, events or circumstances discovered by
Chemicals and as to which Chemicals provided written notice prior to September 4, 1996, irrespective
of when Chemicals incurs and gives notice of such costs.

Tierra Solutions Inc. (‘‘Tierra’’) was formed to deal with the results of the alleged obligations of
Maxus, as described above, resulting from actions or facts that occurred primarily between the 1940s
and 1970s while Chemicals was controlled by other companies.

See ‘‘Item 8. Financial Information—Legal Proceedings—YPF Holdings’’ below for a description

of environmental matters in connection with YPF Holdings.

Remediation Plans for our Offshore Operations

The offshore ﬁelds operated by us as well as those in which we have a working interest have in
place a Health, Safety, Environmental and Community (‘‘HSEC’’) management plan to address risks
associated with the project. In addition, all drilling projects that we operate or in which we have a
working interest have in place an Emergency Response Plan (‘‘ERP’’), including response plans for oil
spills.

The HSEC management plans in place at facilities operated by us include ERPs for an oil spill
or leak, and these ERPs are regularly assessed for adequacy in light of available information and
technical developments. We review our HSEC management plans for our drilling projects on a
regular basis to seek to ensure that appropriate measures are in place for every phase of the project.

Malvinas

We are currently in the planning stage for a deep water project named Malvinas,

located in
blocks CAA40/CAA46 and situated in Argentinean waters. Our HSEC management plan for this
project includes an ERP for an oil spill. We also have in place an Oil Spill Response Plan (OSRP)
the priority of which is to protect human health and the environment in the event of an oil spill or
leak. The OSRP sets forth the response measures, assignment of responsibilities and resources
available in the case of an oil spill or leak, and seeks to minimize its impact by establishing control,
containment, clean up and recovery procedures, as well as restitution and mitigation procedures to
the extent applicable. The overall clean up and recovery procedures would be managed by an
Argentine company contracted by us and authorized by the relevant government authority. The
OSRP uses the tiered response concept, in which spills are classiﬁed as Tier I spills (small spills close
to the offshore operation that generally require only on site resources), Tier II spills (larger spills that
generally require resources and assistance from other oil industry operators) and Tier III spills (very
large spills with serious consequences that generally require substantial additional resources and
assistance). A multipurpose supply vessel (MSV) is available exclusively for this project, which, in the
event of a Tier I or Tier II spill, will operate with a supporting vessel (a platform supply vessel (PSV)

56

or an anchor handling towing supply vessel
(AHTS)). Such vessels are equipped with rapid
deployment marine booms, absorbent materials, dispersants, skimmers, fast tanks, ﬂoats, fences and
barriers, among other materials, as well as qualiﬁed personnel. Pursuant to the contract entered into
with the aforementioned Argentine company, in the case of a Tier II or Tier III spill, we would be
entitled to the use of additional resources of such company, located in different sites in Argentina,
and including vessels, containment booms, sorbents, dispersants, collectors, pumps, and containers. In
addition, the Argentine company we have contracted is a party to an agreement with the Argentine
Public Airlines (Lı´neas Ae´reas del Estado, or LADE), pursuant to which it would have priority in the
use of the He´rcules aircrafts of the Argentine Air Force in the event of an emergency scenario.

In addition to the above, our remediation efforts would be supported by the companies which
are parties to the inter-company agreement (the Convenio de Cooperacio´n Interempresarial, or ‘‘CCI’’)
which was entered into by several oil companies and pursuant to which they have committed to
cooperate in case of oil spills or environmental damage in Argentinean waters. Each of the parties to
the CCI has undertaken to maintain and operate a number of Response Operations Centers, or
ROCs, each of which is required to be furnished with the equipment and materials detailed in the
CCI. There are a total of 14 ROCs, six of which are operated by the company. As provided in the
agreement, the equipment distributed among the ROCs includes 16,945 meters of containment booms
(5,135 meters of which are located in our ROCs), 18,900 meters of absorbent booms (8,700 meters of
which are located in our ROCs), 307 tanks of dispersants (27 of which are located in our ROCs), 94
collectors (38 of which are located in our ROCs), 38 pumps (14 of which are located in our ROCs),
and several containers, among others, shall be available to any of the signing parties at their request.
The operator of each ROC is responsible for the maintenance of its equipment, and is committed to
provide the requesting party with nautical support in the area. In addition, at each of these ROCs the
operator must maintain personnel adequately trained to take action in case of a spill. The requesting
party is responsible for the replacement of the equipment in operative conditions after making use of
it, as well as for the related operation costs.

Neptune

Under the Neptune Joint Operating Agreement, the operator of the ﬁeld is required to maintain
an HSEC management plan based on health and safety rules agreed upon between the operator and
the non-operators. As a non-operator, we are entitled to review the operator’s
safety and
environmental management systems for compliance with the HSEC management plan, but we do not
have direct control over the measures taken by the ﬁeld operator to remedy any particular spill or
leak. The operator of the ﬁeld is required to notify all non-operators, including us, in writing of any
spill greater than 50 barrels, among other incidents.

The HSEC management plan for Neptune, which is maintained by the operator of the ﬁeld,

includes the following critical elements and procedures:

*

*

*

*

*

*

*

*

*

*

*

*

*

Emergency Shutdown (ESD) System

Fire Detection System

Combustible Gas Detection System

Ventilation Systems (Mechanical)

Spill/Leak Containment Systems

Vent/Flare System

Subsea Well Control System

Temporary Refuge

Escape Water Craft

Critical Power Systems (including electric, pneumatic, hydraulic)

Emergency Communication Systems

Hull Ballast Systems

Hull Tendons

57

*

*

*

*

*

*

*

Riser Hang-off Components

Design HSE Case Critical Procedures

Emergency Shutdown (ESD) Procedures

Evacuation Procedures

Dire Fighting Procedures

Helideck Operations Procedures

Emergency Response Procedures

Additionally, the operator’s Emergency, Preparedness and Response procedures include teams
that generally are on call 24 hours a day, 7 days a week and are summoned based on the severity
level of the emergency (1-low up to 7-extreme) through a third party London based emergency
dispatcher. The operator’s teams include the following:

*

*

*

*

*

Fire and Safety Team (FAST) Site Response (Level 1 to 2 severity): Provides initial on-
scene response and incident containment
tower building including
evacuation, ﬁrst aid, CPR, search and rescue.

in the operator’s

Incident Management Team (IMT)—Asset/Local Response (Level 2 to 5 severity): Provides
tactical, operational, HSEC, planning,
logistical and regulatory notiﬁcation support and
other technical expertise. An Incident Management Center is established for the IMT in
one room of the operator building in Houston. The IMT is also supported by a drilling-
speciﬁc team from the World Wide Drilling group for any incidents during drilling and
completions activities.

Emergency Management Team (EMT)—Petroleum/Asset Response (Level 3 to 5 severity):
Provides support to the IMT with emphasis on strategic issues affecting the Asset and
Petroleum including internal and external stakeholder management, ﬁnancial,
legal, and
communication support. An Emergency Management Room for the EMT is established in
one room of the operator’s building in Houston.

Crisis Management Team (CMT)—Operator Response (Levels 5 to 7 severity): Provides
support to the EMT with emphasis on strategic issues affecting the operator including
communications with stakeholders at senior levels.

External Response Organizations: Summoned for any severity level based on needs assessed
by the IMT, EMT or CMT. Includes government response groups and external oil spill
response organizations and emergency management consultants.

The HSEC management plan is administered by a leading oil ﬁeld services contractor contracted

by the operator and includes a plan of action in the event of a spill or leak.

Property, Plant and Equipment

Most of our property, which comprises investments in assets which allow us to explore and/or
storage, manufacturing and
exploit crude oil and natural gas
transportation facilities and service stations,
is located in Argentina. As of December 31, 2010,
approximately 99.9% of our proved reserves were located in Argentina. We also own property in the
United States, Guyana and Uruguay. See ‘‘—Exploration and Production—Principal properties.’’

reserves, as well as

reﬁneries,

There are several classes of property which we do not own in fee. Our petroleum exploration
and production rights are in general based on sovereign grants of concession. Upon the expiration of
the concession, our exploration and production assets associated with the particular property subject
to the relevant concession revert to the government. In addition, as of December 31, 2010, we leased
87 service stations to third parties and also had activities with service stations that are owned by
third parties and operated by them under a supply contract with us for the distribution of our
products.

58

Insurance

The scope and coverage of the insurance policies and indemniﬁcation obligations discussed
below are subject to change, and such policies are subject to cancellation in certain circumstances. In
addition, the indemniﬁcation provisions of certain of our drilling, maintenance and other services
contracts may be subject to differing interpretations, and enforcement of those provisions may be
limited by public policy and other considerations. We may also be subject to potential liabilities for
including liabilities discussed in
which we are not insured or in excess of our insurance coverage,
‘‘Item 3. Key Information-Risk Factors-We may not have sufﬁcient
the
insurance to cover all
operating hazards that we are subject to’’,
‘‘—The oil and gas industry is subject to particular
economic and operational risks’’ and ‘‘—We may incur signiﬁcant costs and liabilities related to
environmental, health and safety matters’’.

Argentine operations

We insure our operations against risks inherent in the oil and gas industry, including loss of or
loss of production or proﬁts
damage to property and our equipment, control-of-well
incidents, removal of debris, sudden and accidental pollution, damage and clean up and third-party
claims, including personal injury and loss of life, among other business risks. Our insurance policies
are typically renewable annually and generally contain policy limits, exclusions and deductibles.

incidents,

Our insurance policy covering our Argentine operations provides third party liability coverage
up to U.S.$400 million per incident, with varying deductibles of between U.S.$0.1 million and U.S.$1
million, in each case depending on the type of incident. Certain types of incidents, such as intentional
pollution and gradual and progressive pollution, are excluded from the policy’s coverage. The policy’s
coverage extends to control-of-well incidents, deﬁned as an unintended ﬂow of drilling ﬂuid, oil, gas
or water from the well that cannot be contained by equipment on site, by increasing the weight of
drilling ﬂuid or by diverting the ﬂuids safely into production. Our policy provides coverage for third-
party liability claims relating to pollution from a control-of-well event ranging from U.S.$75 million
for certain onshore losses and a maximum combined single limit of U.S.$250 million for offshore
losses.

Our insurance policy also covers physical

loss or damage in respect of, but not limited to,
onshore and offshore property of any kind and description (whether upstream or downstream), up to
U.S.$1,000 million per incident, with varying deductibles of between U.S.$1 million and U.S.$6.75
million, including loss of production or proﬁts with deductibles of 60 days for downstream operations
with a minimum deductible of U.S.$20 million for upstream operations.

Argentine regulations require us to purchase from specialized insurance companies (Aseguradoras
de Riesgos de Trabajo – ART) insurance covering the risk of personal injury and loss of life of our
employees. Our insurance policies cover medical expenses, lost wages and loss of life, in the amounts
set
forth in the applicable regulations. These regulatory requirements also apply to all of our
contractors.

We have adopted a position in agreements entered into with contractors that provide drilling
services, well services or other services to our exploration and production operations (‘‘E&P Services
Agreements’’), whereby contractors are generally responsible for indemnifying us to varying degrees
for certain damages caused by their personnel and property above the drilling surface. Similarly, we
are generally responsible under our drilling contracts to indemnify our contractors for any damages
caused by our personnel and property above the drilling surface.

We typically assume responsibility for indemnifying our contractors for any loss or liability
resulting from damages caused below the surface provided that such damages below the surface have
not been caused by the negligence of the contractor in which case the contractor shall be liable up to
a limited amount agreed by the parties in the E&P Services Agreements.

E&P Services Agreements usually establish that contractors are responsible for pollution or
contamination including clean-up costs and third party damages caused above the surface by the spill
of substances under their control, provided that the damage has been caused by the negligence or
willful misconduct of the contractor. In the event of pollution or contamination produced below the
shall also typically be liable for damages caused due to the contractor’s
surface, contractors

59

negligence or willful misconduct. However, in this last case the damages are also usually limited to an
amount agreed upon by the parties in the E&P Services Agreement.

We are also partners in several

joint ventures and projects that are not operated by us.
Contractual provisions, as well as our obligations arising from each agreement, can vary. In certain
cases, insurance coverage is provided by the insurance policy entered into by the operator, while in
others, our risks are covered by our insurance policy covering our Argentine operations. In addition,
in certain cases we may contract insurance covering speciﬁc incidents or damages which are not
provided for in the operator’s insurance policy. We also retain the risk for liability not indemniﬁed by
the ﬁeld or rig operator in excess of our insurance coverage.

With respect to downstream servicing contracts, contractors are usually responsible for damages
to their own personnel and caused by them to third parties and they typically indemnify us for
damages to equipment. A mutual hold-harmless provision for indirect damages such as those resulting
from loss of use or loss of proﬁts is normally included.

Gulf of Mexico operations

Our operations in the Gulf of Mexico currently include only our 15% working interest, through
our subsidiary Maxus U.S. Exploration Company, in the Neptune ﬁeld, which is operated by BHP
Billiton. Our Gulf of Mexico operations are insured under a policy similar to that described above
for our Argentine properties, with certain differences that are addressed below.

Our Gulf of Mexico operations insurance policy provides coverage for property damage,
operator’s extra expenses,
loss of production and third party liability, subject to certain customary
exclusions such as property damage resulting from wear and tear and gradual deterioration. The
following limits and deductibles are applicable to our insurance coverage:

*

*

*

Physical loss or damage to owned property and equipment is limited to U.S.$772 million
(100%), with deductibles ranging from U.S.$0.75 million (100%)
to U.S.$1.25 million
(100%), and U.S.$10 million (100%) in respect of windstorms;

Loss of production is covered up to a limit of U.S.$35 million (15%) with a deductible of
60 days of production (90 days in respect of windstorms);

Coverage for operator’s extra expenses is subject to a limit of U.S.$250 million (100%) per
incident, with a U.S.$1 million deductible (100%) (U.S.$10 million (100%) in respect of
incidents related to windstorms). Our control-of-well
insurance mainly covers expenses
incurred on account of bringing or attempting to bring under control a well that is out of
control or extinguishing a well ﬁre, including but not limited to the value of materials and
supplies consumed in the operation, rental of equipment, fees of individuals, ﬁrms or
corporations specializing in ﬁre ﬁghting and/or the control of wells, deliberate well ﬁring,
and cost of drilling direction relief well(s) necessary to bring the well(s) under control or to
extinguish the ﬁre and excludes bodily injury, damage to property of others and loss of
hole (except in respect of certain costs incurred in re-drilling and/or recompletion as a
result of an occurrence). For the purpose of this insurance, a well shall be deemed to be
out of control only when there is an unintended ﬂow from the well of drilling ﬂuid, oil,
gas or water (1) which ﬂow cannot promptly be (a) stopped by use of the equipment on
site and/or the blowout preventor, storm chokes or other equipment; or (b) stopped by
increasing the weight by volume of drilling ﬂuid or by use of the other conditioning
materials in the well; or (c) safely diverted into production; or (2) which ﬂow is deemed to
be out of control by the appropriate regulatory authority.

*

Third party liability coverage arising from personal injury and loss of life, which extends
to our employees, contractors and unafﬁliated third party individuals,
limited to
U.S.$266 million (100%), with a U.S.$66.7 thousand deductible (100%).

is

According to the procedures applicable to the Neptune ﬁeld consortium, its operator shall use
its best efforts to require contractors to carry insurance coverage for worker compensation, employers
liability, commercial general
liability and automobile liability. To our knowledge, based solely on
inquiries made to the operator, this policy is applicable to all contracts and a majority of contractors
carry such insurance. Contractors providing aircraft and watercraft are required to provide further

60

insurance cover relevant to this activity. In addition, our own insurance policy covers risks of physical
loss or damage incurred as a result of negligence by any contractor to supplies and equipment of
including, among others, materials,
every kind and description incidental
equipment, machinery, outﬁt and consumables, in each case as deﬁned in our insurance contract and
with the deductibles and exclusions speciﬁed therein. The consortium or operator, as applicable,
is
responsible for indemnifying a contractor for damages caused by its personnel and property. The
is also responsible for indemnifying contractors for certain
operator or consortium, as applicable,
losses and liabilities resulting from pollution or contamination.

to our operations,

Regulatory Framework and Relationship with the Argentine Government

Overview

The Argentine oil and gas industry has been and continues to be subject to certain policies and
regulations that have resulted in domestic prices that are,
in some cases, substantially lower than
prevailing international market prices, export restrictions, domestic supply requirements that oblige us
from time to time to divert supplies from the export or industrial markets in order to meet domestic
consumer demand, and increasingly heavy export duties on the volumes of hydrocarbons allowed to
be exported. These governmental pricing limitations, export controls and tax policies have been
implemented in an effort to satisfy increasing domestic market demand at prices below international
market prices.

The Argentine oil and gas industry is regulated by Law No. 17,319, referred to as the
‘‘Hydrocarbons Law,’’ which was adopted in 1967 and amended by Law No. 26,197 in 2007, which
established the general legal framework for the exploration and production of oil and gas, and Law
No. 24,076, referred to as the ‘‘Natural Gas Law,’’ enacted in 1992, which established the basis for
deregulation of natural gas transportation and distribution industries.

The executive branch of the Argentine government issues the regulations to complement these
laws. The regulatory framework of the Hydrocarbons Law was established on the assumption that the
reservoirs of hydrocarbons would be national properties and Yacimientos Petrolı´feros Fiscales
Sociedad del Estado, our predecessor, would lead the oil and gas industry and operate under a
different
the
‘‘Privatization Law,’’ privatized YPF and provided for transfer of hydrocarbon reservoirs from the
Argentine government to the provinces, subject to the existing rights of the holders of exploration
permits and production concessions.

framework than private companies.

In 1992, Law No. 24,145,

referred to as

The Privatization Law granted us 24 exploration permits covering approximately 132,735 square
kilometers and 50 production concessions covering approximately 32,560 square kilometers. The
Hydrocarbons Law limits to ﬁve the number of concessions that may be held by any one entity, and
also limits the total area of exploration permits that may be granted to a single entity. Based on our
interpretation of the law, we were exempted from such limit with regard to the exploration permits
and production concessions awarded to us by the Privatization Law. Nevertheless, the National
Department of Economy of Hydrocarbons (Direccio´n Nacional de Economı´a de los Hidrocarburos),
applying a restrictive interpretation of Section 25 and 34 of the Hydrocarbons Law, has objected to
the award of new exploration permits and production concessions in which we have a 100% interest.
As a result, our ability to acquire 100% of new exploration permits and/or production concessions
has been hindered, although this interpretation has not impeded our ability to acquire any permits or
concessions where an interest is also granted to other parties. As a consequence of the transfer of
ownership of certain hydrocarbons areas to the provinces, we participate in competitive bidding
rounds organized since the year 2000 by several provincial governments for the award of contracts for
the exploration of hydrocarbons.

In October 2004, the Argentine Congress enacted Law No. 25,943 creating a new state-owned
energy company, Energı´a Argentina S.A. (‘‘ENARSA’’). The corporate purpose of ENARSA is the
the transport, storage,
exploration and exploitation of solid,
distribution, commercialization and industrialization of these products, as well as the transportation
and distribution of natural gas, and the generation, transportation, distribution and sale of electricity.
Moreover, Law No. 25,943 granted to ENARSA all exploration concessions in respect to offshore

liquid and gaseous hydrocarbons,

61

areas located beyond 12 nautical miles from the coast
the
continental shelf that were vacant at the time of the effectiveness of this law (i.e., November 3, 2004).

line up to the outer boundary of

In addition,

in October 2006, Law No. 26,154 created a regime of tax incentives aimed at
encouraging hydrocarbon exploration and which apply to new exploration permits awarded in respect
of the offshore areas granted to ENARSA and those over which no rights have been granted to third
parties under the Hydrocarbons Law, provided the provinces in which the hydrocarbon reservoirs are
located adhere to this regime. Association with ENARSA is a precondition to qualifying for the
beneﬁts provided by the regime created by Law No. 26,154. The beneﬁts include: early reimbursement
of the value added tax for investments made and expenses incurred during the exploration period and
for investments made within the production period; accelerated amortization of investments made in
the exploration period and the accelerated recognition of expenses in connection with production over
a period of three years rather than over the duration of production; and exemptions to the payment
of import duties for capital assets not manufactured within Argentina. As of the date of this annual
report, we have not used the tax incentives previously mentioned.

Ownership of hydrocarbons reserves was transferred to the provinces through the enactment of

the following legal provisions that effectively amended the Hydrocarbons Law:

*

*

*

*

In 1992, the Privatization Law approved the transfer of the ownership of hydrocarbons
reserves to the provinces where they are located. However, this law provided that the
transfer was conditioned on the enactment of a law amending the Hydrocarbons Law to
contemplate the privatization of Yacimientos Petrolı´feros Fiscales Sociedad del Estado.

In October 1994,
to
Article 124 thereof, provinces were granted the primary control of natural resources within
their territories.

the Argentine National Constitution was amended and pursuant

In August 2003, Executive Decree No. 546/03 transferred to the provinces the right to
grant exploration permits, hydrocarbons exploitation and transportation concessions in
certain locations designated as ‘‘transfer areas,’’ as well as in other areas designated by the
competent provincial authorities.

In January 2007, Law No. 26,197 acknowledged the provinces’ ownership of
in accordance with Article 124 of
hydrocarbon reservoirs
(including reservoirs
provinces the right to administer such reservoirs.

the
the National Constitution
to which concessions were granted prior to 1994) and granted

Law No. 26,197

Law No. 26,197, which amended the Hydrocarbons Law, transferred to the provinces and the
City of Buenos Aires the ownership over all hydrocarbon reservoirs located within their territories
and in the adjacent seas up to 12 nautical miles from the coast. Law No. 26,197 also provides that
the hydrocarbon reservoirs located beyond 12 nautical miles from the coast to the outer limit of the
continental shelf shall remain within the ownership of the federal government.

Pursuant

to Law No. 26,197,

the Argentine Congress shall continue to enact

laws and
regulations to develop oil and gas resources existing within all of the Argentine territory (including its
sea), but the governments of the provinces where the hydrocarbon reservoirs are located shall be
responsible for the enforcement of these laws and regulations, the administration of the hydrocarbon
ﬁelds and shall act as granting authorities for the exploration permits and production concessions.
However, the administrative powers granted to the provinces shall be exercised within the framework
of the Hydrocarbons Law and the regulations which complement this law.

Consequently, even though Law No. 26,197 established that the provinces shall be responsible
for administering the hydrocarbon ﬁelds, the Argentine Congress retained its power to issue rules and
regulations regarding the oil and gas legal
the Argentine government
retained the power to determine the national energy policy.

framework. Additionally,

It is expressly stated that the transfer will not affect the rights and obligations of exploration
permit and production concession holders, or the basis for the calculation of royalties, which shall be

62

calculated in accordance with the concession title and paid to the province where the reservoirs are
located.

Law No. 26,197 provides that the Argentine government shall retain the authority to grant
transportation concessions for: (i) transportation concessions located within two or more provinces
territory and (ii) transportation concessions directly connected to export pipelines for export purposes.
Consequently, transportation concessions which are located within the territory of only one province
and which are not connected to export facilities shall be transferred to the provinces.

Finally, Law No. 26,197 grants the following powers to the provinces: (i) the exercise in a
complete and independent manner of all activities related to the supervision and control of the
exploration permits and production concessions transferred by Law No. 26,197; (ii) the enforcement
of all applicable legal and/or contractual obligations regarding investments, rational production and
information and surface fee and royalties payment; (iii) the extension of legal and/or contractual
terms; (iv) the application of sanctions provided in the Hydrocarbons Law; and (v) all the other
faculties related to the granting power of the Hydrocarbons Law.

Public Emergency

On January 6, 2002, the Argentine Congress enacted Law No. 25,561, the Public Emergency and
Foreign Exchange System Reform Law (‘‘Public Emergency Law’’), which represented a profound
change of the economic model effective as of that date, and rescinded the Convertibility Law No.
23,928, which had been in effect since 1991 and had pegged the peso to the dollar on a one-to-one
basis. In addition,
the Argentine
government authority to enact all necessary regulations in order to overcome the economic crisis in
which Argentina was then immersed. The situation of emergency declared by Law 25,561 has been
extended until December 31, 2011 by Law 26,563. The Executive Branch is authorized to execute the
powers delegated by Law 25,561 until such date.

the Public Emergency Law granted the executive branch of

After the enactment of the Public Emergency Law, several other laws and regulations have been
enacted. The following are the most signiﬁcant measures enacted to date in Argentina to overcome
the economic crisis:

*

*

Conversion into pesos of (i) all funds deposited in ﬁnancial institutions at an exchange rate
of Ps.1.40 for each U.S.$1.00 and (ii) all obligations (e.g., loans) with ﬁnancial institutions
denominated in foreign currency and governed by Argentine law at an exchange rate of
Ps.1.00 for each U.S.$1.00. The deposits and obligations converted into pesos would be
thereafter adjusted by a reference stabilization index, the Coeﬁciente de Estabilidad de
Referencia (‘‘CER’’), to be published by the Argentine Central Bank. Obligations governed
by non-Argentine law have not been converted to pesos under the new laws. Substantially
all of our dollar-denominated debt is governed by non-Argentine law.

Conversion into pesos at an exchange rate of Ps.1.00 for each U.S.$1.00 of all obligations
outstanding among private parties at January 6, 2002 that are governed by Argentine law
and payable in foreign currency. The obligations so converted into pesos would be
adjusted through the CER index, as explained above.
In the case of non-ﬁnancial
obligations,
if as a result of the mandatory conversion into pesos the resulting intrinsic
value of goods or services that are the object of the obligation are higher or lower than
their price expressed in pesos, either party may request an equitable adjustment of the
price. If they cannot agree on such equitable price adjustment, either party may resort to
the courts. Executive Decree No. 689/02 established an exception to the Public Emergency
long-term natural gas sale and
Law and regulations and provides that
transportation agreements executed before the enactment of the Decree and denominated in
U.S. dollars will not be converted into pesos (Ps.1.00 for each U.S.$1.00) when the natural
gas is exported.

the prices of

*

Conversion into pesos at an exchange rate of Ps.1.00 for each U.S.$1.00 of all tariffs of
public services, the elimination of the adjustment of tariffs by foreign indexes such as the
Purchaser Price Index (PPI)/Consumer Price Index (CPI) index, and the imposition of a
period of renegotiation with the governmental authorities thereafter.

63

*

Imposition of customs duties on the export of hydrocarbons with instructions to the
executive branch of the Argentine government to set the applicable rate thereof. The
application of these duties and the instruction to the Executive Branch have been extended
until January 2012 by Law 26, 217. See also ‘‘—Taxation’’ below.

Exploration and Production

The Hydrocarbons Law establishes the basic legal framework for the regulation of oil and gas
exploration and production in Argentina. The Hydrocarbons Law empowers the executive branch of
the Argentine government to establish a national policy for development of Argentina’s hydrocarbon
reserves, with the principal purpose of satisfying domestic demand.

Pursuant to the Hydrocarbons Law, exploration and production of oil and gas is carried out
through exploration permits, production concessions, exploitation contracts or partnership agreements.
The Hydrocarbons Law also permits surface reconnaissance of territory not covered by exploration
permits or production concessions upon authorization of the Argentine Secretariat of Energy and/or
competent provincial authorities, as established by Law No. 26,197, and with permission of the
private property owner. Information obtained as a result of surface reconnaissance must be provided
to the Argentine Secretariat of Energy and/or competent provincial authorities, which may not
disclose this
the party who conducted the
two years without permission of
reconnaissance, except in connection with the grant of exploration permits or production concessions.

information for

submission of competitive bids. Permits granted to third parties

Under the Hydrocarbons Law, the federal and/or competent provincial authorities may grant
exploration permits after
in
connection with the deregulation and demonopolization process were granted in accordance with
procedures speciﬁed in Executive Decrees No. 1055/89, 1212/89 and 1589/89 (the ‘‘Oil Deregulation
Decrees’’), and permits covering areas in which our predecessor company, Yacimientos Petrolı´feros
Fiscales S.A., was operating at the date of the Privatization Law and that were granted to us by such
law. In 1991, the executive branch of the Argentine government established a program under the
Hydrocarbons Law (known as Plan Argentina) pursuant to which exploration permits were auctioned.
The holder of an exploration permit has the exclusive right to perform the operations necessary or
appropriate for the exploration of oil and gas within the area speciﬁed by the permit. Each
exploration permit may cover only unproved areas not to exceed 10,000 square kilometers (15,000
square kilometers offshore), and may have a term of up to 14 years (17 years for offshore
exploration). The 14-year term is divided into three basic terms and one extension term. The ﬁrst
basic term is up to four years, the second basic term is up to three years, the third basic term is up
to two years and the extension term is up to ﬁve years. At the expiration of each of the ﬁrst two
basic terms, the acreage covered by the permit is reduced, at a minimum, to 50% of the remaining
acreage covered by the permit, with the permit holder deciding which portion of the acreage to keep.
At the expiration of the three basic terms, the permit holder is required to revert all of the remaining
acreage to the Argentine government, unless the holder requests an extension term,
in which case
such grant is limited to 50% of the remaining acreage.

If the holder of an exploration permit discovers commercially exploitable quantities of oil or
gas, the holder has the right to obtain an exclusive concession for the production and development of
this oil and gas. The Hydrocarbons Law provides that oil and gas production concessions shall
remain in effect for 25 years as from the date of the award of the production concession, in addition
to any remaining exploration term at
the date of such award. The Hydrocarbons Law further
provides for the concession term to be extended for up to 10 additional years, subject to terms and
conditions approved by the grantor at
the
authority to extend the terms of current and new permits and concessions and has been vested in the
governments of the provinces in which the relevant block is located (and the Argentine government in
respect of offshore blocks beyond 12 nautical miles). In order to be entitled to the extension, a
concessionaire, such as us, must have complied with all of its obligations under the Hydrocarbons
Law, including, without limitation, evidence of payment of taxes and royalties and compliance with
environmental, investment and development obligations. Upon the expiration of the 10-year extension
period of the current concessions, the provinces are entitled to award new concessions or contracts in
respect of the relevant blocks.

the extension. Under Law No. 26,197,

the time of

64

A production concession also confers on the holder the right to conduct all activities necessary
or appropriate for the production of oil and gas, provided that such activities do not interfere with
the activities of other holders of exploration permits and production concessions. A production
concession entitles the holder to obtain a transportation concession for the oil and gas produced. See
‘‘—Transportation of Liquid Hydrocarbons’’ below.

Exploration permits and production concessions require holders to carry out all necessary work
to ﬁnd or extract hydrocarbons, using appropriate techniques, and to make speciﬁed investments. In
addition, holders are required to:

*

*

*

avoid damage to oil ﬁelds and waste of hydrocarbons;

adopt adequate measures to avoid accidents and damage to agricultural activities, ﬁshing
industry, communications networks and the water table; and

comply with all applicable federal, provincial and municipal laws and regulations.

According to the Hydrocarbons Law, holders of production concessions, including us, are also
required to pay royalties to the province where production occurs. A 12% royalty, and an additional
3% royalty in certain concessions for which the expiration has been extended (see ‘‘—Extension of
Exploitation Concessions in the province of Neuque´n’’ below), is payable on the value at the wellhead
(equal to the price upon delivery of the product,
less transportation, treatment costs and other
deductions) of crude oil production and the natural gas volumes commercialized. The value is
calculated based upon the volume and the sale price of the crude oil and gas produced, less the costs
of
to Resolution S.E. 435/2004 issued by the
Argentine Secretariat of Energy,
if a concession holder allots crude oil production for further
industrialization processes at its plants, the concession holder is required to agree with the provincial
authorities or the Argentine Secretariat of Energy, as applicable, on the reference price to be used for
purposes of calculating royalties.

transportation and storage. In addition, pursuant

Considering, among other things, that as a result of Resolution 394/2007 of the Ministry of
Economy and Production, which increased duties on exports of certain hydrocarbons, Argentine
companies began to negotiate the price for crude oil in the domestic market, which would in turn be
used as the basis for calculation of royalties, the Undersecretariat of Fuels, which depends on the
Argentine Secretariat of Energy, passed Disposition No. 1/08, which sets a minimum reference price
for the calculation of royalties and does not permit downward adjustments of this price based upon
the quality of crude oil. As of the date of this annual report, we have negotiated with certain third
parties sale prices of crude oil that we have used as the basis for calculating and paying royalties
according to the methodology set forth in the Hydrocarbons Law.

Disposition No 1/08 of the Undersecretariat of Fuels, ratiﬁed by Resolution 813/2010 of the
Secretariat of Energy, was successfully challenged by other companies that considered that such
Disposition was contrary to the royalties calculation method set in the Hydrocarbons Law. These
companies have obtained,
from the Federal Supreme Court, preliminary injunctions ordering,
provisionally, that Disposition 1/08 not be applied to them (e.g., ‘‘Petro Andinda Resources Argentina
S.A. vs. Province of La Pampa’’ (October 19, 2010),
‘‘Colhue Huapi S.A. vs. Chubut s/incidente de
medida cautelar’’ (July 6, 2010), ‘‘Chevron Argentina SRL vs. Santa Cruz y otros s/ medida cautelar’’
(December 29, 2009) and ‘‘Enap Sipetrol Argentina S.A vs. Chubut s/medida cautelar’’ (December 29,
2009)).

In addition to the above, the Public Emergency Law, which created the export withholdings,
established that export withholdings were not to be deducted from the export price for purposes of
calculating the 12% royalties. The royalty expense incurred in Argentina is accounted for as a
production cost (as explained in ‘‘—Exploration and Production—Oil and gas production, production
prices and production costs’’). According to the Hydrocarbons Law, any oil and gas produced by the
holder of an exploration permit prior to the grant of a production concession is subject to the
payment of a 15% royalty.

Furthermore, pursuant to Sections 57 and 58 of the Hydrocarbons Law, holders of exploration
permits and production concessions must pay an annual surface fee that is based on acreage of each
block and which varies depending on the phase of the operation, i.e., exploration or production, and
in the case of the former, depending on the relevant period of the exploration permit. Additionally,

65

Executive Decree No. 1,454/07, dated October 17, 2007,
increased the amount of exploration and
production surface fees expressed in Argentine pesos that are payable to the provinces in which the
hydrocarbon ﬁelds are located or, in the case of offshore and certain other ﬁelds, to the Argentine
government.

Exploration permits and production or transportation concessions may be terminated upon any

of the following events:

*

*

*

*

*

*

*

*

failure to pay annual surface taxes within three months of the due date;

failure to pay royalties within three months of the due date;

substantial and unjustiﬁable failure to comply with speciﬁed production, conservation,
investment, work or other obligations;

repeated failure to provide information to, or facilitate inspection by, authorities or to
utilize adequate technology in operations;

in the case of exploration permits, failure to apply for a production concession within 30
days of determining the existence of commercially exploitable quantities of hydrocarbons;

bankruptcy of the permit or concession holder;

death or end of legal existence of the permit or concession holder; or

failure to transport hydrocarbons for third parties on a non-discriminatory basis or
repeated violation of the authorized tariffs for such transportation.

The Hydrocarbons Law further provides that a cure period, of a duration to be determined by
the Argentine Secretariat of Energy and/or the competent provincial authorities, must be provided to
the defaulting concessionaire prior to the termination.

When a production concession expires or terminates, all oil and gas wells, operating and
to the province where the reservoir is
maintenance equipment and facilities automatically revert
jurisdiction (i.e.,
located or to the Argentine government in the case of reservoirs under federal
located on the continental shelf or beyond 12 nautical miles offshore), without compensation to the
holder of the concession.

Certain of our production concessions expire in 2017. The granting of an extension is an
unregulated process and normally involves lengthy negotiations between the applicant and the relevant
government. Although the Hydrocarbons Law provides that applications must be submitted at least
six months prior to the concession expiration date, it is industry practice to commence the process far
earlier, typically as soon as the technical and economic feasibility of new investment projects beyond
the concession term become apparent.

On March 16, 2006, the Argentine Secretariat of Energy issued Resolution S.E. No. 324/06
establishing that holders of exploration permits and hydrocarbon concessions must ﬁle with such
agency details of their proved reserves existing in each of their areas, certiﬁed by an external reserves
auditor, each year. Holders of hydrocarbon concessions that export hydrocarbons are obliged to
certify their oil and gas proved reserves. The aforementioned certiﬁcation only has the meaning
established by Resolution S.E. No. 324/06, according to which it is not to be interpreted as a
certiﬁcation of oil and gas reserves under the SEC rules. See ‘‘—Exploration and Production—Oil and
Gas Reserves.’’

In March 2007,

the Argentine Secretariat of Energy issued Resolution No 407/2007 which
approved new regulations concerning the Oil and Gas Exploration and Production Companies
Registry. According to Resolution No 407/2007, YPF, as a holder of Production Concessions and
is banned from hiring or in any way beneﬁting from any company or entity
Exploration Permits,
which is developing or has developed oil and gas exploration activities within the Argentine
continental platform without an authorization from the relevant Argentine authorities.

Extension of Exploitation Concessions in the province of Neuque´n
In addition to the extension in 2002 of the expiration date of the exploitation concession of the
Loma La Lata ﬁeld until 2027, during the years 2008 and 2009, YPF entered into a number of
agreements with the province of Neuque´n, pursuant to which the exploitation concession terms of

66

several areas located within the province were extended for a 10-year term, which now expire between
2026 and 2027. As a condition to the extension of the concession terms, YPF has undertaken to do
the following under the relevant agreements: (i) to make initial payments to the province of Neuque´n
in an aggregate amount of approximately U.S.$204 million; (ii) to pay the province of Neuque´n an
‘‘Extraordinary Production Royalty’’ of 3% of the production of the areas affected by this extension
(in addition, the parties agreed to make additional adjustments of up to an additional 3% in the
event of extraordinary income, as deﬁned in each agreement); (iii) to carry out exploration activities
in the remaining exploration areas and make certain investments and expenditures until the expiration
of the concessions in an aggregate amount of approximately U.S.$3,512 million, and (iv) to make
‘‘Corporate Social Responsibility’’ contributions to the province of Neuque´n in an aggregate amount
of approximately U.S.$23 million.

Extension of Exploitation Concessions in the province of Mendoza
In April 2011, YPF entered into a Memorandum of Agreement to extend the term of the
exploitation concessions identiﬁed below, which will become effective upon its approval, through the
issuance of the corresponding executive decree, by the province of Mendoza.

The Memorandum of Agreement between YPF and the province of Mendoza provides,

inter

alia, the following:

*

*

*

Concessions involved: el Porto´ n, Barrancas, Cerro Fortunoso, el Manzano, La Brea,
Llancanelo, Llancanelo R, Puntilla de Huinca´ n, Rı´o Tunuyan, Valle del Rı´o Grande,
Vizcacheras, Can˜ ado´ n Amarillo, Altiplanicie del Payu´ n, Chihuido de la Sierra Negra,
Puesto Herna´ ndez and La Ventana;

Exploitation concession terms, which were originally set to expire in 2017, are extended for
a 10-year term; and

(ii)

YPF has undertaken: (i) to make initial payments to the province of Mendoza in an
aggregate amount of approximately of U.S.$ 135 million, on the date speciﬁed in the
Memorandum of Agreement;
to pay the province of Mendoza an ‘‘Extraordinary
Production Royalty’’ of 3% of the production of the areas affected by the Memorandum
of Agreement; (iii) to carry out exploration activities in the remaining exploration areas
and make certain investments and expenditures in a total amount of U.S.$4,113 million
until the expiration of the extended term, as stipulated in the Memorandum of Agreement,
on the exploitation concessions affected by the Memorandum of Agreement;
to
contribute with U.S.$16.2 million to a ‘‘Social Infrastructure Investment Fund’’ to satisfy
community needs in the province of Mendoza, and; (v) to make payments equal to 0.3%
of the annual amount paid as ‘‘Extraordinary Production Royalty’’ in order to fund the
purchase of equipment and ﬁnance training activities in certain government agencies of the
province of Mendoza.

(iv)

Security Zones Legislation

Argentine law restricts the ability of non-Argentine companies to own real estate, oil concessions
or mineral rights located within, or with respect to areas deﬁned as, security zones (principally border
areas). Prior approval of the Argentine government is required:

*

*

for non-Argentine shareholders to acquire control of us; or

if and when the majority of our shares belong to non-Argentine shareholders, such as is
currently the case, for any additional acquisition of real estate, mineral rights, oil or other
Argentine government concessions located within, or with respect to, security zones.

Because approval of Class A shareholders is required for a change in our control under our by-
laws, and approval of the executive branch of the Argentine government or provincial governments is
required for the grant or transfer of hydrocarbon permits and concessions, we believe that possible
additional requirements under the security zone legislation will not have a signiﬁcant impact on our
operations.

67

Natural Gas Transportation and Distribution

In June 1992, the Natural Gas Law was passed, providing for the privatization of Gas del
Estado Sociedad del Estado (‘‘Gas del Estado’’) and the deregulation of the price of natural gas. To
effect the privatization of Gas del Estado, the ﬁve main trunk lines of the gas transmission system
were divided into two systems principally on a geographical basis (the northern and the southern
trunk pipeline systems). This was designed to give both systems access to gas sources and to the main
centers of demand in and around Buenos Aires. These systems were transferred into two new
transportation companies. The Gas del Estado distribution system was divided into eight regional
distribution companies, including two distribution companies serving the greater Buenos Aires area.
Shares of each of the transportation and distribution companies were sold to consortiums of private
bidders. Likewise, in 1997, a distribution license for the provinces of Chaco, Formosa, Entre Rı´os,
Corrientes and Misiones was granted to private bidders.

The regulatory structure for the natural gas industry creates an open-access system, under which
gas producers, such as us, will have open access to future available capacity on transmission and
distribution systems on a non-discriminatory basis.

Cross-border gas pipelines were built to interconnect Argentina, Chile, Brazil and Uruguay, and
producers such as us have been exporting natural gas to the Chilean and Brazilian markets, to the
extent permitted by the Argentine government. During the last several years the Argentine authorities
including
have adopted a number of measures restricting exports of natural gas from Argentina,
issuing domestic supply instruction pursuant to Regulation No. 27/04 and Resolutions Nos. 265/04,
659/04 and 752/05 (which require exporters to supply natural gas to the Argentine domestic market),
issuing express instructions to suspend exports, suspending processing of natural gas and adopting
restrictions on natural gas exports imposed through transportation companies and/or emergency
committees created to address crisis situations. See ‘‘—Market Regulation—Natural gas export
restrictions and domestic supply priorities.’’

Transportation of Liquid Hydrocarbons

The Hydrocarbons Law permits the executive branch of the Argentine government to award 35-
year concessions for the transportation of oil, gas and petroleum products following submission of
competitive bids. Pursuant to Law No. 26,197, the relevant provincial governments have the same
powers. Holders of production concessions are entitled to receive a transportation concession for the
oil, gas and petroleum products that they produce. The term of a transportation concession may be
extended for an additional ten-year term upon application to the executive branch. The holder of a
transportation concession has the right to:

*

*

transport oil, gas and petroleum products; and

construct and operate oil, gas and products pipelines, storage facilities, pump stations,
compressor plants, roads, railways and other facilities and equipment necessary for the
efﬁcient operation of a pipeline system.

The holder of a transportation concession is obligated to transport hydrocarbons for third
parties on a non-discriminatory basis for a fee. This obligation, however, applies to producers of oil
or gas only to the extent that the concession holder has surplus capacity available and is expressly
subordinated to the transportation requirements of the holder of the concession. Transportation tariffs
are subject to approval by the Argentine Secretariat of Energy for oil and petroleum pipelines and by
the National Gas Regulatory Authority (Ente Nacional Regulador del Gas or ‘‘ENARGAS’’) for gas
pipelines. Upon expiration of a transportation concession,
the pipelines and related facilities
automatically revert to the Argentine government without payment to the holder. The Privatization
Law granted us a 35-year transportation concession with respect
to the pipelines operated by
Yacimientos Petrolı´feros Fiscales S.A. at the time. Gas pipelines and distribution systems sold in
connection with the privatization of Gas del Estado are subject to a different regime under the
Natural Gas Law.

Additionally, pursuant to Law No. 26,197, all transportation concessions located entirely within
a province’s jurisdiction and not directly connected to any export pipeline are to be transferred to
such province. The executive branch retains the power to regulate and enforce all transportation

68

concessions
connected to export pipelines.

located within two or more provinces and all

transportation concessions directly

Reﬁning

Crude oil reﬁning activities conducted by oil producers or others are subject

to the prior
registration of oil companies in the registry maintained by the Argentine Secretariat of Energy and
to provincial environmental
compliance with safety and environmental
legislation and municipal health and safety inspections.

regulations, as well as

In January 2008, the Argentine Secretariat of Domestic Commerce issued Resolution No. 14/
2008, whereby the reﬁning companies were instructed to optimize their production in order to obtain
maximum volumes according to their capacity.

Executive Decree No. 2014/2008 of November 25, 2008, created the ‘‘Reﬁning Plus’’ program to
encourage the production of diesel
fuel and gasoline. The Argentine Secretariat of Energy, by
Resolution S.E. No. 1312/2008 of December 1, 2008, approved the regulations of the program.
Reﬁning companies that undertake the construction of a new reﬁnery or the expansion of their
reﬁning and/or conversion capacity, whose plans are approved by the Argentine Secretariat of Energy,
will be entitled to receive export duty credits to be applied to exports of products within the scope of
issued by the Department of
Resolution No. 394/2007 and Resolution No. 127/2008 (Annex)
Economy and Production.

Market Regulation

Overview
Under

the Hydrocarbons Law and the Oil Deregulation Decrees, holders of production
concessions, such as us, have the right to produce and own the oil and gas they extract and are
allowed to dispose of such production in the domestic or export markets, in each case subject to the
conditions described below.

The Hydrocarbons Law authorizes the executive branch of the Argentine government to regulate
the Argentine oil and gas markets and prohibits the export of crude oil during any period in which
the executive branch ﬁnds domestic production to be insufﬁcient to satisfy domestic demand. If the
executive branch restricts the export of crude oil and petroleum products or the free disposition of
natural gas, the Oil Deregulation Decrees provide that producers, reﬁners and exporters shall receive
a price:

*

*

in the case of crude oil and petroleum products, not lower than that of imported crude oil
and petroleum products of similar quality; and

in the case of natural gas, not less than 35% of the international price per cubic meter of
Arabian light oil, 34˚ API.

Furthermore,

the Oil Deregulation Decrees expressly required the executive branch to give
twelve months’ notice of any future export restrictions. Notwithstanding the above provisions, certain
subsequently-enacted Resolutions (Resolution S.E. 1679/04, Resolution S.E. 532/04 and Resolution of
the Ministry of Economy and Production 394/2007) have modiﬁed the aforementioned price
mechanism, resulting, in certain cases, in prices to producers below the levels described above.

Production of crude oil and reserves

Executive Decree No. 2014/2008 of November 25, 2008, created the ‘‘Petroleum Plus’’ program
to encourage the production of crude oil and the increase of reserves through new investments in
exploration and development. The Argentine Secretariat of Energy, by Resolution S.E. No. 1312/2008
of December 1, 2008, approved the regulations of the program. The program entitles production
companies, whose plans are approved by the Argentine Secretariat of Energy, which increase their
production and reserves within the scope of the program, to receive export duty credits to be applied
to exports of products within the scope of Resolution No. 394/2007 and Resolution No. 127/2008
(Annex) issued by the Department of Economy and Production.

69

Reﬁned products

to public bus

In April 2002, the Argentine government and the main oil companies, including us, reached an
transportation
agreement on a subsidy provided by the Argentine government
(Convenio de Estabilidad de
companies. The Agreement on Stability of Supply of Diesel Fuel
Suministro de Gas Oil) was approved by Executive Decree No. 652/02 and assured the transportation
companies their necessary supply of diesel fuel at a ﬁxed price of Ps.0.75 per liter from April 22, 2002
to July 31, 2002. Additionally, it established that the oil companies are to be compensated for the
difference between the ﬁxed price and the market price through export duty credits. Through new
price-stabilization agreements, the price paid by urban and suburban transporters was revised, the
current price being Ps.0.90 per liter. In March 2009, Executive Decree No. 1390/2009 empowered the
fuel subsidy to transportation
Chief of Cabinet
companies for the ﬁscal year 2009 and until the end of the public emergency declared by the Public
Emergency Law, and its amendments, and instructed such ofﬁcial
to incorporate the necessary
modiﬁcations in order to extend the possibility to compensate with export duty credits on all
hydrocarbon products currently exported, and in defect thereof, in cash. As of the date of this annual
report, the annual agreements for the ﬁscal years 2010 and 2011 are under negotiation. Duty credits
corresponding to the year 2010 have already been approved and the relevant certiﬁcates have been
delivered to YPF.

to sign annual agreements extending the diesel

The Argentine Secretariat of Energy has issued a series of resolutions affecting the fuel market.
For example, Resolution S.E. No. 1,102/04 created the Registry of Liquid Fuels Supply Points, Self
Consumption, Storage, Distributors and Bulk Sellers of Fuels and Hydrocarbons, and of Compressed
Natural Gas; Resolution S.E. No. 1,104/04 created a bulk sales price information module as an
integral part of the federal fuel information system, as well as a mechanism for communication of
volumes sold by fuel manufacturers and by sellers; Resolution S.E. No. 1,834/05 compels service
stations and/or supply point operators and/or self consumption of liquid fuels and hydrocarbons who
have requested supply, and have not been supplied, to communicate such situation to the Argentine
Secretariat of Energy; and Resolution S.E. No. 1,879/05 established that reﬁning companies registered
by the Argentine Secretariat of Energy, who are parties to contracts that create any degree of
exclusivity between the reﬁning company and the fuel seller, shall assure continuous, reliable, regular
and non-discriminatory supply to its counterparties, giving the right
to the seller to obtain the
product from a different source, and thereupon, charging any applicable overcosts to the reﬁning
company.

Disposition S.S.C. No. 157/06 of the Undersecretariat of Fuels provides that fuel sellers who are
parties to contracts that create any degree of exclusivity between the reﬁning company and the fuel
seller, and which for any reason are seeking to terminate such contract, shall report the termination
in advance with the Undersecretariat of Fuels in order to inform the Argentine Secretariat of
Domestic Commerce of the situation. In that case, the Argentine Secretariat of Domestic Commerce
is to: (i) issue a statement regarding the validity of the termination of the contract and (ii) use all
necessary means to allow the fuel seller terminating the contract to execute another agreement with a
reﬁning company and/or fuel broker in order to guarantee its fuel supply.

Resolution S.E. No. 1,679/04 reinstalled the registry of diesel

fuel and crude oil export
transactions created by Executive Decree No. 645/2002, and mandated that producers, sellers, reﬁning
companies and any other market agent that wishes to export diesel fuel or crude oil to register such
transaction and to demonstrate that domestic demand has been satisﬁed and that they have offered
the product to be exported to the domestic market. In addition, Resolution S.E. No. 1338/06 added
other petroleum products to the registration regime created by Executive Decree No. 645/2002,
including gasoline, fuel oil and its derivatives, aviation fuel, coke coal, asphalts, certain petrochemicals
and certain lubricants. Resolution No. 715/2007 of the Argentine Secretariat of Energy empowered
the National Reﬁning and Marketing Director to determine the amounts of diesel fuel to be imported
by each company, in speciﬁc periods of the year, to compensate exports of products included under
is
the regime of Resolution No. 1679/04; the fulﬁllment of this obligation to import diesel fuel
necessary to obtain authorization to export the products included under Decree No. 645/2002 (crude,
fuel oil, diesel fuel, coke coal and gasoline, among others). In addition, Resolution No. 25/06 of the
issued within the framework of Law No. 20,680,
Argentine Secretariat of Domestic Commerce,

70

imposes on each Argentine reﬁning company the obligation to supply all reasonable diesel
fuel
demand, by supplying certain minimum volumes (established pursuant to the resolution) to their usual
customers, mainly service station operators and distributors.

Resolution S.E. No. 459/07, of July 12, 2007, created the ‘‘Energy Substitution Program’’,
intended to mitigate gas and electricity shortages. This program encouraged industrial users to
substitute natural gas and electricity use with diesel, fuel oil and LPG.

Resolution No. 1451/2008 extended until December 31, 2009 the Energy Substitution Program
and Rule No. 287/2008, issued by the Sub-secretary of Coordination and Control on December 19,
2008, which approved the following general plans for the implementation of the Energy Substitution
Program in 2009:

1. General Plan for the Supply of Gaseous Fuels, including:

(i)

(ii)

a plan for the supply of regasiﬁed liqueﬁed natural gas (LNG), which provided for the
construction, maintenance, management
the
regasiﬁcation of LNG and the supply of natural gas to the Argentine market, and
empowered ENARSA, directly or through third parties,
to take all necessary actions,
including the purchase of the LNG, for such purpose;

and administration of

system for

a

a plan for the supply of propane, which provided for the management of a system to
acquire and deliver propane to be injected into the natural gas distribution network of the
province of Buenos Aires, and empowered ENARSA, directly or through third parties, to
take all necessary actions, including the purchase of propane, for such purpose; and

(iii) a plan for the provision of imported gas deemed necessary to fulﬁll the objectives of the
Energy Substitution Program. In this respect, ENARSA was to purchase the natural gas
necessary to fulﬁll domestic demand.

2. General Plan for the Supply Liquid Fuels, including:

(i)

(ii)

a plan designed to guarantee that demand for liquid fuel in the Argentine market was met.
For such purpose, ENARSA, directly or through third parties, was empowered to buy and
sell liquid fuels; and

a plan to encourage and subsidize replacement of natural gas and/or electric power
consumption with the use of alternative fuels in productive activities and/or electric power
generation through an efﬁcient use of gas. ENARSA, directly or through third parties, was
empowered to manage the mechanisms for the supply of liquid fuels to replace the natural
gas.

The Energy Substitution Program was extended for the year 2010.

On August 17, 2010, the Argentine Secretariat of Domestic Commerce issued Resolution No.
295/2010, imposing that the trade price of liquid fuels should be leveled back to those prices existing
on July 31, 2010. This Resolution has been successfully challenged by another company and a
preliminary injunction was granted suspending the effects of such Resolution. This Resolution was
later on derogated by Resolution No. 543/2010 of the Argentine Secretariat of Domestic Commerce.

On February 2, 2011, the Argentine Secretariat of Domestic Commerce issued Resolution No.
13/2011 stating that the retail price of liquid fuels had to be leveled back to those prices existing on
January 28, 2011. This resolution also required reﬁneries and oil companies to continue to supply
amounts of fuel to the domestic market consistent with amounts supplied the prior year, as adjusted
for the positive correlation between the increase in the demand of fuel and gross domestic product.
On March 29, 2011, however, the Argentine Secretariat of Domestic Commerce issued Resolution No.
46/2011, which derogated Resolution No. 13/2011, alleging that market conditions had changed since
its issuance.

Natural gas

In January 2004, Executive Decree No. 180/04 (i) created the Mercado Electro´ nico del Gas
(MEG) for the trade of daily spot sales of gas and a secondary market of transportation and
distribution services and (ii) established information duties for buyers and sellers of natural gas in
relation to their respective commercial operations, required as a condition to be authorized to inject

71

into and transport through the transportation system any volume of natural gas (further regulated by
Resolution No. 1,146/04 issued on November 9, 2004 and Resolution No. 882/05 issued by the
Argentine Secretariat of Energy). According to Executive Decree No. 180/04, all daily spot sales of
natural gas must be traded within the MEG.

In January 2004, Executive Decree No. 181/04 authorized the Argentine Secretariat of Energy to
negotiate with natural gas producers a pricing mechanism for natural gas supplied to industries and
electric generation companies. Domestic market prices at the retail market level were excluded from
these negotiations. On April 2, 2004, the Argentine Secretariat of Energy and gas producers signed an
agreement which was ratiﬁed by Resolution No. 208/04 issued by the Ministry of Federal Planning,
Public Investment and Services. The aim of the agreement was to implement a scheme for the
normalization of natural gas prices following the 2001 crisis. The main aspects of the agreement were:
(i) initial price adjustments applied exclusively to gas supplied by producers to industrial users, new
direct consumers and electricity generators (to the extent that electricity was destined for the domestic
market); (ii) prices were adjusted as of May 10, 2004; and (iii) the Argentine Secretariat of Energy
would implement a progressive scheme for the normalization of the price of natural gas destined to
residential end-users and small commercial users, which was never implemented. This agreement
expired on December 31, 2006.

On June 14, 2007, Resolution No. 599/07 of the Argentine Secretariat of Energy approved a
proposal of agreement with natural gas producers regarding the supply of natural gas to the domestic
market during the period 2007 through 2011 (the ‘‘Propuesta de Acuerdo,’’ or ‘‘Agreement 2007-
2011’’), giving such producers a ﬁve-business-day term to enter into the Agreement 2007-2011. If
within that term, the Agreement 2007-2011 was not executed by a sufﬁcient number of producers to
make it viable, the Argentine Secretariat of Energy would disregard the Agreement and enact the
Internal Market 2007-2011 (Procedimientos de
Procedures
Abastecimiento Complementario al Mercado Interno 2007-2011) (not described in Resolution No. 599/
07). We executed the agreement taking into account that natural gas exports and certain domestic
sales of producers that do not enter into the Agreement 2007-2011 are to be called upon ﬁrst in order
to satisfy domestic demand, before the export sales of the producers that have signed the Agreement
2007-2011 are affected. While producers are authorized to withdraw from the Agreement 2007-2011
under its terms, if they do so such producers will be treated as any producer that has not entered
into the Agreement 2007-2011 in the ﬁrst place.

for Complementary Supply of

the

The purpose of the Agreement 2007-2011 is to guarantee the supply of the domestic market
demand at
the levels registered in 2006, plus the growth in demand by residential and small
commercial customers (the ‘‘agreed demand levels’’). Producers that have entered into the Agreement
2007-2011 would commit to supply a part of the agreed demand levels according to certain shares
determined for each producer based upon its share of production for the 36 months prior to April
2004. For this period, our share of production was approximately 36.5%, or 36.8 mmcm/d (or 1,300
mmcf/d). The Agreement 2007-2011 also provides guidelines for the terms of supply agreements for
each market segment, and certain pricing limitations for each market segment of the agreed demand
levels. In order to guarantee any domestic market demand of natural gas in excess of the agreed
demand levels, Resolution S.E. No. 599/07 maintains the effectiveness of
the Resolutions that
implemented the curtailment of natural gas export commitments and the re-routing of such natural
gas volumes to certain sectors of the domestic market. See ‘‘—Natural gas export restrictions and
domestic supply priorities.’’ The Resolution also states that
the Agreement 2007-2011 does not
prevent the possible suspension or termination of export permits.

We were compelled to execute the Agreement 2007-2011, among other reasons,

in order to
mitigate our potential damages. Producers failing to sign the Agreement 2007-2011 could be penalized
and subject to other unfavorable measures by regulatory authorities. However, we expressly stated
that the execution of the Agreement 2007-2011 did not entail any recognition by us of the validity of
the Argentine Secretariat of Energy
the terms and conditions of
establishing programs for the curtailment or re-routing of exports to satisfy domestic demand. We
challenged Resolution No. 599/07 and stated that we signed the Agreement 2007-2011 taking into
account the potential consequences of not doing so.

the various Resolutions of

72

The Department of Federal Planning, Public Investment and Services, by its Resolution S.E.
No. 459/07 of July 12, 2007, created the ‘‘Energy Substitution Program,’’ which was designed to
mitigate shortages of gas and electricity during the Argentine winter of 2007. The program
encouraged industrial users to substitute natural gas and electricity use with diesel, fuel oil and LPG.

The Argentine Secretariat created, by its Resolution No. 24/2008 issued on March 13, 2008, a
to encourage natural gas production resulting from new reserves
program named ‘‘Gas Plus’’
discoveries, new ﬁelds and tight gas, among other factors. The natural gas produced under the Gas
Plus program will not be subject to the Agreement 2007-2011 and will not be subject to the price
conditions established under such Agreement.

The Argentine Secretariat of Energy, through Resolution No. 1031/2008 issued on September 12,
2008, modiﬁed Resolution No. 24/2007, establishing the speciﬁc conditions petitioners must meet in
order to qualify for the Gas Plus program. Certain of such conditions were modiﬁed by Resolution
No. 695/2009 of the Argentine Secretariat of Energy, which demands compliance with commitments
already assumed.

The Argentine Secretariat of Energy, through Resolution No. 1070/2008 issued on October 1,
2008, ratiﬁed the complementary agreement entered into between Argentine natural gas producers and
the Argentine Secretariat of Energy on September 19, 2008 (the ‘‘Complementary Agreement’’), which
(i) modiﬁed gas prices at the wellhead and segmented the residential sector in terms of natural gas
demand, and (ii) established the requirement that natural gas producers contribute to the ﬁduciary
fund created by Law No. 26,020. On January 13, 2010,
the natural gas producers signed an
addendum to the Complementary Agreement which extended the commitment to contribute to the
ﬁduciary funds created by Law No. 26,020 until December 31, 2010. On January 25, 2011, the
natural gas producers signed a second addendum to the Complementary Agreement which extends
such commitment until December 31, 2011. See ‘‘—Liqueﬁed Petroleum Gas.’’

Additionally, Executive Decree No. 2067/2008 of December 3, 2008, created a ﬁduciary fund to
ﬁnance natural gas imports destined for injection into the national pipeline system, when required to
satisfy the internal demand. The ﬁduciary fund will be funded through the following mechanisms: (i)
various tariff charges to be paid by users of regular transport and distribution services, gas consumers
that receive gas directly from producers and companies that process natural gas; (ii) special credit
programs that may be arranged with domestic or international organizations; and (iii) speciﬁc
contributions assessed by the Argentine Secretariat of Energy on participants in the natural gas
industry. To date, the competent authorities have only imposed the tariff on users of transport and
distribution services. This decree has been subject to different judicial claims and judges throughout
the country have issued precautionary measures suspending its effects. Through Resolution No. 1417/
2008, the Secretariat of Energy determined the new basin prices for the residential segment applicable
to the producers that signed the Complementary Agreement.

On July 17, 2009, the Ministry of Federal Planning, Public Investment and Services and certain
natural gas producers (including YPF) signed an agreement which set forth: (i) natural gas prices at
the wellhead for the electric power generators segment from July to December 2009, and (ii) amounts
to be received by natural gas producers for volumes sold to the residential segment from August 2009
onwards. The previously mentioned amounts will be adjusted monthly so that the resulting amounts
represent 50% of the amount collected by the ﬁduciary fund to ﬁnance natural gas imports.

Through Resolution 828/2009, ENARGAS ordered natural gas distributors to reinvoice and
return to consumers certain tariff charges collected from them according to Executive Decree No.
2067/2008 (in different percentages). The ENARGAS Resolution was applicable to natural gas
consumptions by residential consumers during the period between May 1 and September 30, 2009.

On October 4, 2010, the Ofﬁcial Gazette published National Gas Regulatory Authority (Ente
Nacional Regulador del Gas or ‘‘ENARGAS’’) Resolution No. 1410/2010, which approves the
‘‘Procedimiento para Solicitudes, Conﬁrmaciones y Control de Gas’’ setting new rules for natural gas
dispatch applicable to all participants in the gas industry and imposing the following new and more
severe priority demand gas restrictions on producers:

73

*

*

*

*

Distributors remain able to solicit all the gas necessary to cover the priority demand
despite such gas volumes’ exceeding those that the Argentine Secretariat of Energy
would have allocated by virtue of the agreement 2007-2011 ratiﬁed by the Resolution
No.
‘‘Item 4—Information on the Company—Exploration and
Production—Delivery Commitments’’.

599/07. See

Producers are obligated to conﬁrm all the natural gas requested by distributors in
respect of the priority demand. The producers’ portion of such volumes follow the
allocation criterion established by the Resolution No. 599/07. We cannot predict the
amount of the estimated domestic demand that a producer may be required to satisfy
regardless of whether such producer signed the Agreement 2007-2011.

Once the priority demand has been satisﬁed, the remaining demands are fulﬁlled with
exports last in order of priority.

In the event a producer is unable to meet the requested demand, transporters are
responsible for redirecting gas until a distributor’s gas demand is met. The gas
deﬁciency is either (i) deducted from the producer suffering the deﬁciency if it is able
to meet the demands of its other clients in the same basin or (ii) recuperated from
the remainder of the gas producers in the event the deﬁcient producer is not able to
serve any of its clients in the same basin.

As a result, this regime imposes a jointly liable supply obligation on all producers in the event
the

supply deﬁciency. We have

challenged the validity of

experiences a gas

any producer
aforementioned regulation.

On December 17, 2010 certain natural gas producers (including YPF) signed an agreement
which sets forth the percentage of regasiﬁed LNG to be assigned to each natural gas producer for
2011 which shall be counted towards such producers’ commitments to supply natural gas to
distributors under Resolution No. 599/07.

Natural gas export restrictions and domestic supply priorities

In March 2004, the Argentine Secretariat of Energy issued Resolution S.E. No. 265/04 adopting
measures intended to ensure the adequate supply of natural gas to the domestic market and regulate
its consequences on electricity wholesale prices. Among the measures adopted were:

*

*

*

*

the suspension of all exports of surpluses of natural gas;

the suspension of automatic approvals of requests to export natural gas;

the suspension of all applications for new authorizations to export natural gas ﬁled or to
be ﬁled before the Argentine Secretariat of Energy; and

authorizing the Undersecretariat of Fuels to create a rationalization plan of gas exports
and transportation capacity.

In March 2004, the Undersecretariat of Fuels, pursuant to the authority given to it under
Resolution S.E. No. 265/04, issued Regulation S.S.C. No. 27/04 establishing a rationalization plan of
gas exports and transportation capacity. Among other things, Regulation No. 27/04 established a
limit on natural gas
export authorizations, which, absent an express authorization by the
Undersecretariat of Fuels, may not be executed for volumes exceeding exports registered during 2003.

In June 2004, the Argentine Secretariat of Energy issued Resolution S.E. No. 659/04, which
established a new program to assure natural gas supply to the domestic market (which substitutes for
the program created by Regulation No. S.S.C. 27/04). Under Resolution S.E. No. 659/04 (amended
by Resolution S.E. No. 1,681/04), natural gas exports may be restricted due to shortages of natural
gas in the domestic market, because exporting producers may be required to supply additional
volumes of natural gas to the domestic market beyond those that they are contractually committed to
supply. The export of natural gas under current export permits is conditioned on the fulﬁllment of
additional supply requirements imposed on exporting producers by governmental authorities.

This program was further amended and supplemented by Resolution S.E. No. 752/05 issued by
the Argentine Secretariat of Energy in May 2005, which further reduced the ability of producers to
export natural gas, and created a mechanism under which the Argentine Secretariat of Energy may

74

require exporting producers to supply additional volumes to domestic consumers during a seasonal
period (Permanent Additional Supply), which volumes of natural gas are also not committed by the
exporting producers. Based on the provisions of Rule No. 27/04, Resolution S.E. No. 659/04 and
Resolution S.E. No. 752/05, the Argentine Secretariat of Energy and/or the Undersecretariat of Fuels
have instructed us to re direct natural gas export volumes to the internal market, thereby affecting
natural gas export commitments. We have challenged the validity of the aforementioned regulations
and resolutions, and have invoked the occurrence of a force majeure event under the corresponding
natural gas export purchase and sale agreements. The counterparties to such agreements have rejected
our position. See ‘‘Item 8. Financial Information—Legal Proceedings.’’

Resolution S.E. No. 752/05 also establishes (i) a special market, open and anonymous, for
compressed natural gas stations to purchase natural gas under regulated commercial conditions, with
the demand being ensured by the Argentine Secretariat of Energy through Permanent Additional
Supply required of exporting producers, and (ii) a mechanism of standardized irrevocable offers for
electric power generators and industrial and commercial consumers to obtain supply of natural gas,
with the demand being ensured by the Argentine Secretariat of Energy through the issuance of the
Permanent Additional Supply mentioned above.

Pursuant to the standardized irrevocable offers procedure mentioned above, which operates at
the MEG, any direct consumer may bid for a term gas purchase at the export average gas price net
of withholdings by basin. The volume necessary to satisfy the standardized irrevocable offers which
have not been satisﬁed will be required as a Permanent Additional Supply only until the end of the
seasonal period during which the unsatisﬁed requests should be made (October-April or May-
September). Such Permanent Additional Supply will be requested from the producers that export gas
and that inject the natural gas from the basins that are able to supply those unsatisﬁed irrevocable
offers. Resolution of the Argentine Secretariat of Energy S.E. No. 1886/2006, published on January 4,
2007, extended the term of effectiveness of this mechanism of standardized irrevocable offers until
2016, and empowered the Undersecretariat of Fuels to suspend its effectiveness subject
to the
satisfaction of internal demand of natural gas achieved by means of regulations, agreements or due to
the discovery of reserves.

By means of Resolution S.E. No. 1329/06, later supplemented by Note SSC No. 1011/07, the
Argentine Secretariat of Energy forced producers to give ﬁrst priority in their injections of natural gas
into the gas pipelines to certain preferential consumers and obligates transportation companies to
guarantee these priorities
these
regulations subordinate all exports of natural gas to the prior delivery of natural gas volumes that are
sufﬁcient to satisfy domestic market demand.

through the allocation of

transportation capacity.

In general,

Also, beginning during the severe Argentine winter in 2007 and continuing thereafter, we and
most of gas producers as well as the transportation companies received instructions from the
government to cut off exports, except for certain volumes addressed to satisfy Chilean residential
consumptions and other speciﬁc consumptions.

Liqueﬁed petroleum gas

Law No. 26,020 enacted on March 9, 2005 sets forth the regulatory framework for the industry
and commercialization of LPG. This
the activities of production, bottling,
law regulates
transportation, storage, distribution, and commercialization of LPG in Argentina and declares such
activities to be of public interest. Among other things, the law:

*

*

*

*

creates the registry of LPG bottlers, obliging LPG bottlers to register the bottles of their
property;

protects the trademarks of LPG bottlers;

creates a reference price system, pursuant to which, the Argentine Secretariat of Energy
shall periodically publish reference prices for LPG sold in bottles of 45 kilograms or less;

required the Argentine Secretariat of Energy to comply with the following tasks: (i) create
LPG transfer mechanisms, in order to guarantee access to the product to all the agents of
the supply chain; (ii) establish mechanisms for the stabilization of LPG prices charged to
local LPG bottlers; and (iii) together with the CNDC, analyze the composition of the LPG

75

*

*

market and its behavior, in order to establish limitations on market concentration in each
phase, or limitations to the vertical integration throughout the chain of the LPG industry
(such limitations apply to afﬁliates, subsidiaries and controlled companies);

grants open access to LPG storage facilities; and

creates a ﬁduciary fund to ﬁnance bottled LPG consumption for low-income communities
in Argentina and the extension of the natural gas distribution network to new areas, where
technically possible and economically feasible. The ﬁduciary fund will be funded through
the following mechanisms: (i) penalties established by Law 26,020, (ii) assignments from
the General State Budget, (iii) funds from special credit programs that may be arranged
institutions, and (iv) funds that may be assessed by the
with national or international
Argentine Secretariat of Energy on participants in the LPG industry.

The Argentine Secretariat of Energy established,

resolutions,
reference prices applicable to sales of LPG bottles of less than 45 kilograms, and to sales of bulk
LPG exclusively to LPG bottlers. Also, the Argentine Secretariat of Energy approved the method for
calculating the LPG export parity to be updated monthly by the Undersecretariat of Fuels. The
Argentine Secretariat of Energy in 2007 increased the LPG volumes to be sold to bottlers at the
reference prices set forth in the above-mentioned resolutions.

through several

subsequent

Disposition 168/05 of the Undersecretariat of Fuels requires companies intending to export LPG
to ﬁrst obtain an authorization from the Argentine Secretariat of Energy. Companies seeking to
export LPG must ﬁrst demonstrate that the local demand is satisﬁed or that an offer to sell LPG to
local demand has been made and rejected.

for the stability of

the price of LPG in the domestic market

On September 19, 2008, the Secretariat of Energy and Argentine LPG producers entered into an
agreement
(the ‘‘Complementary
Agreement’’). The Complementary Agreement applies only to LPG sold to bottlers that declare their
intention to bottle such LPG in LPG bottles of 10, 12 or 15 kilograms. The Agreement requires LPG
producers to supply LPG bottlers with the same volume of LPG supplied the prior year and to
accept the price per ton set forth in the Complementary Agreement. The Complementary Agreement
was extended on October 23, 2009 pursuant to an addendum entered into by YPF and Repsol YPF
Gas S.A. The addendum requires LPG producers to supply LPG bottlers in 2010 with the same
volume provided during 2009 plus an additional 5%. This addendum expired on December 31, 2010.

On December 29, 2010, LPG producers signed a second addendum to the Complementary
Agreement
(as deﬁned in ‘‘—Natural gas’’) which extends the Complementary Agreement until
December 31, 2011. Such second addendum establishes that LPG producers shall supply in 2011 the
same volume sold during 2010 in the LPG bottler market.

Argentine Environmental Regulations

The enactment of Articles 41 and 43 in the National Constitution, as amended in 1994, as well
as new federal, provincial and municipal
legislation, has strengthened the legal framework dealing
with damage to the environment. Legislative and government agencies have become more vigilant in
enforcing the laws and regulations regarding the environment, increasing sanctions for environmental
violations.

Under the amended Articles 41 and 43 of the National Constitution, all Argentine inhabitants
have both the right to an undamaged environment and a duty to protect it. The primary obligation
of any person held liable for environmental damage is to rectify such damage according to and within
the scope of applicable law. The federal government sets forth the minimum standards for the
protection of the environment and the provinces and municipalities establish speciﬁc standards and
implementing regulations.

Federal, provincial and municipal

laws and regulations relating to environmental quality in
Argentina affect our operations. These laws and regulations set standards for certain aspects of
environmental quality, provide for penalties and other liabilities for the violation of such standards,
and establish remedial obligations in certain circumstances.

76

In general, we are subject to the requirements of the following federal environmental regulations

(including the regulations issued thereunder):

*

*

*

*

*

*

*

*

*

National Constitution (Articles 41 and 43);

Law No. 25,675 on National Environmental Policy;

Law No. 25,612 on Integrated Management of Industrial and Service Industry Waste;

Law No. 24,051 on Hazardous Waste;

Law No. 20,284 on Clean Air;

Law No. 25,688 on Environmental Management of Waters;

Law No. 25,670 on the Management and Elimination of Polychlorinated Biphenyls;

Criminal Code; and

Civil Code, which sets forth the general rules of tort law.

These laws address environmental issues, including limits on the discharge of waste associated
with oil and gas operations, investigation and cleanup of hazardous substances, workplace safety and
health, natural resource damages claims and toxic tort liabilities. Furthermore, these laws typically
require compliance with associated regulations and permits and provide for the imposition of
penalties in case of non-compliance.

In addition, we are subject to various other provincial and municipal regulations,

including

those relating to gas venting, oil spills and well abandonment, among other matters.

By Resolution No. 404/94, the Argentine Secretariat of Energy amended Resolution No. 419/93,
and created the Registry of Independent Professionals and Safety Auditing Companies (Registro de
Profesionales Independientes y Empresas Auditoras de Seguridad), which may act with respect to areas
of hydrocarbons storage, oil reﬁneries, gas stations, fuel commercialization plants and plants for
fractionation of LPG in containers or cylinders. The Resolution provides that external audits of oil
reﬁneries, gas stations and all fuel storage plants must be carried out by professionals registered in
the Registry. Domestic fuel manufacturing companies and companies that sell fuels are prohibited
from supplying these products to any station failing to comply with its obligations. Penalties for
failure to perform the audits and remedial or safety tasks include the disqualiﬁcation of plants or gas
stations. In addition, a set of obligations is established in relation to underground fuel storage
systems, including a mechanism for instant notiﬁcation in cases of loss or suspicion of loss from the
storage facilities.

On July 19, 2001, the Secretariat of Environmental Policy of the province of Buenos Aires
issued Resolution No. 1037/01 ordering us to clean up certain areas adjacent to the La Plata reﬁnery.
The resolution was appealed through an administrative procedure which has not yet been resolved.
Nevertheless, we have commenced certain works in order to identify potential technical solutions for
the treatment of the historical contamination, while reserving that the remediation must be made by
the parties responsible for the environmental damage. Under current law, the Argentine government
has the obligation to indemnify us against any liability and hold us harmless for events and claims
arising prior to January 1, 1991, according to Law No. 24,145.

During 2005, the Argentine Secretariat of Energy, by means of Resolution No. 785/05, created
the National Program of Hydrocarbons Warehousing Aerial Tank Loss Control, a measure aimed at
reducing and correcting environmental pollution caused by hydrocarbons warehousing-aerial tanks.
We have commenced the development and implementation of a technical and environmental audit
plan as required by this Resolution.

The above description of the material Argentine environmental regulations is only a summary
and does not purport to be a comprehensive description of the Argentine environmental regulatory
framework. The summary is based upon Argentine regulations related to environmental issues as in
effect on the date of this annual report, and such regulations are subject to change.

77

U.S. Environmental Regulations

federal,

In addition,

state and local

safety and
environmental quality in the United States, where YPF Holdings Inc. (‘‘YPF Holdings’’) operates,
affect the operations of this subsidiary. YPF Holdings’ U.S. operations, conducted primarily through
Maxus Energy Corporation (‘‘Maxus’’), are subject
the following U.S.
environmental laws:

to the requirements of

laws and regulations

relating to health,

*

*

*

*

*

*

*

*

*

Safe Drinking Water Act;

Clean Water Act;

Oil Pollution Act;

Clean Air Act;

Resource Conservation and Recovery Act;

National Environmental Policy Act;

Occupational Safety and Health Act;

Comprehensive Environmental Response, Compensation and Liability Act; and

various other federal, state and local laws.

These laws and regulations set various standards for many aspects of health, safety and
environmental quality (including limits on discharges associated with oil and gas operations), provide
for ﬁnes and criminal penalties and other consequences (including limits on operations and loss of
applicable permits) for the violation of such standards, establish procedures affecting location of
facilities and other operations, and in certain circumstances impose obligations concerning reporting,
investigation and remediation, as well as liability for natural resource damages and toxic tort claims.

Taxation

Holders of exploration permits and production concessions are subject to federal, provincial and
municipal taxes and regular customs duties on imports. The Hydrocarbons Law grants such holders a
legal guarantee against new taxes and certain tax increases at the provincial and municipal
levels,
except in the case of a general increase in taxes.

Pursuant to Sections 57 and 58 of the Hydrocarbons Law, holders of exploration permits and
production concessions must pay an annual surface fee that is based on acreage of each block and
which varies depending on the phase of the operation, i.e., exploration or production, and in the case
of the former, depending on the relevant period of the exploration permit. On October 17, 2007, the
Ofﬁcial Gazette published Executive Decree No. 1,454/07, which signiﬁcantly increased the amount of
exploration and production surface fees expressed in Argentine pesos that are payable to the different
jurisdictions where the hydrocarbon ﬁelds are located. See ‘‘—Exploration and Production.’’

‘‘net proﬁt’’

In addition,

(as deﬁned in the Hydrocarbons Law) of holders of permits or
concessions accruing from activity as such holders might be subject to the application of a special
55% income tax. This tax has never been applied. Each permit or concession granted to an entity
other than us has provided that the holder thereof is subject instead to the general Argentine tax
regime, and a decree of the executive branch of the Argentine government provides that we are also
subject to the general Argentine tax regime.

Following the introduction of market prices for downstream petroleum products in connection
with the deregulation of the petroleum industry, Law No. 23,966 established a volume-based tax on
transfers of certain types of fuel, replacing the prior regime, which was based on the regulated price.
Law No. 25,745, modiﬁed, effective as of August 2003, the mechanism for calculating the tax,
replacing the old ﬁxed value per liter according to the type of fuel for a percentage to apply to the
sales price, maintaining the old ﬁxed value as the minimum tax.

Export taxes
In 2002,

the Argentine government began to impose customs duties on the export of
hydrocarbons. Export tax rates were increased on crude oil to 20%, on butane, methane and LPG to
20% and gasoline and diesel fuel to 5%. In May 2004, Resolution No. 337/04 of the Ministry of

78

in May 2004, pursuant

to Resolution No. 645/04 of

Economy and Production increased export duties on crude oil to 25%. These export tax rates were
increased again in 2004, when the Ministry of Economy and Production issued Resolution No. 532/
04, establishing a progressive scheme of export duties for crude oil, with rates ranging from 25% to
45%, depending on the quotation of the WTI reference price at the time of the exportation. In
addition,
the Ministry of Economy and
Production, an export duty on natural gas and natural gas liquids was established at a rate of 20%.
The export duty on natural gas was increased again in July 2006, when the Ministry of Economy and
Production increased the rate to 45% and instructed the Customs General Administration to apply
the price ﬁxed by the Framework Agreement between Argentina and Bolivia as the base price to
which to apply the new tax rate, irrespective of the actual sales price. In addition, on October 10,
2006, the Ministry of Economy and Production imposed prevalent export duties on exports from the
Tierra del Fuego province, which were previously exempted from taxes. Moreover, in May 2007 the
Ministry of Economy and Production increased to 25% the export duty on butane, propane and
LPG. There can be no assurances as to future levels of export taxes.

Resolution No. 394/2007 of the Ministry of Economy and Production, effective as of November
16, 2007, increased export duties on Argentine oil exports (as deﬁned by the regulator) on crude oil
and other crude derivatives products. The new regime provides that when the WTI international price
exceeds the reference price, which is ﬁxed at U.S.$60.9/barrel, the producer shall be allowed to collect
at U.S.$42/barrel, with the remainder being withheld by the Argentine government as an export tax.
If the WTI international price is under the reference price but over U.S.$45/barrel, a 45% withholding
rate will apply. If such price is under U.S.$45/barrel, the applicable export tax is to be determined by
the Argentine government within a term of 90 business days. Resolution No. 127/2008 of the Ministry
of Economy and Production increased export duties applicable to natural gas exports from 45% to
100%, mandating a valuation basis for the calculation of the duty as the highest price established in
any contract of any Argentine importer for the import of gas (abandoning the previously applicable
reference price set by the Framework Agreement between Argentina and Bolivia mentioned above).
Resolution No. 127/2008 provides with respect to LPG products (including butane, propane and
blends thereof) that if the international price of the relevant LPG product, as notiﬁed daily by the
Argentine Secretariat of Energy,
is under the reference price established for such product in the
Resolution (U.S.$338/m3 for propane, U.S.$393/m3 for butane and U.S.$363/m3 for blends of the
two), the applicable export duty for such product will be 45%. If the international price exceeds the
reference price, the producer shall be allowed to collect the maximum amount established by the
Resolution for the relevant product (U.S.$233/m3 for propane, U.S.$271/m3 for butane and U.S.$250/
m3 for blends of the two), with the remainder being withheld by the Argentine government as an
export tax.

In addition, the calculation procedure described above also applies to other petroleum products
reference prices and prices allowed to

and lubricants based upon different withholding rates,
producers. See ‘‘—Market Regulation.’’

Antitrust Agreement

On June 16, 1999, the Argentine Ministry of Economy and Public Works delivered a letter to
Repsol YPF setting forth a series of obligations that Repsol YPF was required to assume after the
acquisition of the majority of our share capital. Repsol YPF met all of the requirements upon
execution of the asset swap agreement entered into with Petrobras in December 2001. Repsol YPF
believes that the acquisition of YPF will not be subject to further antitrust scrutiny in Argentina
under existing law. However, the Ministry has not stated that there will be no further antitrust
scrutiny and no assurances can be given that Repsol YPF will not be required to accept additional
undertakings or other measures intended to address any perceived anti-competitive effects of the YPF
acquisition.

Repatriation of Foreign Currency

Executive Decree No. 1,589/89, relating to the deregulation of the upstream oil industry, allows
us and other companies engaged in oil and gas production activities in Argentina to freely sell and
dispose of the hydrocarbons they produce. Additionally, under Decree No. 1,589/89, we and other oil

79

producers are entitled to keep out of Argentina up to 70% of foreign currency proceeds they receive
from crude oil and gas export sales, but are required to repatriate the remaining 30% through the
exchange markets of Argentina.

In July 2002, Argentina’s Attorney General issued an opinion (Dictamen No. 235) which would
have effectively required us to liquidate 100% of our export receivables in Argentina, instead of the
30% provided in Decree No. 1,589/89 based on the assumption that Decree No. 1,589/89 had been
superseded by other decrees (Decree No. 530/91 and 1,606/01) issued by the government. Subsequent
to this opinion, however, the government issued Decree No. 1,912/02 ordering the Central Bank to
apply the 70%/30% regime set out in Decree No. 1,589/89. Nevertheless, the uncertainty generated by
the opinion of Argentina’s Attorney General resulted in a legal proceeding described under ‘‘Item 8.
contingencies—
Financial
Proceedings related to foreign currency proceeds’’.

proceedings—Argentina—Non-accrued,

Information—Legal

remote

ITEM 4A. Unresolved Staff Comments.

YPF does not have any unresolved Staff comments.

ITEM 5. Operating and Financial Review and Prospects

The following discussion should be read in conjunction with our audited consolidated ﬁnancial
statements as of December 31, 2010, 2009 and 2008 and for the years then ended (the ‘‘Audited
Consolidated Financial Statements’’).

Overview

We are Argentina’s leading energy company, operating a fully integrated oil and gas chain with
leading market positions across the domestic upstream and downstream segments. Our upstream
operations consist of the exploration, development and production of crude oil, natural gas and
liqueﬁed petroleum gas. Our downstream operations include the reﬁning, marketing, transportation
and distribution of oil and a wide range of petroleum products, petroleum derivatives, petrochemicals,
LPG and bio-fuels. Additionally, we are active in the gas separation and natural gas distribution
sectors both directly and through our investments in several afﬁliated companies. In 2010, we had
consolidated net sales of Ps.44,162 million (U.S.$11,096 million) and consolidated net income of
Ps.5,790 million (U.S.$1,455 million).

Most of our predecessors were state-owned companies with operations dating back to the 1920s.
In November 1992, the Argentine government enacted the Privatization Law (Law No. 24,145), which
in July
established the procedures for our privatization. In accordance with the Privatization Law,
1993, we completed a worldwide offering of 160 million Class D shares that had previously been
owned by the Argentine government. As a result of
the
Argentine government’s ownership interest
reduced from 100% to
approximately 20% by the end of 1993.

that offering and other transactions,

in our capital

stock was

Since 1999, we have been controlled by Repsol YPF, an integrated oil and gas company
headquartered in Spain with global operations. Repsol YPF owned approximately 99% of our capital
stock from 2000 until 2008, when the Petersen Group purchased,
shares
representing 15.46% of our capital stock. In addition, Repsol YPF granted certain afﬁliates of
Petersen Energı´a an option to purchase up to an additional 10% of our outstanding capital stock.
This option will expire on February 21, 2012. Since September 2010, Repsol YPF has
sold
approximately 15.78% of our capital stock and granted an option to acquire from Repsol YPF
additional shares representing 1.6% of our capital stock. As of March 28, 2011, Repsol YPF
controlled approximately 68.23% of our capital stock and voting rights.

in different

stages,

Upstream Operations

* We hold interests in more than 90 oil and gas ﬁelds in Argentina, accounting for
approximately 39% of the country’s total production of crude oil, excluding natural gas
liquids, and approximately 37% of its total natural gas production, including natural gas
liquids, in 2010, according to information provided by the Argentine Secretariat of Energy.

80

* We had proved reserves, as estimated as of December 31, 2010, of approximately 531
mmbbl of oil, including condensates and natural gas liquids, and approximately 2,533 bcf
of gas, representing aggregate reserves of approximately 982 mmboe.
In 2010, we produced approximately 107 mmbbl of oil (293 mbbl/d), including condensates
and natural gas liquids, and approximately 491 bcf of gas (1,346 mmcf/d).

*

Downstream Operations

* We are Argentina’s leading reﬁner with operations conducted at

three wholly-owned
reﬁneries with combined annual reﬁning capacity of approximately 116 mmbbl
(319.5
mbbl/d). We also have a 50% interest in Reﬁnor, an entity jointly controlled with and
operated by Petrobras Energı´a S.A., which has a reﬁning capacity of 26.1 mbbl/d.
Our retail distribution network for automotive petroleum products as of December 31,
2010 consisted of 1,622 YPF-branded service
estimate we held
approximately 31% of all gasoline service stations in Argentina.

stations, and we

*

* We are one of the leading petrochemical producers in Argentina and in the Southern Cone
of Latin America, with operations conducted through our Ensenada and Plaza Huincul
sites. In addition, Profertil, a company that we jointly control with Agrium, is one of the
leading producers of urea in the Southern Cone.

Presentation of Financial Information

We prepare our audited consolidated ﬁnancial statements in accordance with Argentine GAAP,
which differ in certain signiﬁcant respects from U.S. GAAP. Notes 12, 13 and 14 to the Audited
Consolidated Financial Statements provide a summary of the effect of these signiﬁcant differences on
net income and shareholders’ equity under Argentine GAAP and U.S. GAAP.

We fully consolidate the results of subsidiaries in which we have a sufﬁcient number of voting
shares to control corporate decisions and proportionally consolidate the results of companies that we
control jointly.

Under Argentine GAAP, we currently are not required to record the effects of inﬂation in our
ﬁnancial statements. However, because Argentina experienced a high rate of inﬂation in 2002, with
the wholesale price index increasing by approximately 118%, we were required by Decree No. 1269/
2002 and CNV Resolution No. 415/2002 to remeasure our ﬁnancial statements in constant pesos in
accordance with Argentine GAAP. On March 25, 2003, Decree No. 664/2003 rescinded the
requirement that ﬁnancial statements be prepared in constant currency, effective for ﬁnancial periods
on or after March 1, 2003. According to the Argentine statistics and census agency (Instituto Nacional
de Estadı´sticas y Censos, or ‘‘INDEC’’), the wholesale price index increased 7.1% in 2006, 14.4% in
2007, 8.8% in 2008, 10.0% in 2009 and, according to preliminary data, 14.6% in 2010. We cannot
assure you that in the future we will not be again required to record the effects of inﬂation in our
ﬁnancial statements (including those covered by the ﬁnancial statements included in this annual
report) in constant pesos. See ‘‘—Critical Accounting Policies—U.S. GAAP reconciliation’’ for an
explanation of how the effect of inﬂation is treated under U.S. GAAP.

On March 20, 2009, the Argentine Federation of Professional Councils in Economic Sciences
(‘‘FACPCE’’) approved Technical Resolution No. 26 on the ‘‘Adoption of the International Financial
the International Accounting Standards Board (IASB)’’. Such
Reporting Standards
resolution was approved by the CNV through General Resolution No. 562/09 on December 29, 2009,
with respect to certain publicly-traded entities subject to Law No. 17,811. Compliance with such rules
will be mandatory for YPF for the ﬁscal year beginning on January 1, 2012.

(IFRS) of

In addition, according to General Resolution No. 576/10, companies which, in accordance with
Argentine GAAP, previously exercised the option to report in a note to the ﬁnancial statements the
deferred tax liability related to the inﬂation adjustment of ﬁxed assets, should account for this liability
with effect in retained earnings at any interim period end or year end until the end of the transition
period to IFRS, i.e. December 31, 2011.

During the year ended December 31, 2010, the company has recorded the deferred income tax
liability originated in the difference between the book value of ﬁxed assets remeasured into constant

81

Argentine pesos and their corresponding historical cost used for tax purposes. According to Argentine
GAAP, the effect of changes in the accounting policies must be recorded with retrospective effect as
of the beginning of the ﬁrst ﬁscal year presented. As a result of the adoption of the resolution above
mentioned, the unappropriated retained earnings as of the end of each year have been modiﬁed as
follows:

As of December 31,

Change in Unappropriated Retained Earnings (Loss)

2009

2008

2007

2006

Deferred income tax liability – YPF and

controlled and jointly controlled companies.....

(1,086)

(1,276)

(1,523)

(1,799)

Deferred income tax liability – Investments in

signiﬁcant inﬂuence companies .........................

(94)

(107)

(121)

(135)

(in millions of pesos)

(1,180)

(1,383)

(1,644)

(1,934)

Our ﬁnancial statements as of December 31, 2009, 2008 and 2007, were amended to give
retrospective effect to this change in our accounting rules. As a result, net income for the years ended
December 31, 2009, 2008 and 2007,
increased by Ps.203, 261 and 290 million, respectively. Such
Restated Audited Consolidated Financial Statements were included in our report on Form 6-K
furnished to the SEC on March 14, 2011 (SEC Accession No. 0001208646-11-000114). Our net
income and shareholders’ equity under U.S. GAAP were unaffected by this change in Argentine
GAAP.

The restatement of our ﬁnancial statements as of December 31, 2009, 2008 and 2007 will not
imply any change to any statutory decisions already made. In addition, we do not expect this change
in accounting rules to affect our ability to pay dividends because our board of directors has proposed
to the April 26, 2011 shareholders meeting that the amount of the reduction in shareholders’ equity
resulting from the change be allocated to the adjustment to contributions account, and also the
corresponding transfer
to unappropriated retained earnings of an amount of Ps.236 million
corresponding to the surplus of the legal reserve after this allocation.

Finally, certain oil and gas disclosures are included in this annual report under the heading

‘‘Supplemental information on oil and gas producing activities (unaudited).’’

Segment Reporting

We report our business into the following segments: (i) exploration and production, which
includes exploration and production activities, natural gas and crude oil purchases, sales of natural
gas, and to a lesser extent crude oil, to third parties and intersegment sales of crude oil, natural gas
and its byproducts and to a lesser extent electric power generation (‘‘Exploration and Production’’);
(ii) the production, transport and marketing of crude oil that we sell to third parties and of reﬁned
products that we sell to third parties and other segments of our business (‘‘Reﬁning and Marketing’’);
and (iii) the production, transport and marketing of petrochemical products (‘‘Chemicals’’). Other
activities not falling into the previously described categories are reported under a separate segment
(‘‘Corporate and Other’’), principally including corporate administration costs and assets and
construction activities.

Sales between business segments are made at internal transfer prices established by us, which

generally seek to approximate market prices.

82

Summarized Income Statement

Net sales.......................................................................................
Cost of sales.................................................................................
Gross proﬁt..................................................................................
Administrative expenses...............................................................
Selling expenses............................................................................
Exploration expenses ...................................................................
Operating income ........................................................................
(Loss) income on long-term investments.....................................
Other income/(expense), net ........................................................
Financial/(loss) income, net and holding gains ...........................

Net income before income tax.....................................................
Income tax ...................................................................................

For the Year Ended December 31,

2010

2009

2008

(in millions of pesos)

44,162
(29,899)
14,263
(1,429)
(3,015)
(344)
9,475
79
(155)
(379)

9,020
(3,230)

34,320
(23,177)
11,143
(1,102)
(2,490)
(552)
6,999
(9)
159
(1,242)

5,907
(2,218)

34,875
(24,013)
10,862
(1,053)
(2,460)
(684)
6,665
97
(376)
(174)

6,212
(2,311)

Net income ..................................................................................

5,790

3,689

3,901

Factors Affecting Our Operations

Our operations are affected by a number of factors, including:

*

*

*

*

*

*

*

*

*

*

*

*

*

*

the volume of crude oil, oil byproducts and natural gas we produce and sell;

domestic price limitations;

export restrictions and domestic supply requirements;

international prices of crude oil and oil products;

our capital expenditures;

inﬂation and cost increases;

domestic market demand for hydrocarbon products;

operational risks, labor strikes and other forms of public protest in the country;

taxes, including export taxes;

capital controls;

the Argentine peso/U.S. dollar exchange rate;

dependence on the infrastructure and logistics network used to deliver our products;

laws and regulations affecting our operations; and

interest rates.

Our business is inherently volatile due to the inﬂuence of exogenous factors such as internal
demand, market prices, and government regulations affecting prices. Accordingly, our results of
operations and the trends indicated by those results in any period may not be indicative of results or
trends in future periods.

Our operating income in 2010 increased approximately by 35% compared to 2009. This increase
was attributable to, among other things, the increase in the volumes sold of our premium line
products and to the adjustment of sale prices in the domestic market, as well as a result of the
increase in the average international market price of WTI. Commodity prices were strongly affected
during 2009, with the average price of WTI approximately 29% lower than in 2010 and, as a result,
the average price of certain products sold in the domestic market, such as fuel oil,
jet fuel, and
certain chemicals, which generally track international prices, were sold at higher prices in 2010. The

83

impact of higher net sales was partially offset by increased depreciation of ﬁxed assets and a higher
cost of sales caused mainly by upward price pressure.

Our operating income in 2009 increased by 5.0% compared with 2008, mainly as a result of
higher average sales prices and beneﬁts related to the Petroleum Plus Program (see ‘‘—Policy and
regulatory developments in Argentina’’ below) due to our fulﬁllment of the requirements set forth by
that program. The impact of higher sales prices and beneﬁts of the Petroleum Plus Program were
increased depreciation of ﬁxed assets as a result of increased assets subject to
mostly offset by:
depreciation (principally exploration and production assets that entered into production and the
acceleration of depreciation resulting from the decline in our proved reserves), a decline in production
and higher costs mainly as a result of inﬂation.

Macroeconomic conditions

The Argentine economy has experienced signiﬁcant volatility in recent decades, characterized by
periods of low or negative growth and high variable levels of inﬂation. Inﬂation reached its peak in
the late 1980s and early 1990s. Due to inﬂationary pressures prior to the 1990s, the Argentine
currency was devalued repeatedly and macroeconomic instability led to broad ﬂuctuations in the real
exchange rate of the Argentine currency relative to the U.S. dollar. To address these pressures, past
Argentine governments implemented various plans and utilized a number of exchange rate systems.

With the enactment of the Convertibility Law in 1991, inﬂation declined progressively and the
Argentine economy enjoyed seven years of growth.
In the fourth quarter of 1998, adverse
international ﬁnancial conditions caused the Argentine economy to enter into a recession and GDP to
decrease between 1999 and 2001. By the end of 2001, Argentina suffered a profound deterioration in
social and economic conditions, accompanied by high political and economic instability. The
restrictions on the withdrawal of bank deposits, the imposition of exchange controls, the suspension
of the payment of Argentina’s public debt and the abrogation of the peso’s one-to-one peg to the
dollar (with the consequent depreciation of the peso against the dollar) caused a decline in economic
inﬂation rose to 41%, the exchange rate
activity. Real GDP declined by 10.9% in 2002, annual
continued to be highly volatile, and the unemployment rate rose to more than 20%. The political and
economic instability not only curtailed commercial and ﬁnancial activities in Argentina but also
severely restricted the country’s access to international ﬁnancing.

Strong economic growth in the world’s developed economies and favorable raw material pricing
from 2003 through the ﬁrst half of 2008 paved the way for Argentina’s economic recovery. Real
GDP grew at an average cumulative rate of 8.5% between 2003 and 2008. As a result of the crisis in
the global economy, Argentina’s real GDP growth rate decelerated in 2009 to 0.9%, but recovered in
2010 growing by approximately 9%, according to preliminary data. According to the IMF’s October
2010 projections, the Argentine economy is expected to grow by 4% in 2011.

imbalances, as well as signiﬁcant

During 2010, the global economy continued its recovery from the recession. Nonetheless, sizable
ﬁscal and current account
indebtedness in several euro area
countries continued to hold back recovery in those economies, with potentially negative spillover
effects for the rest of Europe. According to IMF’s estimates,
in 2010, global economic growth
reached 5%, although the rate of growth or,
in some cases, contraction, varied signiﬁcantly from
region to region. For 2011, a slight decrease in the pace of the recovery is expected, due to the
implementation of constraining policies aimed at controlling inﬂation.

Following signs of recovery, oil prices responded strongly to signs of a demand rebound in
China. More recently, uncertainty about the global economy brought by instability in several Middle
East and African countries and the effects of natural disasters in Japan, has led to signiﬁcant
volatility in oil prices. WTI has recently traded over U.S.$100 per barrel, compared to approximately
U.S.$79 at the end of 2009.

In Argentina, domestic fuel prices have increased over the past three years, but have not kept
pace with either increases or decreases in international market prices for petroleum products due to
the characteristics of, and regulations affecting the Argentine market. Nonetheless, the gap between
domestic and international prices for certain products has narrowed as a result of the increase in
domestic fuel prices mentioned previously. See ‘‘—Differences between Argentine and international
prices for hydrocarbon products.’’

84

In 2005, Argentina successfully completed the restructuring of a substantial portion of its bond
indebtedness and settled all of
in June 2010, Argentina
its debt with the IMF. Additionally,
completed the renegotiation of approximately 67% of defaulted bonds that were not swapped in 2005.
As a result of the 2005 and 2010 debt swaps, approximately 91% of the country’s bond indebtedness
on which Argentina defaulted in 2002 has now been restructured. Additionally,
the Argentine
government announced that it would repay the outstanding portion of the defaulted debt that was
not included in the 2005 debt swap (the ‘‘Paris Club’’ debt). Currently, Standard & Poor’s (S&P)
credit rating for Argentina’s sovereign debt is ‘‘B-’’, with a ‘‘stable’’ outlook since October 2008,
while Moody’s, which rates Argentina’s sovereign debt at ‘‘B3’’, has maintained its credit watch of
Argentina as ‘‘stable’’ since August 2008.

Between 2004 and 2008, Argentina recorded consolidated primary budget surpluses of over 3%
at both national and provincial levels according to INDEC. The consolidated primary surplus fell to
1.36% through 2009 owing to a general slowdown in economic activity before recovering to 2.3% in
2010, when government ﬁscal revenues outpaced growth in public expenditure, according to Argentine
Central Bank.

The annual wholesale price index, according to the INDEC, increased by 14.6% in 2007, 8.8%
in 2008, 10.0% in 2009 and, based on preliminary data, 14.6% in 2010. According to reports
published by the IMF, however, most private sector analysts believe that actual
inﬂation is
considerably higher than reﬂected in ofﬁcial data.

After a decline in trade in 2009, caused mainly by lower commodity prices and the effects of a
severe drought, both exports and imports increased during 2010. Industrial goods exports (in
particular, related to the automotive industry) as well as agricultural exports boosted exports, while
imports increased even further than exports, mainly as a result of increased economic activity, which
resulted in higher demand for fuel, consumer and intermediate goods, and capital assets, according to
the Argentine Central Bank. As a result, the Argentine trade balance remained in surplus, although to
a lesser degree than in previous years, reaching approximately U.S.$12.5 billion. The Argentine
Central Bank expects that,
in 2011, exports will continue to grow (particularly industrial exports
related to the automotive industry), while an increase in imports is also expected, although at a
slower pace than in 2010.

According to INDEC, 7.5% of the active population was unemployed in the third quarter of
2010, 1.6 percentage points lower than the 9.1% rate in the third quarter of 2009. According to the
Argentine Central Bank, unemployment is expected to decrease further through 2011, although at a
slower pace. In line with the recovery in general activity, wages during 2010 rose faster than in 2009.
Cross-industry wage negotiations are expected to take start in the second quarter of 2011.

The Argentine Central Bank reserves

increased by over U.S.$4.0 billion in 2010 to
approximately U.S.$52.1 billion at the end of 2010, despite the withdrawal of reserves to support
payments to sovereign multilateral lenders and bondholders. For 2011, the government has passed a
regulation allowing the withdrawal of up to an additional U.S.$7.5 billion from these reserves for the
same purpose. The exchange rate of the Argentine peso against the U.S dollar as of December 31,
2010 was Ps.3.98/ U.S.$1.00, reﬂecting peso depreciation of 4.7% compared to December 31, 2009.

We cannot predict the evolution of future macroeconomic events, or the effect that they are
likely to have on our business, ﬁnancial condition and results of operations. See ‘‘Item 3. Risk
Factors—Risks Relating to Argentina’’.

Energy consumption in Argentina has increased signiﬁcantly since 2003, driven in part by price
limitations that have kept Argentine energy prices below international prices. Continued growth in
demand have led to fuel shortages and power outages, prompting the Argentine government to take
additional measures to assure domestic supply. At the same time, growth in the production of certain
hydrocarbon products has slowed, and in the case of crude oil production has recently declined, due
to Argentina’s maturing oil and gas ﬁelds. As a result of this increasing demand and actions taken by
the Argentine regulatory authorities to prioritize domestic supply, exported volumes of hydrocarbon
products, especially natural gas, declined steadily over this period. At the same time, Argentina has
increased its hydrocarbon imports.

85

The table below shows Argentina’s total sales, production, exports and imports of crude oil,

diesel and gasoline products for the periods indicated.

Year ended December 31,

2010

2009

2008

222.1
32.6
0.5

14,078.1
12,235.2
—
1,465.9

6,440.3
6,149.9
15.0
140.2

227.4
38.3
—

13,524.0
12,009.1
—
544.6

6,203.1
6,035.2
1,297.1
85.8

229.7
15.3
—

14,753.5
12,472.0
7.1
843.6

5,898.5
5,849.1
68.6
51.7

Crude Oil in Argentina

Production (mmbbl).................................................................
Exports (mmbbl) ......................................................................
Imports (mmbbl)......................................................................

Diesel in Argentina

Sales (mcm)(1)...........................................................................
Production (mcm) ....................................................................
Exports (mcm) .........................................................................
Imports (mcm) .........................................................................

Gasoline in Argentina

Sales (mcm)(1)...........................................................................
Production (mcm) ....................................................................
Exports (mcm) .........................................................................
Imports (mcm) .........................................................................

(1) Includes domestic market sales.
Sources: Argentine Secretariat of Energy.

Policy and regulatory developments in Argentina

The Argentine oil and gas industry is currently subject to certain governmental policies and
regulations that have resulted in: (i) domestic prices that have usually been lower than prevailing
international market prices; (ii) export restrictions; (iii) domestic supply requirements that oblige us
from time to time to divert supplies from the export or industrial markets in order to meet domestic
consumer demand; and (iv) increasingly higher export duties on the volumes of hydrocarbons allowed
to be exported. See ‘‘Item 4. Information on the Company—Regulatory Framework and Relationship
with the Argentine Government.’’ These governmental pricing limitations, export controls and tax
policies have been implemented in an effort to satisfy increasing domestic market demand at prices
below international market prices. As discussed in ‘‘Item 3. Key Information—Risk Factors’’ and
elsewhere in this annual report, actions by the Argentine government have had and will continue to
have a signiﬁcant effect on Argentine companies, including us.

Policy and regulatory developments relating to the oil and gas industry in Argentina include, among
others:

*

*

*

to limit

Price limitations. In order to support economic growth, the Argentine government has
sought
increases in hydrocarbons prices through a number of policies and
measures. As a result, ﬂuctuations in Argentina’s domestic hydrocarbon prices have not
matched the recent increases or decreases at the pace of international and regional prices,
as described in ‘‘—Differences between Argentine and international prices for hydrocarbon
products.’’

Export restrictions. Since 2004, the Argentine government has prioritized domestic demand
restricting the export of certain hydrocarbon
and adopted policies and regulations
products. These restrictions have impacted our export sales as described in ‘‘—Declining
export volumes.’’

Export duties. Since the economic crisis in 2002, the Argentine government has imposed
export taxes on certain hydrocarbon products. These taxes have increased substantially in
the following years as international prices have surged. For a description of the most
recent export duties on hydrocarbon exports, see ‘‘—International oil and gas prices and
Argentine export taxes.’’

86

*

*

*

*

Domestic supply requirements. The Argentine government has at times issued regulatory
orders requiring producers to inject natural gas in excess of contractual commitments and
supply other hydrocarbon products to the domestic market. As a result, we have had to
limit our exports. In addition, we have imported diesel
in order to satisfy domestic
demand, which has increased our operating costs, as described in ‘‘—Cost of sales.’’

Energy Substitution Program. The Department of Federal Planning, Public Investment and
Services, by Resolution No. 459/07 of July 12, 2007, created the ‘‘Energy Substitution
Program’’ (Programa de Energı´a Total), which is designed to mitigate shortages of natural
gas and electricity by encouraging industrial users to substitute natural gas and electricity
during the Argentine winter with imported diesel, fuel oil and LPG subsidized by the
government. Resolution No. 1451/2008 of the Department of Federal Planning, Public
Investment and Services extended the Energy Substitution Program until December 31,
2009, and Rule No. 287/08 of the Sub-Secretary of Coordination and Control, issued on
December 19, 2008, approved the general plans
the Energy
Substitution Program for 2009. See ‘‘Item 4. Information on the Company—Regulatory
Framework and Relationship with the Argentine Government—Market Regulation—
Reﬁned Products.’’ Under this program, ENARSA imports diesel,
fuel oil, LPG and
natural gas that we buy from ENARSA at the prevailing domestic prices and then sell to
consumers in Argentina, mostly at similar prices. As a result, this program has the effect
of increasing our net sales and volumes sold, but is mostly operating income-neutral since
we do not earn any signiﬁcant margin on products sold under this program. The Energy
Substitution Program was extended for the year 2010.

implementation of

for

Gas Plus. The Argentine Secretariat of Energy, by Resolution S.E. No. 24/2008 of March
13, 2008, created the ‘‘Gas Plus’’ program to encourage the production of natural gas from
newly discovered reserves, new ﬁelds and tight gas, among other sources. Natural gas
produced under the Gas Plus program will not be subject to the prices set forth in the
Agreement 2007-2011 regarding the supply of natural gas to the domestic market during
the period 2007 through 2011. See ‘‘Item 4. Information on the Company—Regulatory
Framework and Relationship with the Argentine Government—Market Regulation—
Natural Gas.’’

Reﬁning and Petroleum Plus Programs. Decree No. 2014/2008 of
the Department of
Federal Planning, Public Investment and Services of November 25, 2008, created the
‘‘Reﬁning Plus’’ and the ‘‘Petroleum Plus’’ programs to encourage (a) the production of
diesel fuel and gasoline and (b) the production of crude oil and the increase of reserves
through new investments in exploration and operation. The Argentine Secretariat of
Energy, by Resolution S.E. No. 1312/2008 of December 1, 2008, approved the regulation
of these programs. The programs entitle reﬁning companies that undertake the construction
of a new reﬁnery or the expansion of
their reﬁning and/or conversion capacity and
production companies that increase their production and reserves within the scope of the
program to receive export duty credits to be applied to exports of products within the
scope of Resolution No. 394/2007 and Resolution No. 127/2008 (Annex) issued by the
Department of Economy and Production. In order to be eligible for the beneﬁts of both
programs, companies’ plans must be approved by the Argentine Secretariat of Energy. Our
participation in the Petroleum Plus program resulted in a positive contribution to our net
sales in 2009 and 2010.

Declining export volumes

The exported volumes of many of our hydrocarbon products have declined signiﬁcantly in
recent years, driven mainly by increasing domestic demand and export restrictions, as well as by
declines in production. This shift
from exports to domestic sales has impacted our results of
operations as the prices for hydrocarbons in the domestic market have, due to price limitations,
generally not kept pace with international and regional prices.

87

The table below presents, for the periods indicated, the exported volumes of certain of our

principal hydrocarbon products.

Product

Year Ended December 31,

2010

2009

2008

(units sold)

Natural gas (mmcm)....................................................................
Gasoline (mcm)............................................................................
Fuel oil (mtn)(1) ...........................................................................
Petrochemicals (mtn) ...................................................................

315
448
677
647

630
777
828
430

580
880
1,138
530

(1) Includes bunker sales of 401, 272, and 181 mtn for the years 2010, 2009 and 2008, respectively.

Due to the decreased export product volumes indicated above and increasing export duties, the
portion of our net sales accounted for by exports decreased steadily in recent years. Exports
accounted for 12.9%, 14.3%, and 20.7% of our consolidated net sales in 2010, 2009 and 2008,
respectively.

The Argentine government requires companies intending to export crude oil, diesel and LPG to
obtain prior authorization from the Argentine Secretariat of Energy by demonstrating that local
demand for those products has been satisﬁed. Since 2005, because domestic diesel production has
generally not been sufﬁcient to satisfy Argentine consumption needs, exports of diesel have been
substantially restricted.

International oil and gas prices and Argentine export taxes

Since the economic crisis in 2002,

in order to prioritize domestic demand,

the Argentine
government has imposed export taxes on certain hydrocarbon products. These taxes have increased
substantially in the following years as international prices have surged. For a description of these
taxes, reference prices and prices allowed to producers, see ‘‘Item 4. Information on the Company—
Regulatory Framework and Relationship with the Argentine Government—Market Regulation’’ and
‘‘Item 4. Information on the Company—Regulatory Framework and Relationship with the Argentine
Government—Taxation.’’

Export taxes have signiﬁcantly affected the proﬁtability of hydrocarbon exportation. They have
also contributed to a shift away from exports and towards domestic sales, as described in ‘‘—
Declining export volumes,’’ and reduced the export parity prices. We expect these export tax increases
to continue to adversely affect our export net sales and margins in future ﬁnancial periods, especially
with respect to any exports of natural gas, diesel, gasoline and petrochemical products.

Differences between Argentine and international prices for hydrocarbon products

In recent years, domestic prices for our products had fallen signiﬁcantly below international
prices as a result of regulatory policies that had resulted in limitations on our ability to increase
domestic prices sufﬁciently to keep pace with international market prices. Despite increases in the
sales price in the domestic market of products such as gasoline and diesel during the last two years,
the price at which we sell some of our products in the domestic market continue to be lower than
average international prices. The following table sets forth the average prices at which we sold our
principal products in the domestic market (net of taxes passed through to consumers, such as value
added and fuel transfer taxes) for the periods indicated:

88

For the Year Ended December 31,

2010

2009

2008

Peso

U.S.$(1)

Peso

U.S.$(1)

Peso

U.S.$(1)

Natural gas(2)(3) .........
Diesel(4)......................
Gasoline products(5) ..

288
2,029
1,922

74
521
494

244
1,556
1,545

66
419
416

228
1,322
1,250

72
416
393

(1) Amounts translated from Argentine pesos at the average exchange rate for the period.
(2) Per thousand cubic meters.
(3) Reﬂects the average of residential prices (which are generally lower than prices to other segments) and industrial prices.
(4) Per cubic meter. Does not include sales by Reﬁnor, in which we have a 50% interest and which is proportionally consolidated in

our consolidated ﬁnancial statements.

(5) Per cubic meter. Does not include sales by Reﬁnor, in which we have a 50% interest, and which is proportionally consolidated in
our consolidated ﬁnancial statements. The average price shown for each period is the volume-weighted average price of the various
grades of gasoline products sold by us in the domestic market during such period.

In addition, the price at which Bolivia exports natural gas to Argentina (which is purchased by
ENARSA) was approximately U.S.$7.33/mmBtu in December 2010, while the price at which we
purchase natural gas from ENARSA was approximately U.S.$2.76/mmBtu in December 2010 and our
average sales price for natural gas in Argentina during 2010 was approximately U.S.$1.96/mmBtu.

In addition, pursuant to Resolution 599/2007 of the Argentine Secretariat of Energy dated June
14, 2007 (see ‘‘Item 4. Information on the Company—Regulatory Framework and Relationship with
the Argentine Government—Market Regulation—Natural gas’’), the Argentine government and gas
producers, including us, entered into an agreement for the supply of certain volumes of gas to each
segment of the domestic market during the period 2007 through 2011. On October 4, 2010, the
Ofﬁcial Gazette published ENARGAS Resolution No. 1410/2010 that approves the ‘‘Procedimiento
para Solicitudes, Conﬁrmaciones y Control de Gas’’, which sets new rules for natural gas dispatch
applicable to all participants in the gas industry (see ‘‘Item 4. Information on the Company—
Regulatory Framework and Relationship with the Argentine Government—Market Regulation—
Natural gas’’).

Relative maturity of our oil and gas assets

Argentina’s oil and gas ﬁelds are mature and, as a result, our reserves and production are likely
to decline as reserves are depleted. Because we mainly have concessions for mature oil and gas ﬁelds
that are undergoing natural production declines,
it is difﬁcult to replace our proved reserves from
other categories of reserves. However, in 2010, our oil replacement ratio (excluding NGL) was 100%
resulting in proved oil reserves at the same level as the preceding year. However, oil production
(excluding NGL) declined by 1.4% over the preceding year and our estimated proved reserves gas and
our gas production declined by 5.2% and 7.8%, respectively, over the same period. In an effort to
maintain our high reﬁnery utilization rates and because of regulatory requirements to supply certain
hydrocarbon products to the domestic market, we purchased crude oil and natural gas from third
parties. See ‘‘Item 4. Information on the Company—Exploration and Production—Oil and Gas
Reserves’’ for more information on our proved reserves.

We continue pursuing an initiative, which encompasses comprehensive reviews of our oil and gas
ﬁelds to identify opportunities in light of new technologies and to design novel strategies to rejuvenate
old ﬁelds and optimize the development of new ﬁelds in Argentine basins. Many of our ﬁelds have
similar characteristics to mature ﬁelds in other regions of the world that have achieved substantially
higher recovery factors through the application of new technologies, similar to the ones we are
currently evaluating. Nevertheless, the ﬁnancial viability of these investments and reserve recovery
efforts will generally depend on the prevailing economic and regulatory conditions in Argentina, as
well as the market prices of hydrocarbon products.

We have budgeted approximately U.S.$3 billion in investments and capital expenditures for
2011, a signiﬁcant portion of which will be dedicated to our exploration and production activities.

89

During the period 2011-2013, we expect to make capital expenditures of around U.S.$8 billion,
principally related to our exploration and production projects,
including some to increase recovery
rates in our ﬁelds.

Cost of sales

Our cost of sales accounted for 67.7%, 67.5% and 68.9% of our consolidated net sales in 2010,
2009 and 2008, respectively. Our cost of sales increased between 2008 and 2010, mainly as a result of:
increased purchases of crude oil from third parties, driven by our efforts to maintain our high
reﬁnery utilization rates in light of our declining production; increased purchases of natural gas and
diesel from third parties; higher labor costs; higher costs related to the renegotiation of certain service
contracts; and inﬂation. Due to prevailing Argentine price limitations, we were unable to pass some
of these cost increases to our customers in the form of higher hydrocarbon product prices in respect
of certain of our products.

Seasonality

Historically, our results have been subject to seasonal ﬂuctuations during the year, particularly
as a result of greater natural gas sales during the winter. After the 2002 devaluation and as a
consequence of the natural gas price freeze imposed by the Argentine government, the use of this fuel
has diversiﬁed, generating an increase in its long-term demand throughout the year. However, sales of
natural gas are still typically much higher in the winter to the residential sector of the Argentine
domestic market, the prices for which are signiﬁcantly lower than other sectors of the Argentine
market.

Critical Accounting Policies

Our accounting policies are described in Notes 1 and 2 to the Audited Consolidated Financial
Statements. Argentine GAAP requires us to make estimates and assumptions that affect the reported
amounts of assets and liabilities, revenues and expenses and disclosures of contingent assets and
liabilities in our ﬁnancial statements. Actual results could differ from those estimates. We consider the
following policies to be most critical in understanding the judgments that are involved in preparing
our ﬁnancial statements and the uncertainties that could impact our results of operations, ﬁnancial
condition and cash ﬂows.

On March 20, 2009, the FACPCE approved the Technical Resolution No. 26 ‘‘Adoption of the
International Financial Reporting Standards (IFRS) of the International Accounting Standards Board
(IASB)’’. Such resolution was approved by the CNV through General Resolution No. 562/09 dated
December 29, 2009, with respect to certain publicly-traded entities subject to Law No. 17,811. The
application of such rules will be mandatory for YPF for the ﬁscal year beginning on January 1, 2012.

Oil and gas reserves

The estimation of oil and gas reserves is an integral part of the decision-making process about
oil and gas assets, such as whether development should proceed or enhanced recovery methods should
be implemented. As further explained below, oil and gas reserve quantities are used for calculating
depreciation of
the related oil and gas assets using the unit-of-production rates and also for
evaluating the impairment of our investments in upstream assets.

At YPF, all the assumptions made and the basis for the technical calculations used in the
estimates regarding oil and gas proved reserves are based on the guides and deﬁnitions established by
Rule 4-10(a) of Regulation S-X promulgated by the SEC.

See ‘‘Item 4.

Information on the Company—Exploration and Production—Oil and Gas

Reserves’’ for a detailed discussion on reserves estimates internal control and audits.

We follow the ‘‘successful efforts’’ method of accounting for our oil and gas exploration and
production operations. Accordingly, exploratory costs, excluding the costs of exploratory wells, have
been charged to expense as incurred. Costs of drilling exploratory wells, including stratigraphic test
wells, have been capitalized pending determination as to whether the wells have found proved reserves
that
the mentioned costs are
charged to expenses. Occasionally, however, an exploratory well may be determined to have found oil

justify commercial development. If such reserves were not

found,

90

and gas reserves, but classiﬁcation of those reserves as proved cannot be made when drilling is
completed. In those cases, the cost of drilling the exploratory well continues to be capitalized if the
well has found a sufﬁcient quantity of reserves to justify its completion as a producing well and the
enterprise is making sufﬁcient progress assessing the reserves and the economic and operating viability
of the project. If any of the mentioned conditions are not met, the cost of drilling exploratory wells is
charged to expenses.

Intangible drilling costs applicable to productive wells and to developmental dry holes, as well

as tangible equipment costs related to the development of oil and gas reserves, have been capitalized.

The capitalized costs related to producing activities, including tangible and intangible costs, have
been depreciated by ﬁeld on the unit-of-production basis by applying the ratio of produced oil and
gas to estimated recoverable proved and developed oil and gas reserves.

The capitalized costs related to acquisitions of properties with proved reserves have been
depreciated by ﬁeld on the unit-of-production basis by applying the ratio of produced oil and gas to
proved oil and gas reserves.

Revisions of crude oil and natural gas proved reserves are considered prospectively in calculating

depreciation.

Capitalized costs related to unproved properties are reviewed periodically by management to

ensure that their carrying value does not exceed their estimated recoverable value.

Impairment of long-lived assets

We assess the recoverability of our held-for-use assets on a business segment basis for Argentine
GAAP purposes. With respect to operations that are held as pending sale or disposal, our policy is to
record these assets at amounts that do not exceed net realizable value.

For Argentine GAAP, held-for-use properties, grouped by business segment, are reviewed for
impairment whenever events or changes in circumstances indicate that the carrying amounts may not
be recoverable. An asset would be impaired if the discounted cash ﬂows were less than its carrying
value.

The impairment of oil and gas producing properties is calculated as the difference between the
market value or, if appropriate, the discounted estimated future cash ﬂows from its proved reserves
and unproved reserves, adjusted for risks related to such reserves, owned at the year end with the net
book value of the assets relating thereto. Expected future cash ﬂows from the sale or production of
reserves are calculated considering crude oil prices based on a combination of market forward quotes
and standard long-term projections. The discounted values of cash ﬂows are determined using a
reasonable and supportable discount rate based on standard WACC-CAPM (weighted average cost of
capital-capital asset pricing model) assumptions including, if appropriate, a risk premium related to
this type of asset. The estimated cash ﬂows are based on future levels of production, the future
lifting and development costs, estimates of future expenditures necessary with
commodity prices,
respect to oil and gas reserves, ﬁeld decline rates, market demand and supply, economic regulatory
conditions and other factors.

The impairment of assets corresponding to our Reﬁning and Marketing and Chemicals business
segments is calculated as the difference between the discounted estimated future cash ﬂows from the
use of those assets and the net book value of the assets related thereto. The discounted values of cash
ﬂows are determined using a discount rate we believe to be reasonable and supportable based on
standard WACC-CAPM (weighted average cost of capital-capital asset pricing model) assumptions
including, if appropriate, a risk premium related to the type of asset. The estimated cash ﬂows are
based on future levels of production, the future estimated prices of our products and costs, other
estimates of future expenditures, estimated useful
life of the respective asset, market demand and
supply, economic regulatory conditions and other factors for each business segment.

Charges for impairment may be recognized in our results from time to time as a result of,
among other factors, adverse changes in the recoverable reserves from oil and natural gas ﬁelds, and
changes in economic regulatory conditions. If proved reserves estimates were revised downward, net
income could be negatively affected by higher impairment charges on the property’s book value.

91

(i)

to:

the market value of reserves,

Therefore, our management must make reasonable and supportable assumptions and estimates
with respect
(ii) oil ﬁelds’ production proﬁles and future
production of reﬁned and chemical products, (iii) future investments, taxes and costs, (iv) risk factors
for unproved reserves which are measured based on the proﬁle and potential of each speciﬁc
exploration and production asset,
life for properties
corresponding to our Reﬁning and Marketing and Chemicals business segments, and (vi) future
prices, among other factors. As such, any change in the variables used to prepare such assumptions
and estimates may have a signiﬁcant effect on the impairment tests.

future capital expenditures and useful

(v)

Impact of oil and gas reserves and prices on testing for impairment

Proved oil and gas properties held and used by us are reviewed for impairment whenever events
the carrying amounts may not be recoverable. Impairments are

or circumstances indicate that
measured by the amount by which the carrying value exceeds its fair value.

We perform asset valuation analyses on an ongoing basis as a part of our asset management
program. In general, we do not view temporarily low oil prices as a triggering event for conducting
the impairment tests. Accordingly, any impairment tests that we perform make use of our long-term
price assumptions for the crude oil and natural gas markets and petroleum products.

Depreciation of oil and gas producing properties

Volumes produced and asset costs are known, while proved reserves have a high probability of
recoverability and are based on estimates that are subject to some variability. The impact of changes
in estimated proved reserves is treated prospectively by depreciating the remaining book value of the
assets over the future expected production, affecting the following year’s net income. In 2010, 2009
and 2008 we recorded depreciation of ﬁxed assets associated with hydrocarbon reserves amounting to
Ps.4,442 million, Ps.4,019 million and Ps.4,058 million, respectively.

Asset retirement obligations

Future costs related to hydrocarbon wells abandonment obligations are capitalized along with
the related assets, and are depreciated using the unit-of-production method. As compensation, a
liability is recognized for this concept at the same estimated value of the discounted payable amounts.
Future estimated retirement obligations and removal costs are based on management’s best estimate
of the time that the event will occur and the assertion of costs to be incurred upon the retirement or
removal of the asset. Asset removal technologies and costs, as well as political, environmental, safety
and other requirements and public expectations, are frequently changing. Consequently, the timing
and future cost of dismantling and abandonment are subject to signiﬁcant modiﬁcation. As such, any
change in variables used to prepare such assumptions and estimates can have, as a consequence, a
signiﬁcant effect on the liability and the related capitalized asset and future charges related to the
retirement obligations. Future obligations are reviewed upon consideration of
the current costs
incurred in abandonment obligations on a ﬁeld-by-ﬁeld basis or other external available information if
abandonment obligations were not performed. Due to the number of the wells in operation and/or
not abandoned and the complexity with respect to different geographic areas where the wells are
located, the current costs incurred in plugging are extrapolated to the wells pending abandonment.
Management believes that current plugging costs incurred are the best source of information at the
end of each ﬁscal year to estimate asset retirement obligations for wells.

Environmental liabilities, litigation and other contingencies

Environmental

liabilities are recorded when environmental assessments and/or remediation are
probable and can be reasonably estimated. Such estimates are based on either detailed feasibility
studies of remediation approach and cost for individual sites, or on our estimate of costs to be
incurred based on historical experience and available information for the stage of assessment and/or
remediation of each site. As additional
information becomes available regarding each site or as
environmental standards change, we revise our estimate of costs to be incurred in environmental
assessment and/or remediation.

Accruals for contingencies are established to cover litigation and other contingencies, including
counsel fees and judicial expenses, which are probable and can be reasonably estimated. The ﬁnal

92

costs arising from litigation and other contingencies may vary from our estimates due to changes in
laws or differing interpretations of laws, the issuance of court decisions or other opinions and ﬁnal
assessments of the amount of claims. Changes in the facts or circumstances related to these types of
contingencies, as well as the future outcome of
these disputes, can have, as a consequence, a
signiﬁcant effect on the accruals for litigation and other contingencies recorded.

U.S. GAAP reconciliation

The recurrent difference between our net income under Argentine GAAP and our net income
under U.S. GAAP for the years ended December 31, 2010, 2009 and 2008 is primarily due to the
remeasurement into functional currency and translation into reporting currency, the elimination of the
inﬂation adjustment into Argentine constant pesos with the corresponding effect in the deferred tax
liability, the impairment of long-lived assets, capitalization of ﬁnancial expenses and accounting for
assets retirement obligations.

Under Argentine GAAP, ﬁnancial

statements are presented in constant Argentine pesos
(‘‘reporting currency’’). Foreign currency transactions are recorded in Argentine pesos by applying to
the foreign currency amount the exchange rate between the reporting and the foreign currency at the
date of the transaction. Exchange rate differences arising on monetary items in foreign currency are
recognized in the income statement of the period.

Under U.S. GAAP, a deﬁnition of the functional currency is required which may differ from the
reporting currency. Management has determined, for us and certain of our subsidiaries and investees,
the U.S. dollar to be the functional currency in accordance with ASC 830. Therefore, we have re-
measured into U.S. dollars the Audited Consolidated Financial Statements as of December 31, 2010,
in each case prepared in accordance with Argentine GAAP by applying the
2009 and 2008,
procedures speciﬁed in ASC 830. The objective of the re-measurement process is to produce the same
results that would have been reported if the accounting records had been kept in the functional
the balance sheet date
currency. Accordingly, monetary assets and liabilities are re-measured at
the
(current) exchange rate. Amounts carried at prices in past
exchange rates in effect when the transactions occurred. Revenues and expenses are re-measured on a
monthly basis at the average rates of exchange in effect during the period, except for consumption of
non-monetary assets, which are re-measured at the rates of exchange in effect when the respective
assets were acquired. Translation gains and losses on monetary assets and liabilities arising from the
re-measurement are included in the determination of net income (loss) in the period such gains and
losses arise. Furthermore,
for certain of our subsidiaries and investees, we have determined the
Argentine peso as the functional currency. Translation adjustments resulting from the process of
translating the ﬁnancial statements of subsidiaries that use peso as their functional currency into
YPF’s functional currency (U.S. dollars) are accounted for in other comprehensive income (‘‘OCI’’),
as a component of shareholders’ equity.

transactions are re-measured at

The amounts obtained from the re-measurement process referred to above are translated into
Argentine pesos under the provisions of ASC 830. Assets and liabilities are translated at the current
selling exchange rate of Ps.3.98, Ps.3.80 and Ps.3.45 to U.S.$1.00, as of December 31, 2010, 2009 and
2008, respectively. Revenues, expenses, gains and losses reported in the income statement are
translated at the exchange rate existing at the time of each transaction or,
if appropriate, at the
the exchange rates during the period. Translation effects of exchange rate
weighted average of
changes are included as a cumulative translation adjustment in shareholders’ equity. For the years
ended December 31, 2010, 2009 and 2008, the re-measurement into functional currency and the
translation into reporting currency decreased net income determined according to Argentine GAAP by
Ps.1,570 million, Ps.1,478 million and Ps.1,230 million, respectively.

liabilities, net sales, cost and expenses of

Under Argentine GAAP, we have proportionally consolidated, net of intercompany transactions,
assets,
is held, and
unincorporated legal entities which are not involved in extractive or construction activities. Under
U.S. GAAP, these investees are accounted for by the equity method. The proportional consolidation
mentioned above generated an increase of Ps.966 million, Ps.965 million and Ps.804 million in total
assets and total liabilities as of December 31, 2010, 2009 and 2008, respectively, and an increase of
Ps.1,684 million, Ps.1,433 million and Ps.1,770 million in net sales and Ps.609 million, Ps.551 million

investees in which joint control

93

and Ps.681 million in operating income for the years ended December 31, 2010, 2009 and 2008,
respectively.

Under Argentine GAAP,

long-lived assets are
grouped with other assets at business segment level, and they would be impaired if the discounted
cash ﬂows, considered at business segment level, were less than its carrying value. With respect to
assets that were held pending sale or disposal, our policy was to record these assets on an individual
basis at amounts that did not exceed net realizable value.

in order to perform the recoverability test,

Under U.S. GAAP, considering the characteristics of the Argentine market and the effects of
certain regulatory provisions described in ‘‘Item 4.
Information on the Company—Regulatory
Framework and Relationship with the Argentine Government’’, oil properties are grouped into an
unique cash generating unit and gas properties are grouped by basin (owing to logistics restrictions),
to perform impairment tests. Other long—lived assets are aggregated, so that the discrete cash ﬂows
produced by each group of assets may be separately analyzed. Each asset is tested following the
guidelines of ASC 360, by comparing the net book value of such an asset with the expected
undiscounted cash ﬂow. Impairment losses are measured as the amount by which the carrying amount
of the assets exceeds the fair value of the assets. When market values are not available, we estimate
them using the expected future cash ﬂows discounted at a rate commensurate with the risks
associated with the recovery of the assets. There were no impairment charges under U.S. GAAP for
the ﬁscal years ended December 31, 2010 and 2009. The accumulated adjustments under U.S. GAAP
of the impairment provisions as of December 31, 2010, 2009 and 2008 were Ps.337 million, Ps.498
million and Ps.613 million, respectively, mainly corresponding to our Exploration and Production
segment. Additional impairment charges under U.S. GAAP amounted to Ps.124 million for the year
ended December 31, 2008. The impairment recorded in 2008 was mainly the result of a decrease in
oil and gas reserves affecting certain long-lived assets of our Exploration and Production business
segment. See ‘‘Item 4. Information on the Company—Exploration and Production.’’ The adjusted
basis after impairment resulted in lower depreciation under U.S. GAAP by Ps.181 million, Ps.173
million and Ps.119 million for the years ended December 31, 2010, 2009 and 2008, respectively.

Under U.S. GAAP, only interest expense on qualifying assets must be capitalized, regardless of
the asset’s construction period. Under Argentine GAAP, for those assets that necessarily take a
substantial period of time to get ready for its intended use, borrowing costs (including interest and
exchange differences) should be capitalized. Accordingly, borrowing costs for those assets whose
construction period exceeds one year have been capitalized, provided that such capitalization does not
exceed the amount of ﬁnancial expense recorded in that period or year.

is incurred,

if a reasonable estimate of

Under U.S. GAAP, ASC 410 addresses ﬁnancial accounting and reporting for obligations
associated with the retirement of tangible long-lived assets and the associated asset retirement cost.
The standard applies to the legal obligation associated with the retirement of long-lived assets that
results from the acquisition, construction, development and normal use of the asset. ASC 410 requires
that the fair value of a liability for an asset retirement obligation be recognized in the period in
fair value can be made. The asset retirement
which it
obligations liability is built up in cash ﬂow layers, with each layer being discounted using the discount
rate as of the date that the layer was created. Remeasurement of the entire obligation using current
discount rates is not permitted. Each cash ﬂow layer is added to the carrying amount of
the
associated asset. This additional carrying amount is then depreciated over the life of the asset. The
liability is increased due to the passage of time based on the time value of money (‘‘accretion
expense’’) until the obligation is settled. Argentine GAAP is similar to ASC 410, except for a change
in the discount rate is treated as a change in estimates, so the entire liability must be recalculated
using the current discount rate, being the change added or reduced from the related asset.

Under U.S. GAAP, results on sales of noncurrent assets to entities under common control (that
is, in our case, to companies that comprise Repsol YPF) and the corresponding accounts receivable
are eliminated and related accounts receivables are considered as a capital (dividend) transaction.
Under Argentine GAAP, these results and the corresponding accounts receivable are recognized in the
statement of income and the balance sheet, respectively.

YPF Holdings has a non-contributory deﬁned-beneﬁt pension plan and postretirement and
the company adopted the

postemployment beneﬁts. On December 31, 2006, under U.S. GAAP,

94

Statement of Financial Accounting Standards (‘‘SFAS’’) No. 158 (currently included in ASC 715).
Under provisions of ASC 715, the company fully recognized the underfunded status of deﬁned-beneﬁt
pension and postretirement plans as a liability in the ﬁnancial statements, reducing the company’s
shareholders’ equity through the accumulated OCI account. Unrecognized gains and losses are
recognized in the income statement during the expected average remaining working lives of the
employees participating in the plans and the life expectancy of retired employees. Under Argentine
GAAP, as of December 31, 2010 and 2009, the actuarial losses and gains are charged to the ‘‘Other
income/(expense), net’’ account of
the
unrecognized actuarial losses and gains generated since December 31, 2003 were disclosed net of the
present value of the obligation and were recognized in the statement of income during the expected
average remaining service period of the employees participating in the plans and the life expectancy of
the retired employees. The effect on net income related to the change in the accounting recognition
criteria for losses and gains due to changes in actuarial assumptions for the year ended December 31,
2008 was not material. For a more detailed discussion of the most signiﬁcant differences between
Argentine GAAP and U.S. GAAP, please refer to Notes 12, 13 and 14 to the Audited Consolidated
Financial Statements.

income. As of December 31, 2008,

the statement of

Principal Income Statement Line Items

The following is a brief description of the principal line items of our income statement.

Net sales

Net sales include primarily our consolidated sales of unreﬁned and reﬁned fuel and chemical
products net of the payment of applicable fuel transfer taxes, turnover taxes and custom duties on
exports. Royalty payments required to be made to a third party, whether payable in cash or in kind,
which are a ﬁnancial obligation, or are substantially equivalent to a production or similar tax, are
accounted for as a cost of production and are not deducted in determining net sales. See ‘‘Item 4.
Information on the Company—Exploration and Production—Oil and gas production, production
prices and production costs’’ and Note 2 (f) to the Audited Consolidated Financial Statements.

Cost of sales

The following table presents, for each of the years indicated, a breakdown of our consolidated

cost of sales by category:

Inventories at beginning of year..................................................
Purchases for the year .................................................................
Production costs(1) .......................................................................
Holding (losses)/gains on inventories ..........................................
Inventories at end of year............................................................

For the Year Ended December 31,

2010

2009

2008

(in millions of pesos)

3,066
9,631
20,391
676
(3,865)

3,449
5,873
16,932
(11)
(3,066)

2,573
8,547
15,866
476
(3,449)

Cost of sales.................................................................................

29,899

23,177

24,013

(1) The table below presents, for each of the years indicated, a breakdown of our consolidated production costs by category:

95

For the Year Ended December 31,

2010

2009

2008

(in millions of pesos)

Salaries and social security taxes.................................................
Fees and compensation for services ............................................
Other personnel expenses ............................................................
Taxes, charges and contributions ................................................
Royalties and easements..............................................................
Insurance .....................................................................................
Rental of real estate and equipment............................................
Depreciation of ﬁxed assets .........................................................
Industrial inputs, consumable material and supplies ..................
Operation services and other service contracts ...........................
Preservation, repair and maintenance .........................................
Contractual commitments ...........................................................
Transportation, products and charges.........................................
Fuel, gas, energy and miscellaneous............................................

1,710
222
488
351
2,970
150
487
5,036
825
2,228
2,955
411
1,037
1,521

1,245
189
359
277
2,516
176
449
4,610
631
1,810
2,176
139
927
1,428

1,072
212
352
284
2,396
131
397
4,573
611
1,101
2,400
61
954
1,322

Total ............................................................................................

20,391

16,932

15,866

Other income/(expense), net

Other income/(expense), net principally include credits and charges for pending lawsuits and
other claims, provisions for environmental remediation and provisions for deﬁned beneﬁt pension
plans and other post-retirement beneﬁts.

Finance income/(expense), net and holding (losses)/gains

Finance income/(expense), net and holding (losses)/gains consist of the net of gains and losses on
interest paid and interest earned, currency exchange differences and the periodic revaluation of
inventories.

Taxes

The effective tax rates for the periods discussed in this annual report were similar to the
statutory corporate income tax rate in Argentina which was 35% during each of the periods presented
in this annual report. See Note 3(j) to the Audited Consolidated Financial Statements.

Results of Operations

Consolidated results of operations for the years ended December 31, 2010, 2009 and 2008

The following table sets forth certain ﬁnancial information as a percentage of net sales for the

years indicated.

Net sales.......................................................................................
Cost of sales.................................................................................

Gross proﬁt..................................................................................
Administrative expenses...............................................................
Selling expenses............................................................................
Exploration expenses ...................................................................

Operating income ........................................................................

96

Year Ended December 31,

2010

2009

2008

(percentage of net sales)

100.0
(67.7)

32.3
(3.2)
(6.8)
(0.8)

21.5

100.0
(67.5)

32.5
(3.2)
(7.3)
(1.6)

20.4

100.0
(68.9)

31.1
(3.0)
(7.1)
(2.0)

19.1

The tables below present, for the years indicated, volume and price data with respect to our
sales of our principal products in the domestic and export markets, respectively. The data presented
below does not include sales by Compan˜ ı´a Mega S.A. (Mega), Reﬁnor or Profertil, jointly controlled
companies in which we have 38%, 50% and 50% interests, respectively, and which are proportionally
consolidated in our
consolidation
adjustments, 0.6%, 0.7% and 0.9%, respectively, of our consolidated net sales for 2010, 2009 and
2008. Reﬁnor contributed, after consolidation adjustments, 1.4%, 1.7% and 1.4%, respectively, of our
consolidated net sales for 2010, 2009 and 2008. Profertil contributed, after consolidation adjustments,
1.8%, 2.0% and 2.8%, respectively, of our consolidated net sales for 2010, 2009 and 2008.

statements. Mega contributed, after

consolidated ﬁnancial

Domestic Market

Year Ended December 31,

2010

2009

2008

Product

Units sold

Average price
per unit(1)

Units sold

Average price
per unit(1)

Units sold

Average price
per unit(1)

(in pesos)

(in pesos)

Natural gas.................... 12,238 mmcm
8,029 mcm
Diesel .............................
3,514 mcm
Gasoline.........................
Fuel oil(2) .......................
650 mtn
895 mtn
Petrochemicals...............

288/mcm 14,238 mmcm
7,733 mcm
2,029/m3
3,382 mcm
1,922/m3
529 mtn
1,556/ton
678 mtn
1,944/ton

244/mcm 15,864 mmcm
8,285 mcm
1,556/m3
3,054 mcm
1,545/m3
931 mtn
1,246/ton
676 mtn
1,538/ton

(in pesos)

228/mcm
1,322/m3
1,250/m3
1,304/ton
2,143/ton

(1) Average prices shown are net of applicable domestic fuel transfer taxes payable by consumers.
(2) Includes 298 mtn sold under the Energy Substitution Program in 2008.

Export Market

Year Ended December 31,

2010

2009

2008

Product

Units sold

Average price
per unit(1)

Units sold

Average price
per unit(1)

Units sold

Average price
per unit(1)

Natural gas....................
Gasoline.........................
Fuel oil ..........................
Petrochemicals(2)............

315 mmcm
448 mcm
677 mtn
647 mtn

(in pesos)
1,324/mcm
1,893/m3
1,826/ton
2,477/ton

630 mmcm
777 mcm
828 mtn
430 mtn

(in pesos)
1,427/mcm
1,331/m3
1,384/ton
1,887/ton

580 mmcm
1,058 mcm
1,138 mtn
530 mtn

(in pesos)
1,271/mcm
1,989/m3
1,495/ton
2,563/ton

(1) Average prices shown are gross of applicable export withholding taxes payable by us, and, as a result, may not be indicative of
amounts recorded by us as net sales. See ‘‘—Factors Affecting Our Operations—International oil and gas prices and Argentine
export taxes’’ for more information on the export tax withholding rates applicable to our principal products.

(2) Includes exports of reﬁned parafﬁnic.

Net sales
Net sales in 2010 were Ps.44,162 million, representing a 28.7% increase compared to Ps.34,320
million in 2009. This increase was attributable to, among other things, the increases in the volumes
sold of premium gasoline and premium diesel, to the adequacy of sales prices in the domestic market,
as well as a result of the increase in the average international market price of WTI (approximately a
29% increase in the average market price in 2010 compared to 2009), with the corresponding effect in
certain products sold in the domestic market which track international prices, such as LPG, jet fuel
and petrochemicals. During 2010, we have continued with our efforts within the scope of
the
Petroleum Plus Program, reinforcing our commitment towards the exploitation and development of
available energetic resources to fulﬁll domestic demand, which have permitted us to record income
under such Program.

Net sales in 2009 were Ps.34,320 million, representing a 1.6% decrease compared to Ps.34,875
million in 2008. This decrease was primarily attributable to a decline in the average prices and

97

volumes of exported products, resulting from the negative economic trend which affected global
trading since the second half of 2008, as well as the decrease in the volume of diesel sold in the
the economic slowdown.
domestic market due to lower demand during 2009 as a result of
Commodity prices in general were strongly affected in 2009, and the average price per barrel of WTI
decreased by approximately 38% compared to 2008. As a result, the price of certain products sold in
the domestic market, which track international prices (such as LPG, aviation fuel, and certain
petrochemicals), also decreased. See ‘‘—Results of operations by business segment for the years ended
December 31, 2010, 2009 and 2008—Reﬁning and Marketing’’. In addition, demand for fertilizers in
the domestic market decreased, particularly in the ﬁrst half of 2009. These decreases were mostly
offset by increases in the average domestic prices of diesel and gasoline, the higher volume of gasoline
sold in the domestic market and income recorded under the Petroleum Plus Program, resulting from
the efforts we have made within the scope of the program and which allowed us to maintain our
commitment towards the fulﬁllment of domestic demand.

For further information on our net sales for the periods discussed above, see ‘‘—Results of

operations by business segment for the years ended December 31, 2010, 2009 and 2008.’’

Cost of sales
Cost of sales in 2010 was Ps.29,899 million compared to Ps.23,177 million in 2009, representing
a 29.0% increase. The increase is partly attributable to the higher average price of crude oil purchased
from third parties (which increased by approximately by 25% compared to the average purchase price
in 2009, whereas the volumes of oil bought from such third parties remained almost unchanged), as
well as an increase in the imported volumes of our new low-sulfur diesel (Euro Diesel), gasoline and
fertilizers in order to fulﬁll the higher demand of these products in the domestic market and to satisfy
the demand for higher quality products. In 2010, we have also made purchases of biofuels (biodiesel
and bioethanol) in order to comply with present regulations. Additionally, within the production
expenses, there was an increase in royalties, driven mainly by the abovementioned higher crude oil
prices, as well as general increases in costs, mainly in preservation, repair and maintenance, salaries
and social security taxes and operation services and other service contracts, caused mainly by upward
price pressure, and also in charges related to contractual commitments.

Cost of sales in 2009 was Ps.23,177 million, compared to Ps.24,013 million in 2008, representing
a 3.5% decrease, which was mainly attributable to a decrease in the volume of products purchased
from third parties, particularly diesel and fertilizers,
in line with the decreased demand for these
products, and crude oil. Strikes in the Southern region of Argentina in the second quarter of 2008
adversely affected our oil production and our margins in that year as a result of the higher volume of
products purchased from third parties, whereas strikes in the third quarter of 2009 had a smaller
impact on our margins.

Selling expenses
Our selling expenses were Ps.3,015 million in 2010, compared to Ps.2,490 million in 2009,
representing an increase of 21.1%, resulting from increases in transportation expenses, due to higher
prices of gasoline and diesel in the domestic market and to increases in the corresponding fees paid
for these services, in line with the upward price pressure in the economy.

Selling expenses were Ps.2,490 million in 2009 and Ps.2,460 million in 2008, representing an
increase of 1.2% from 2008 to 2009. These higher costs in 2009 were a result of increases in operation
services and other service contracts, preservation, repair and maintenance, including the refurbishing
of our service stations to ﬁt them for the sale of our new low-sulfur diesel (Euro Diesel).

Administrative expenses
Our administrative expenses increased by Ps.327 million (29.7%) in 2010 compared to 2009
particularly due to increases in wages and social security costs, driven mainly by a centralization
process of tasks in the corporate departments that previously were carried out in the other business
units, as well as by increases in fees and compensation for services, mainly related to technology
information service contracts and licenses expenses and institutional publicity expenses, all these in
accordance with the general cost increases accross the economy.

98

Administrative expenses increased Ps.49 million in 2009 compared to 2008, due to increases in
in particular expenses related to the depreciation of

substantially all components of such expenses,
ﬁxed assets and payroll and related charges.

Exploration expenses
Our exploration expenses decreased by Ps.208 million in 2010 compared to 2009, mainly as a
result of the high exploration expenses incurred in connection with the offshore dry wells recognized
during 2009 (in the Golfo San Jorge Marina and Austral basins), compared to our exploration
expenses in 2010 (associated mainly to the Neuquina and Noroeste basins). Despite this decrease in
our exploration expenses, our exploration activities continued to be one of our strategic objectives in
2010, with our expenditures on such activities reaching approximately Ps.610 million.

In 2009, exploration expenses decreased by Ps.132 million compared to 2008 since exploration
expenses related to unsuccessful drilling in the western region of Argentina, the Golfo de San Jorge
offshore basin and the Austral basin were greater in 2008 than in 2009.

Operating income
Operating income in 2010 was Ps.9,475 million, compared to Ps.6,999 million in 2009,

representing a 35% increase, due to the factors described above.

Operating income in 2009 was Ps.6,999 million, compared to Ps.6,665 million in 2008,

representing a 5% increase, due to the factors described above.

Our operating margins (operating income divided by net sales) were 21.5%, 20.4% and 19.1% in
2010, 2009 and 2008, respectively. Increased volumes of crude oil purchases in 2008 adversely affected
our margins because we lost the margin earned on our internal exploration and production activities.

Other income/(expense), net
Other expense, net amounted to Ps.155 million in 2010 compared to other income, net of Ps.159
million in 2009, due mainly to: (i) higher expenses related to certain deﬁned beneﬁts pension plans of
our wholly controlled subsidiary, YPF Holdings; (ii) recoveries related to certain claims brought in
2009, as a result of their reassessment in light of new developments in our legal proceedings; and (iii)
income derived from insurance coverage in compensation for certain damages that we suffered in our
facilities in 2009.

Other income, net amounted to Ps.159 million in 2009 compared to other expenses, net of
Ps.376 million in 2008, due mainly to: (i) lower expenses related to environmental obligations of our
for the
wholly controlled subsidiary YPF Holdings, which in 2008 entered into an agreement
to our Audited
remediation of a portion of
their
Consolidated Financial Statements;
reassessment
income derived from
insurance coverage in compensation for certain damages that we suffered in our facilities, and; (iv)
certain recoveries from insurance claims related to Profertil, our jointly controlled entity. See Note
3(i) to our Audited Consolidated Financial Statements.

in light of new developments in our legal proceedings;

(ii) recoveries related to certain claims, as a result of

the Passaic River, as mentioned in Note 10 (a)

(iii)

Financial income/(expense), net and holding gains/(losses)
In 2010, ﬁnancial expense, net and holding gains, decreased to Ps.379 million, from Ps.1,242
million in 2009. This material diminution is mainly attributable to a Ps.687 million increase in
holding gains on inventories valued at replacement cost, mainly to reﬂect the aforementioned general
cost increases in the economy during 2010 compared to 2009, as well as lower net negative exchange
rate differences in 2010, related to our net liabilities denominated in U.S. dollars, as a result of the
lower depreciation of the Argentine peso against the U.S. dollar in 2010 compared to the previous
year.

In 2009, ﬁnancial expense, net and holding losses,

increased to Ps.1,242 million, from Ps.174
million in 2008. The increase was mainly due to higher interest expense from loans attributable to our
increased indebtedness and a slight decline in the value of our inventories in 2009 (whereas the value
of our inventories increased in 2008). In addition, we suffered from higher net negative exchange rate
differences resulting from the depreciation of the Argentine peso against the U.S. dollar, as our
outstanding liabilities denominated in U.S. dollars exceed our assets denominated in U.S. dollars.

99

Taxes
Income tax expense in 2010 increased 45.6% to Ps.3,230 million from Ps.2,218 million in 2009
mainly as a result of the higher net income before income tax, as explained above. The effective
income tax rates for 2010 and 2009 were 35.8% and 37.5%, respectively, compared to the statutory
income tax rate of 35%.

Income tax expense in 2009 decreased 4.0% to Ps.2,218 million from Ps.2,311 million in 2008.
The effective income tax rates for 2009 and 2008 were 37.5% and 37.2%, respectively, compared to
the statutory income tax rate of 35%.

For additional

information on our

income tax expense see Note 3(j)

to the Audited

Consolidated Financial Statements.

Net income
Net income for 2010 was Ps.5,790 million, compared to Ps.3,689 million in 2009, an increase of
57.0%. This increase is mainly attributable to the increase in operating income and the decrease in
ﬁnancial expense described above.

Net income for 2009 was Ps.3,689 million, compared to Ps.3,901 million in 2008, a decrease of

5.4%. This decrease is mainly attributable to the increase in ﬁnancial expense described above.

100

Results of operations by business segment for the years ended December 31, 2010, 2009 and 2008

The following table sets forth net sales and operating income for each of our lines of business

for the years ended December 31, 2010, 2009 and 2008:

Net sales(1)
Exploration and Production(2)

To unrelated parties .................................................................
To related parties .....................................................................
Intersegment sales and fees(3)...................................................

Total Exploration and Production.......................................

Reﬁning and Marketing

To unrelated parties .................................................................
To related parties .....................................................................
Intersegment sales and fees ......................................................

Total Reﬁning and Marketing .............................................

Chemicals

To unrelated parties ................................................................
Intersegment sales and fees ......................................................

Total Chemicals....................................................................

Corporate and Other

To unrelated parties .................................................................
Intersegment sales and fees ......................................................

Total corporate and others ..................................................

For the Year Ended December 31,

2010

2009

2008

(in millions of pesos)

4,611
981
17,428

23,020

34,209
917
1,668

36,794

2,445
1,871

4,316

999
358

1,357

4,757
751
14,473

19,981

25,733
627
1,202

27,562

1,932
1,105

3,037

520
350

870

4,016
939
12,663

17,618

25,364
1,508
1,145

28,017

2,829
1,094

3,923

219
461

680

Less intersegment sales and fees ..................................................

(21,325)

(17,130)

(15,363)

Total net sales(4) ...................................................................

44,162

34,320

34,875

Operating income (loss)

Exploration and Production ....................................................
Reﬁning and Marketing...........................................................
Chemicals .................................................................................
Corporate and Other ...............................................................
Consolidation adjustments.......................................................

Total operating income .......................................................

6,210
3,313
874
(952)
30

9,475

5,379
1,896
559
(820)
(15)

6,999

3,315
3,089
1,178
(815)
(102)

6,665

(1) Net sales are net to us after payment of a fuel transfer tax, turnover tax and custom duties on exports. Royalty payments required
to be made to a third party, whether payable in cash or in kind, which are a ﬁnancial obligation, or are substantially equivalent to
a production or similar tax, are accounted for as a cost of production and are not deducted in determining net sales. See ‘‘Item 4.
Information on the Company—Exploration and Production—Oil and gas production, production prices and production costs’’
and Note 2 (f) to the Audited Consolidated Financial Statements.

(2) Includes exploration costs in Argentina, Guyana and the United States and production operations in Argentina and the United

States.

(3) Intersegment sales of crude oil to Reﬁning and Marketing are recorded at transfer prices that reﬂect our estimates of Argentine

market prices.

(4) Total net sales include export sales of Ps.5,678 million, Ps.4,904 million, Ps.7,228 million for the years ended December 31, 2010,

2009 and 2008, respectively. The export sales were mainly to the United States and Brazil.

101

Exploration and Production
Exploration and Production sales increased to Ps.23,020 million in 2010 from Ps.19,981 million
in 2009, representing an increase of 15.2%. Intersegment net sales (substantially all of which relate to
intersegment sales of crude oil) increased by Ps.2,955 million during 2010 compared to the prior year
mainly as a result of an approximately 20% increase in the average intersegment price in pesos of a
barrel of oil (an approximately 15% increase in U.S. dollars), which was partially offset by an
approximately 2.5% decrease in the volumes transferred. These positive effects were reinforced by the
income recorded under the Petroleum Plus Program referred to above. The average price of natural
gas sold in the domestic market increased 18% in 2010 and was driven mainly by price increases in
the power generation and industry segments of the Argentine market, especially with respect to sales
to our subsidiary Mega, whose contractual prices track international prices, which increased along
with the WTI price.

Exploration and Production operating income reached Ps.6,210 million in 2010, a 15.4% increase
from Ps.5,379 million in 2009, due to the aforementioned increases in crude oil sales, but was
partially offset by an increase in operating expenses. Segment operating expenses increased by
approximately 15.1% due mainly to (i) increases in expenses related to operation services and other
service contracts undertaken in order to increase and improve our reserves replacement ratio, which
increased substantially in 2010, (ii) generalized cost increases and higher contractual commitments
costs required under present agreements and management estimations, and (iii) a Ps.395 million
increase in royalties paid, due mainly to the higher value, expressed in pesos at the wellhead (used as
the basis for calculation of such royalties), of hydrocarbons produced, mainly as a result of higher
product prices in 2010 as previously mentioned.

Our exploration expenses decreased by Ps.208 million in 2010 compared to 2009, mainly as a
result of the high exploration expenses incurred in connection with the offshore dry wells recognized
during 2009 (in the Golfo San Jorge Marina and Austral basins), compared to our exploration
expenses in 2010 (associated mainly to the Neuque´n and Noroeste basins). Despite this decrease in
our exploration expenses, our exploration activities continued to be one of our strategic objectives in
2010, with our expenses on such activities reaching approximately Ps.610 million.

Average oil production during 2010 reached 293 thousand barrels per day, compared to 302
thousand barrels per day in 2009. Natural gas production in 2010 decreased by 7.8% to 1,346 mmcf/d
from 1,460 mmcf/d in 2009. This decline was mainly attributable to the natural decline in the
production curve resulting from the continuing overall maturity of our ﬁelds, and the decline in
natural gas demand from thermal power plants.

Exploration and Production net sales in 2009 were Ps.19,981 million, representing a 13.4%
increase from Ps.17,618 million in 2008. Intersegment net sales (substantially all of which relate to
intersegment sales of crude oil) increased by Ps.1,810 million in 2009, mainly as a result of a 19%
increase in the average intersegment price in pesos of a barrel of oil (1% increase in U.S. dollars),
which was partially offset by a 1.7% decrease in the volumes transferred. Net sales in 2009 were also
strengthened by the income recorded pursuant to the Petroleum Plus Program and a 7.0% increase in
the domestic price of natural gas mainly attributable to price increases for gas sold to industrial
customers and thermal power plants in the domestic market during 2009, which were partially offset
by a decrease in the price of natural gas sold to our jointly controlled company, Mega, which is set
according to international parameters and therefore decreased in line with the WTI price. Natural gas
exported volumes remained low in 2009 due to the restrictions we are subject to. Export taxes
remained relatively stable in 2009 compared with 2008.

Exploration and Production operating income increased 62% to Ps.5,379 million in 2009 from
Ps.3,315 million in 2008, as a result of the increase in inter-segment crude oil prices, and the income
recorded pursuant to the Petroleum Plus Program, as explained above. This was partially offset by a
2.1% increase in segment operating expenses, which was mainly due to increases in the prices of
service contracts resulting from general costs increase, and an increase in royalties paid by Ps.121
million, due to the higher value, expressed in pesos at the wellhead (used as the basis for calculation
of such royalties), of hydrocarbons produced (mainly as a result of the 10.1% peso depreciation
against the U.S. dollar compared to December 31, 2008).

102

Average oil production during 2009 decreased 3.5% to 302 thousand barrels per day from 313
thousand barrels per day in 2008. Natural gas production in 2009 decreased 11.9% to 1,470 mmcf/d
from 1,658 mmcf/d in 2008. These declines were mainly attributable to the natural decline in the
production curve resulting from the continuing overall maturity of our ﬁelds, and the decline in
natural gas demand from industrial customers and thermal power plants.

Reﬁning and Marketing
Reﬁning and Marketing net sales in 2010 were Ps.36,794 million, 33.5% higher than the
Ps.27,562 million in net sales recorded in 2009. This increase was attributable, among other factors, to
higher volumes sold in the domestic market, especially in the premium lines of diesel and gasoline, as
well as to the higher average sale prices of gasoline and diesel sold in the domestic market in 2010
(the most important products in this business segment). Notwithstanding the increase in the average
domestic prices of diesel and gasoline, domestic prices of our reﬁned products remained below
average international prices, except for the domestic prices of certain reﬁned products that tend to
track international prices, such as aviation fuel and LPG, which increased in 2010.

Reﬁning and Marketing operating proﬁt increased to Ps.3,313 million in 2010 from Ps.1,896
million in 2009. This increase was mainly due to higher volumes and average sales prices of products
sold in the domestic market. In addition, purchases of crude oil, which account for approximately
90% of the segment’s operating costs, were made at an average intersegment price (paid to the
Exploration and Production business segment) which was 20% higher than in 2009. This increase
reﬂected the adjustments made in crude oil prices in the domestic market among local producers,
considering the market evolution and the differences in crude oil qualities. This increase also affected
crude oil purchase prices paid to third parties. Further, reﬁning costs (excluding crude oil purchases
increased by approximately 20%, mainly due to higher energy prices,
and transportation costs)
increases in operation services and service contract costs, as well as salary increases and adjustments
paid in 2010. Reﬁning costs per barrel, which we calculate as the segment’s production costs for the
period less crude oil purchase costs, divided by the number of barrels produced during the period,
was Ps.17.8 in 2010, compared to Ps.14.8 in 2009.

Reﬁnery output in 2010, including 50% of Reﬁnor’s output (we own 50% of Reﬁnor), reached
304 thousand barrels per day, representing a 1.9% decrease compared to 310 thousand barrels per day
processed in 2009.

Reﬁning and Marketing net sales in 2009 were Ps.27,562 million, 1.6% lower than the Ps.28,017
million in net sales recorded in 2008. This decrease was mainly attributable to the sharp decreases in
international prices for substantially all of our exported reﬁned products, a decrease in the volumes of
gasoline sold by us in the export market (11.7%), and a decline in the volumes of diesel sold in the
domestic market (6.7%). These decreases were partially offset by an increase in the average domestic
prices of diesel and gasoline (of 17.7% and 23.6%, respectively), as well as a 10.7% increase in the
volume of gasoline sold domestically. Notwithstanding the increase in the average domestic prices of
diesel and gasoline, domestic prices for our products remained below average international prices. In
addition, the domestic prices of certain reﬁned products that tend to track international prices, such
as aviation fuel and LPG, decreased in 2009.

Reﬁning and Marketing operating proﬁt decreased 38.6% to Ps.1,896 million in 2009 from
Ps.3,089 million in 2008. This decrease was mainly due to the aforementioned decline in international
prices. In addition, purchases of crude oil, which account for approximately 90% of the segment’s
operating costs, were made at a price which was on average 19% higher in Argentine pesos than the
previous year (although it was less than 1% higher when measured in U.S. dollars). Further, reﬁning
costs (excluding crude oil purchase and transport costs) increased by approximately 17%, mainly due
to the higher costs of energy and increases in operation services and service contract costs, as well as
higher depreciation costs arising from an increase in assets that commenced operations. Reﬁning cost
per barrel, which we calculate as the segment’s production costs for the period less crude oil purchase
costs, divided by the number of barrels produced during the period, was Ps.14.8 in 2009, compared to
Ps.12.7 in 2008.

Reﬁnery output in 2009, including 50% of Reﬁnor’s output (we own 50% of Reﬁnor), reached
310 thousand barrels per day, representing a 5.4% decrease compared to 328 thousand barrels per day

103

processed in 2008. The decrease is mainly a result of planned overhauls in our reﬁneries, as well as
external factors which affected our operations such as strikes related to the transport services used to
receive crude oil supplies.

Chemicals
Net sales increased 42.1% to Ps.4,316 million in 2010 compared to Ps.3,037 million in 2009. This
increase was attributable mainly to higher sales prices in the domestic market, particularly with
respect to methanol and aromatic products lines, and to higher volumes of fertilizers sold in the
domestic market as well. Additionally, higher volumes were sold and higher prices were received from
the sales of aromatic additives, such as toluene and xylene, which are used in the elaboration of
liquid fuels, to the Reﬁning and Marketing business unit. In the international market, net sales rose
in 2010, both in terms of volume (essentially, of paraﬁnic reﬁned) and in average prices for exported
petrochemical products as a consequence of an upward trend in reference prices in 2010 compared to
2009, consistent with the upward trend in reference prices experienced in other segments.

Operating income increased by 56.4% to Ps.874 million in 2010 compared to Ps.559 million in
2009 due mainly to higher margins in various aromatics product
lines processed at Ensenada
Industrial Complex. The results obtained from our interest in Profertil S.A. remained stable compared
to 2009, as the higher urea and other fertilizer volumes sold in the domestic market and the higher
average prices of these products both at the domestic and international market, were offset by a
sharp diminution in the volumes of urea sold in the international market.

Net sales in 2009 decreased by 22.6% to Ps.3,037 million from Ps.3,923 million in 2008. This
decrease was attributable mainly to lower sales prices in the domestic market, particularly with
respect to methanol and fertilizers, and declines in the average prices of exported products (in line
with lower international market prices for hydrocarbon products during 2009 compared to 2008) and,
to a lesser extent, lower exported volumes of methanol.

Operating income on this segment decreased by 52.5% to Ps.559 million in 2009 compared to
the Ensenada
Ps.1,178 million in 2008 due mainly to lower margins in aromatics produced at
Industrial Complex, and the lower income obtained by our jointly controlled company Profertil,
resulting from decreased urea sales.

Corporate and others
In ﬁscal year 2010, operating loss for administrative expenses and other expenses reached Ps.952
million, a 16.1% increase over the previous year. The main reasons for the increase were higher
salaries and related charges,
increases in fees and compensation for services, higher technology
information services and licenses expenses and institutional publicity expenses. This increase was,
however, partially offset by the slight increase in operating income of our controlled company A-
Evangelista S.A., and by earnings related to support services, mainly IT services, provided to related
parties.

In ﬁscal year 2009, operating loss for administrative expenses and other expenses reached Ps.820
million, 0.6% over the previous year. This slight increase was mainly attributable to higher salaries
and related charges compared to the previous year as well as ﬁxed assets depreciation, and was
partially offset by an slightly higher operating income achieved by our controlled company A-
Evangelista S.A.

Liquidity and Capital Resources

Financial condition

Total debt outstanding as of December 31, 2010 and 2009 was Ps.7,789 million and Ps.6,819
million, respectively, consisting of short-term debt (including the current portion of long-term debt) of
Ps.6,176 million and long-term debt of Ps.1,613 million as of December 31, 2010, and short-term debt
of Ps.4,679 million and long-term debt of Ps.2,140 million as of December 31, 2009. As of December
31, 2010 and 2009, a major part of our debt was denominated in U.S. dollars.

Since September 2001, we have repurchased certain of our publicly-traded bonds in open market
transactions on an arms-length basis. As of December 31, 2010, we had repurchased approximately
U.S.$12 million of our outstanding bonds. We may from time to time make additional purchases of,

104

or affect other transactions relating to, our publicly-traded bonds if in our own judgment the market
conditions are attractive.

The following tables set forth our consolidated cash ﬂow information for the periods indicated.

Net cash ﬂows provided by operating activities..........................
Net cash ﬂows used in investing activities...................................
Net cash ﬂows used in ﬁnancing activities ..................................

Net increase/(decrease) in cash and equivalents ..........................
Cash and equivalents at the beginning of period ........................
Cash and equivalents at the end of period..................................

For the Year Ended December 31,

2010

2009

2008

(in millions of pesos)

12,726
(8,624)
(3,720)

382
2,145
2,527

9,414
(5,603)
(2,881)

930
1,215
2,145

13,558
(7,043)
(6,147)

368
847
1,215

Net cash ﬂow provided from operating activities was Ps.12,726 million in 2010, compared to
Ps.9,414 million in 2009. This 35% increase was mainly attributable to higher operating income in
2010 compared to 2009, as explained above. Net cash ﬂow provided by operating activities was
Ps.9,414 million in 2009, compared to Ps.13,558 million in 2008, a decrease of approximately 31%,
mainly attributable to lower net proceeds from our receivables with related parties during 2009, as
well as a net increase in our working capital, resulting from our relatively higher level of receivables
and relatively lower level of accounts payable in 2009.

The main uses of cash in investing and ﬁnancing activities in 2010 involved Ps.8,729 million in
ﬁxed asset acquisitions corresponding mainly to our Exploration and Production business segment
and our reﬁneries, and Ps.4,444 million to dividend payments. These uses of cash were also afforded
by Ps.724 million net cash ﬂow corresponding to proceeds from loans. The principal uses of cash in
investing and ﬁnancing activities in 2009 included Ps.5,636 million in ﬁxed asset acquisitions relating
mainly to exploration and development activities in our upstream operations, Ps.4,897 million in
dividend payments, while net proceeds from loans reached Ps.2,016 million. In 2008, the principal
uses of cash in investing and ﬁnancing activities included Ps.7,035 million in ﬁxed asset acquisitions
relating mainly to our Exploration and Production business unit, and Ps.9,287 million in dividend
payments (which include dividends declared in respect of 2007 and paid in 2008), while net proceeds
from loans reached Ps.3,140 million. Our current ﬁnancing policy is to use cash ﬂows provided by
operating activities and debt to fund both our investing and operating activities. In response to
market ﬁnancial conditions prevailing in Argentina as of the date of this annual report, our ﬁnancial
policy seeks to fund a substantial portion of our short-term debt in local currency. Pursuant to this
policy, we have several domestic credit lines available from ﬁnancial institutions. We believe that our
level of working capital will not affect our business operations, mainly as a result of the expected net
cash ﬂow provided by operating activities in 2011.

Repsol YPF and Petersen Energı´a have agreed in the shareholders’ agreement entered into by
them in connection with the Petersen Transaction to effect the adoption of a dividend policy under
which we would distribute 90% of our net income as dividends, starting with our net income for
2007. See ‘‘Item 8. Financial Information—Dividend Policy’’ and ‘‘Item 7. Major Shareholders and
Related Party Transactions—Shareholders’ Agreement.’’

The shareholder’s meeting held on January 8, 2008 approved a notes program for an amount up
to U.S.$1 billion. The proceeds of any offerings under this program must be used exclusively to
invest in ﬁxed assets and working capital in Argentina. On September 28, 2009, we issued negotiable
obligations under this program in an amount of Ps.205 million, which accrued interest at a variable
rate and matured in March 2011. Additionally, in March 2010 we issued two different series of notes
under the same notes program: one denominated in Argentine pesos and maturing in September 2011,
for a total of Ps.143 million, and a second one, denominated in U.S. dollars, for a total of U.S.$70
million, which will mature in March 2013.

105

The following table sets forth our commitments for the periods indicated below with regard to
the principal amount of our debt, as of December 31, 2010, plus accrued but unpaid interest through
December 31, 2010:

Expected Maturity Date

Total

Less than
1 year

1 – 2 years

2 – 3 years

3 – 4 years

4 – 5 years

More than
5 years

Debt .....................................

7,789

6,176

394

277

447

—

494

(in millions of pesos)

Contractual obligations

The following table sets forth information with regard to our commitments, expressed in U.S.

dollars, under commercial contracts for the years indicated below, as of December 31, 2010:

Contractual Obligations

Total

Less than 1
year

1 – 3 years

3 – 5 years

More than
5 years

(in millions of U.S.$)(5)

Debt(1)..............................................
Operating Lease Obligations ...........
Purchase Obligations(2)....................
Purchases of services....................
Purchases of goods ......................
LPG..........................................
Electricity .................................
Gas ...........................................
Oil ............................................
Steam........................................
Others.......................................
Other Liabilities(3) ...........................

Total(3)(4)..........................................

2,144
553
2,956
1,379
1,577
78
789
127
506
47
31
4,260

9,913

1,613
241
878
569
309
23
100
54
96
5
31
2,674

5,406

206
237
879
424
454
48
185
24
186
10
—
204

136
52
581
171
410
7
183
24
186
10
—
243

1,525

1,011

189
24
619
215
404
—
321
25
36
21
—
1,139

1,971

(1) These projected amounts include interest due during all the periods presented. Interest on variable rate instruments is calculated

using the rate as of December 31, 2010 for all periods.

(2) Includes purchase commitments under commercial agreements that do not provide for a total ﬁxed amount, which have been
valued using our best estimates. Accordingly, our actual purchase obligations may differ from the estimated amounts shown in the
table.

(3) Reserves for contingent liabilities under commercial contracts, which amounted to U.S.$710 million as of December 31, 2010, are
not included in the table above since we cannot, based on available evidence, reasonably estimate the settlement dates of such
contingencies.

(4) In addition to the contractual obligations detailed in the preceding table, we are also committed to carry out exploration activities
in certain exploration areas and to make certain investments and expenditures until the expiration of some of our concessions.
These commitments amounted to approximately U.S.$4.2 billion as of December 31, 2010.

(5) The table is presented in U.S.$, which is the company’s functional currency, and not in its reporting currency, as the majority of

the company’s contractual obligations are originally denominated in U.S.$.

We have additional commitments under guarantees. For a discussion of

these additional

commitments see ‘‘—Guarantees provided’’ below.

Covenants in our indebtedness

Our ﬁnancial debt generally contains customary covenants for contracts of this nature, including
negative pledge, material adverse change and cross-default clauses, as well as customary acceleration
provisions.

With respect to a signiﬁcant portion of our ﬁnancial debt totaling Ps.7,789 million,

including
accrued interest (long- and short-term debt) as of December 31, 2010, we have agreed, among other
things and subject to certain exceptions, not to establish liens or charges on our assets. In addition, a
small part of our debt (approximately 7.7%) is subject to ﬁnancial covenants related to our leverage

106

ratio and debt service coverage ratio. In the event of a payment default, the creditors may declare
due and immediately payable the principal and accrued interest on amounts owed to them. Upon an
in the case of outstanding negotiable obligations
event of default with respect to other matters,
amounting to Ps.987 million (included in the ﬁgure above),
the trustee may declare due and
immediately payable the principal and accrued interest on amounts owed if required by holders
representing at least a percentage that varies between 10 and 25% of the total principal of the
outstanding obligations.

Almost all of our total outstanding ﬁnancial debt is subject to cross-default provisions. As a
result of these cross-default provisions, a default on our part or, in certain cases, on the part of any
of our consolidated subsidiaries covered by such provisions, could result in a substantial portion of
our debt being declared in default or accelerated. None of our debt or the debt of our consolidated
subsidiaries is currently in default.

Guarantees provided

(and maximum potential amount of

As of December 31, 2010, we had signed a guarantee in relation to a loan that Central Dock
Sud S.A. had borrowed from the European Investment Bank in 2001. As of December 31, 2010 the
carrying amount
the guarantee was
approximately U.S.$13.9 million, consisting of U.S.$12.7 million of principal, plus a 9% cap which
liquidated damages, charge or expense or any other sum
covers any sum of interest, commission,
which is expressed to be payable by the borrower to the bank. The guarantee triggers in the event of
a lack of payment of any guaranteed amount by Central Dock Sud S.A. The corresponding loan
matures in 2013.

future payments) of

In addition, as of December 31, 2010, we had signed a guarantee in relation to a loan that
Pluspetrol borrowed from the Royal Bank of Scotland, with a carrying amount of U.S.$3.4 million.
The loan matured on January 3, 2011.

Furthermore, during 2010, we issued letters of credit in an aggregate total amount of U.S.$44
million to guarantee certain environmental obligations and guarantees in an aggregate amount of
U.S.$24 million in relation with the performance of contracts of certain of our controlled companies.

Capital investments, expenditures and divestitures

Capital investments and expenditures
Capital investments in 2010 totaled approximately Ps.8,962 million. The table below sets forth
our capital expenditures and investments by activity for each of the years ended 2010, 2009 and 2008.

2010

2009

2008

(in millions
of pesos)

(%)

(in millions
of pesos)

(%)

(in millions
of pesos)

(%)

Capital Expenditures
and Investments

Exploration and

Production ............

Reﬁning and

Marketing .............
Chemicals ..................
Corporate and Other.

Total ..........................

6,274

1,826
712
149

8,961

70

20
8
2

100%

4,322

1,177
155
178

5,832

74

20
3
3

100%

5,696

1,013
148
511

7,368

77

14
2
7

100%

We have budgeted approximately U.S.$3.0 billion in investments and capital expenditures for
2011, a signiﬁcant portion of which will be dedicated to our exploration and production activities.
During the period 2011-2013, we expect to make capital expenditures of around U.S.$7.6 billion,
principally related to our exploration and production projects,
including some to increase recovery
rates in our ﬁelds.

107

We intend to ﬁnance planned capital expenditures through our internally-generated cash ﬂows
to the extent necessary, borrowings. For a detailed description of our principal current

and,
investment projects, see ‘‘Item 4. Information on the Company—Overview.’’

Actual investments and capital expenditures may differ from the above estimates.

Capital divestitures
We have not made any signiﬁcant divestitures in the past three years.

Off-Balance Sheet Arrangements

We do not have any material off-balance sheet arrangements. Our only off-balance sheet

arrangements are those described in ‘‘—Liquidity and Capital Resources—Guarantees provided’’.

ITEM 6. Directors, Senior Management and Employees
Board of Directors

Our business and affairs are managed by the Board of Directors in accordance with our by-laws
and the Argentine Corporations Law No. 19,550 (the ‘‘Argentine Corporations Law’’). Our by-laws
provide for a Board of Directors of 11 to 21 members, and up to an equal number of alternates.
Alternates are those elected by the shareholders to replace directors who are absent from meetings or
who are unable to exercise their duties, when and for whatever period appointed to do so by the
Board of Directors. Alternates have the responsibilities, duties and powers of directors only if and to
the extent they are called upon to attend board meetings and as long as they perform the duties of a
director.

Directors shall hold ofﬁce from one to three years, as determined by the shareholders’ meetings.
Since the shareholders’ general ordinary meeting held on April 28, 2009, our Board of Directors is
composed of 17 directors and 13 alternates.

In accordance with our by-laws, the Argentine government, sole holder of Class A shares,

is
entitled to elect one director and one alternate. On November 5, 2010, our Board of Directors
discussed the resignation handed in by the director representative of Class A shares. A replacement is
yet to be appointed.

Under the Argentine Corporations Law, a majority of our directors must be residents of
Argentina. All directors must establish a legal domicile in Argentina for service of notices in
connection with their duties.

Our by-laws require the Board of Directors to meet at least once every quarter in person or by
video conference, and a majority of directors is required in order to constitute a quorum. If a
quorum is not met one hour after the start time set for the meeting, the President or his substitute
may invite alternates of the same class as that of the absent directors to join the meeting, or call a
meeting for another day. Resolutions must be adopted by a majority of
the directors present
(including by teleconference), and the President or his substitute is entitled to cast the deciding vote
in the event of a tie.

The current members of our Board of Directors, the year in which they were appointed and the

year their current term expires are as follows:

Name

Position

Antonio Brufau Niubo.................... Chairman and Director
Enrique Eskenazi............................. Vice-Chairman and Director
Sebastia´ n Eskenazi .......................... Executive Vice-Chairman, Chief

Antonio Gomis Sa´ ez ....................... Repsol Argentina General

Executive Ofﬁcer (CEO) and
Director

Director, Assistant Director to
the CEO and Director

Anı´bal Guillermo Belloni ................ Director

Age

Director
Since

Term
Expires

63
84
47

58

76

2004
2008
2008

2011
2011
2011

2007

2011

2008

2011

108

Name

Position

Age

Director
Since

Term
Expires

Mario Blejer .................................... Director
Carlos Bruno ................................... Director
Carlos de la Vega ............................ Director
Matı´as Eskenazi Storey ................... Assistant Director to the CEO

and Director

Rau´ l Fortunato Cardoso Maycotte Director
Salvador Font Estrany .................... Director
Federico Man˜ ero ............................. Director
Miguel A´ ngel Devesa del Barrio ..... Director
Luis Sua´ rez de Lezo Mantilla ......... Director
Javier Monzo´ n................................. Director
Mario Va´ zquez ................................ Director
To be appointed * ........................... Director
Alejandro Quiroga Lo´ pez................ Alternate Director
Alfredo Pochintesta ......................... Alternate Director and

Toma´ s Garcı´a Blanco...................... Alternate Director and Upstream

Commercial Executive Director

Executive Director

Fernando Dasso .............................. Alternate Director and Director

of Human Resources

Carlos Jime´nez Lo´ pez...................... Alternate Director and Director

of Management Control

Carlos Alfonsi.................................. Alternate Director and

Downstream Executive Director
A´ ngel Ramos Sa´ nchez ..................... Alternate Director and Director

Ezequiel Eskenazi Storey................. Alternate Director
Mauro Renato Jose´ Dacomo .......... Alternate Director and General

of Administration and Tax

Counsel

Ignacio Cruz Moran........................ Alternate Director and COO
Eduardo A´ ngel Garrote .................. Alternate Director
To be appointed .............................. Alternate Director
To be appointed * ........................... Alternate Director

62
62
70
42

56
61
54
45
59
55
75
—
48
58

46

45

54

50

54

50
46

40
59
—
—

2008
2008
1993
2008

2008
2008
2005
2011
2008
2005
2008
—
2004
2008

2008

2008

2008

2008

2009

2008
2008

2008
2008
—
—

2011
2011
2011
2011

2011
2011
2011
2011
2011
2011
2011
—
2011
2011

2011

2011

2011

2011

2011

2011
2011

2011
2011
—
—

* Representing our Class A shares.

The only director who owns shares in YPF is Alternate Director Alejandro Quiroga Lo´ pez, who
owned 4,000 Class D shares as of April 11, 2011 (representing approximately 0.001% of our Class D
shares outstanding as of such date). Sebastia´ n Eskenazi, Enrique Eskenazi, Matı´as Eskenazi Storey
and Ezequiel Eskenazi Storey control Petersen Energı´a and PEISA (the ‘‘Petersen Group’’), which
own 15.46% of our capital stock, and aggregately hold an option to purchase up to an additional
10.0% of our capital stock. See ‘‘Item 7. Major Shareholders and Related Party Transactions.’’

Pursuant

to the shareholders’ agreement between Repsol YPF and Petersen Energı´a,

the
composition of our Board of Directors shall reﬂect a proportional representation of Repsol YPF’s
and Petersen Energı´a’s interests in our capital stock. See ‘‘Item 7. Major Shareholders and Related
the
Party Transactions-Shareholders’ Agreement’’
shareholders’ agreement on the composition of our board of directors and the appointment of
directors and ofﬁcers.

for a summary of certain material

terms of

Directors’ outside business interests and experience

Antonio Brufau Niubo
Mr. Brufau Niubo graduated with an economics degree from the University of Barcelona. From
1999 to 2004, he acted as managing director for the La Caixa Group. He served as a member of the

109

Repsol YPF Board of Directors from 1996 until becoming chairman and CEO of Repsol YPF in
October 2004, a position he currently occupies. He was appointed chairman of Gas Natural group in
July 1997 and is now vice chairman of the group. From July 2002 to July 2005, he served as
chairman of Barcelona’s Cı´rculo de Economı´a. Mr. Brufau has served on the boards of several other
companies,
including Suez, Enaga´ s, Abertis, Aguas de Barcelona, Colonial and Caixa Holding,
CaixaBank France and CaixaBank Andorra. Until December 2005, he was the only Spanish member
of the Executive Committee of the International Chamber of Commerce.

Enrique Eskenazi
Mr. Eskenazi graduated with a chemical engineering degree from the Universidad Nacional del
Litoral. Mr. Eskenazi has been Vice Chairman and Director of YPF since 2008. He is also the Co-
Chief Executive Ofﬁcer of Marviol S.R.L. and the President of Petersen Inversiones S.A., Napelgrind
S.A., Banco de San Juan S.A., Banco de Santa Cruz S.A., Nuevo Banco de Santa Fe S.A., Nuevo
Banco de Entre Rı´os S.A., Petersen Energı´a S.A. (Argentina), Fundacio´ n Banco San Juan, Fundacio´ n
Banco Santa Cruz, Fundacio´ n Nuevo Banco de Santa Fe, Fundacio´ n Nuevo Banco de Entre Rı´os,
Mantenimientos y Servicios S.A., Petersen, Thiele y Cruz S.A., Estacionamientos Buenos Aires S.A,
Petersen Energı´a Pty. Ltd., Agro Franca S.A. and Fundacio´ n YPF. Mr. Eskenazi
is the father of
Messrs. Sebastia´ n Eskenazi and Matı´as and Ezequiel Eskenazi Storey.

Sebastia´n Eskenazi
Mr. Eskenazi has been Executive Vice-Chairman, Chief Executive Ofﬁcer and Director of YPF
since March 2008. He is also Co-Chief Executive Ofﬁcer of Marviol S.R.L. and President of Arroyo
Lindo S.A. Mr. Eskenazi
is Vice President of Petersen Inversiones S.A, Petersen Energı´a S.A.
(Argentina), and Nuevo Banco de Santa Fe S.A. He is member of the Board of Directors of Petersen
Energı´a Pty. Ltd., Petersen Energı´a S.A. (Spain) and Petersen Energı´a Inversora S.A. (Spain), and
alternate director in Banco de San Juan S.A., Banco de Santa Cruz S.A., and Nuevo Banco de Entre
Rı´os. Mr. Eskenazi is the son of Mr. Enrique Eskenazi and brother of Messrs. Matı´as and Ezequiel
Eskenazi Storey.

Antonio Gomis Sa´ez
Mr. Gomis Sa´ ez graduated with a chemical engineering degree from the Complutense University
of Madrid and a master’s in business administration from IESE Business School – University of
Navarra in Spain. He began his career in 1974 at the Repsol YPF Petro´ leo reﬁnery in Puertollano,
Ciudad Real and later went to work at the International Energy Agency in Paris founded by the
Organization for Economic Cooperation and Development (‘‘OECD’’). He served as advisor to the
General Secretary of Energy and Mineral Resources at the Spanish Ministry of Energy. In 1986 he
joined the Instituto Nacional de Hidrocarburos, where he was appointed managing director of
international and institutional relations of Repsol YPF. From 1997 to 2000, he was general director
of energy at the Spanish Ministry of Industry and Energy. From September 2000 to November 2004,
he was corporate director of external relations, overseeing investor and media relations. In January
2005 he was appointed CEO of Repsol YPF Quı´mica and managing director of Repsol YPF’s
Chemicals Europe and Rest of the World. In July 2007 he was appointed director of our company
and in February 2010 he was appointed General Director Repsol Argentina, and Assistant Director
to the CEO.

Anı´bal Guillermo Belloni
Mr. Belloni holds a degree in Electrical Engineering from the Universidad de Buenos Aires, and
has been a director of Petersen, Thiele y Cruz S.A. since 1989. He has worked as an engineer and
business development manager at Sade S.A., as a general manager at Cosapi S.A., in Lima, Peru, as
a Vice President of Kanter S.A., and as the Argentine representative of Foster Wheeler Corporation.
He has been an Executive Board member of the Argentine Chamber of Construction and was a
founding member and Executive Board member of the Argentine Union of Construction.

Mario Blejer
Mr. Blejer holds a bachelor’s and a master’s degree in Economics from the Hebrew University,
in Economics from the University of Chicago. He has been a
the Central

the Hebrew University of Jerusalem, Boston University,

and a master’s degree and a Ph.D.
professor of Economics at

110

European University,
in Budapest, and the New York University Graduate School of Business, a
senior advisor to the World Bank, Europe and Central Asia region, and the International Monetary
Fund, and was a senior researcher at the Center for Latin American Monetary Studies. From 2001 to
2002, he was the Deputy Governor and then the Governor of the Central Bank of Argentina, and
from 2003 to 2008 he was the director of the Centre for Central Banking Studies, and advisor to the
Governor, of the Bank of England. He is currently an independent economic consultant, professor at
the Universidad de San Andre´s in Buenos Aires, and is a director of Inversiones y Representaciones
S.A. and Consultants Asset Management, both located in Buenos Aires.

Carlos Bruno
Mr. Bruno graduated with a degree in architecture from the University of Buenos Aires. He is
president and co-founder of the Centro de Investigaciones para la Transformacio´n. He has participated
in the creation of the Center of International Economy while being a member of the Ministry of
Foreign Relations. He was the Undersecretary of Economic Integration and Secretary of International
Economy Relations from 1984 to 1989 and was appointed Ambassador V with the Senate’s approval.
His areas of expertise are international economic relations and international trade.

Carlos de la Vega
Mr. de la Vega was director of La Caja ART from 1996 to 2004 and director of Luncheon
Tickets from 1991 to 1998. Since April 2003 he has been president of the Argentine Chamber of
Commerce, a position he also held from 1988 to 1993. He has been a member of our Board of
Directors for Class D shares since 1993, and until 1996 he was director of Institutional Relations of
Ciba-Geigy Argentina. He has been a member of our Audit Committee from 1993 to 1997 and from
2004 to the present.

Matı´as Eskenazi Storey
Mr. Eskenazi Storey is Chief Executive Ofﬁcer of Administradora San Juan S.R.L. He is
President of November S.A. and Vice President of Comercial Latino S.A. and Nuevo Banco de Entre
Rı´os S.A. Mr. Storey is member of the Board of Directors of Petersen Energı´a S.A. (Spain), Petersen
Energı´a Pty. Ltd., Profertil S.A., Reﬁnerı´a del Norte S.A., Compan˜ ı´a Mega S.A., and vice-president
of Petersen Energı´a S.A. (Spain) and Petersen Energı´a Inversora S.A. (Spain). He is also alternate
director in Banco de San Juan S.A., Banco de Santa Cruz S.A., and Nuevo Banco de Santa Fe S.A.
Mr. Eskenazi is the son of Mr. Enrique Eskenazi and the brother of Messrs. Sebastia´ n Eskenazi and
Ezequiel Eskenazi Storey.

Rau´l Fortunato Cardoso Maycotte
Mr. Cardoso has a degree in Law from the Universidad Auto´ noma de Me´xico and a Masters
Degree in International Relations from the Institute of Social Studies at The Hague. Mr. Cardoso
began his professional career in the Mexican Ministry of Foreign Affairs and later at the Mexican
Ministry of Finance, holding a variety of positions within the International Affairs Department with
a focus on bilateral economic relations. In 1983, Mr. Cardoso commenced working for Pemex
Internacional Espan˜ a, S.A. (Pemex) in its International Trade area. During his extensive career, Mr.
Cardoso has held a number of positions in the Crude Oil division and at points in his career ran the
P.M.I. (Pemex) Trading ofﬁces in both Madrid and London. From 2001 to 2003, Mr. Cardoso was
stationed in Ankara as the Ambassador of Mexico to Turkey, Pakistan, Azerbaijan, Kazakhstan,
Uzbekistan, Turkmenistan and Kirgizstan. After this assignment he returned to his position at Pemex.
He was the Managing Director of Pemex Internacional Espan˜ a, S.A., based in Madrid, and
represented that company on Repsol YPF, S.A.’s Board of Directors. He represents Mexico in a
variety of international forums, including OPEC, the IEA, the OECD and the International Energy
Forum. Mr. Cardoso is also a member of the Mexican delegation on various presidential and cabinet
assignments.

Salvador Font Estrany
Mr. Font Estrany is a civil engineer. He is currently Energy General Manager of Sacyr
Vallehermoso, S.A.
in Spain. He has previously served as Commercial Director and Chairman of
CAMPSA Red, Managing Director of CEPSA Red, Cepdisa and Dispesa, Chairman of CEPSA
Estaciones de Servicio, a member of the Executive Committee of CEPSA, and was a Director of

111

CEPSA Lubricantes, CEPSA Gas, Petro Cat, Cepsa Portuguesa and Turyocio. He also previously
served as Commercial General Manager and member of the Operating and Executive Committees of
Iberdrola.

Federico Man˜ero
Mr. Man˜ ero graduated with a law degree from the San Sebastia´ n Faculty of Law. He is
president of Comunicacio´ n y Gestio´ n de Entornos, and has more than 25 years of experience in
managerial and consulting positions for organizations and private, public and political projects. He is
an expert in strategic positioning and corporate communications, and has an international proﬁle with
professional activities in more than 50 countries and strong relations in Latin America. He is the
founder of various nonproﬁt projects and organizations like Solidaridad Internacional, Programa de
Cooperacio´n Iberoamericana en Temas de Juventud (Organismo Iberoamericano de Juventud) and
Movimiento por la Paz, el Desarme y la Libertad and is a regular collaborator with the Fundacio´n
Salvador Allende, Fundacio´ n Progreso Global and UNICEF. Mr. Man˜ ero is a native speaker of
Spanish and French.

Miguel A´ngel Devesa del Barrio
Mr. Devesa del Barrio graduated as an industrial engineer from University School of Industrial
Engineers of Madrid. He started his professional career at Arthur Andersen later becoming Vice-
President of Cap Gemini Ernst & Young, where he focused on projects for businesses in the energy
sector. Prior to joining Repsol YPF in August 2006, he served as Director of Energy Management at
Hidrocanta´ brico Energı´a, and in EDP Group as Managing Director of EDP Gas. He currently serves
as Chief Financial Ofﬁcer of Repsol YPF.

Luis Sua´rez de Lezo Mantilla
Mr. Sua´ rez de Lezo Mantilla received his degree in Law from the Universidad Complutense of
Madrid and is a State Attorney (on leave) specializing in Commercial and Administrative Law. He
was Director of Legal Affairs of CAMPSA, and has been in private legal practice, particularly in the
energy industry. He is currently Director of Gas Natural SDG, S.A., YPF and Repsol-Gas Natural
LNG, S.L., Vice Chairman of Foundation Repsol and member of the Environment and Energy
Commission of the International Chamber of Commerce (ICC).

Javier Monzo´n
Mr. Monzo´ n graduated with a degree in economics from the Complutense University of
Madrid. He is chairman and CEO of Indra. He has a ﬁnance and management background. He has
acted as corporate banking director of Caja Madrid, CFO and president of Telefo´ nica International,
executive vice president and member of the executive committee of Telefo´ nica, worldwide partner of
Arthur Andersen, managing partner of Corporate Finance Consulting Services and president of Alpha
Corporate in Arthur Andersen Spain. He is a member of the boards of other companies, foundations
and entrepreneurial organizations, such as our company, ACS and the American Chamber of
Commerce.

Mario E. Va´zquez
Mr. Va´ zquez graduated as a certiﬁed public accountant from the University of Buenos Aires.
He has been a professor of auditing at the Economics School of the University of Buenos Aires. Mr.
Va´ zquez has acted as CEO of Grupo Telefo´ nica in Argentina and was a member of the Board of
Telefo´ nica, S.A. from 2000 to 2006. Mr. Va´ zquez is currently a member of the Board of Telefo´ nica
Internacional, S.A. (Spain) and of Telefo´ nica Chile. He is also a member of the boards of directors
or a statutory auditor of several companies (including Telefo´ nica de Argentina S.A., Telefo´ nica
Holding de Argentina S.A., YPF S.A., Santander Rı´o Seguros, Indra, Universia and Sheraton
(Latin American Foundation for Economic
Hotels). He is a member of
(Consejo
Investigation), Fundacio´ n Leer,
Argentino para las Relaciones Internacionales) and Fundacio´ n Carolina. Mr. Va´ zquez was also partner
and general director of Arthur Andersen (Pistrelli, Dı´az y Asociados y Andersen Consulting –
Accenture) for more than 20 years until his retirement in 1993.

the Argentine Chamber of Commerce,

the board of F.I.E.L.

IDEA, CARI

112

Alejandro Quiroga Lo´pez
Mr. Quiroga Lo´ pez graduated with a law degree from the University of Buenos Aires School of
Law. Since 2001 and until February 2010 he has been our general counsel and Secretary of our
Board of Directors. He was a partner at the law ﬁrm Nicholson & Cano from 1986 to 1997, a
foreign associate at Davis Polk & Wardwell in 2000, and Undersecretary of Banking and Insurance at
the Ministry of Economy of Argentina from 1997 to 1999. He was professor of banking and
the
commercial
University of Buenos Aires School of Law. He is also a graduate of
the Wharton Advanced
Management Program.

the University of Cema. He was a member of

the Executive Board of

law at

Alfredo Pochintesta
Mr. Pochintesta has

S.A.,

received degrees

in public accounting and administration from the
University of Buenos Aires. Mr. Pochintesta worked as a planning and administration manager in
Pluspetrol Energy
at
PriceWaterhouseCoopers. He worked for Astra for more than 18 years as CFO and since 1990 as
head of the Gas and Electricity Division. Mr. Pochintesta joined YPF in 1999 when YPF merged
with Astra. He was in charge of the LPG business for Latin America from 1999 to January 2005,
when he was appointed marketing director. He also serves as director of a number of other
companies. He is currently our Commercial Executive Director.

planning manager

Petrosur

auditor

senior

S.A.

and

in

Toma´s Garcı´a Blanco
Mr. Garcı´a Blanco graduated with a degree in mining engineering from Oviedo University, a
certiﬁcate in petroleum engineering from Oil & Gas Consultants International
in Tulsa, Oklahoma
and an IMD Managing Corporate Resources degree from Laussane University. He has developed his
the United States, Egypt, Libya,
Exploration and Production career
internationally in Spain,
Venezuela and Argentina. Mr. Garcı´a Blanco has held several positions in Repsol YPF,
including
ﬁeld engineer, reservoir engineer, production engineer, development manager, production manager,
operations manager, business unit manager, director of technical staff. He is currently our Upstream
Executive Director.

Fernando Dasso
Mr. Dasso graduated with a labor relations degree from the University of Buenos Aires. In
1993, he joined our company and has held several positions within our company ever since. In 2006,
he was appointed Director of Human Resources in the Exploration and Production business unit for
Argentina, Bolivia and Brazil. Since June 2007, he has been our Director of Human Resources.

Carlos Jime´nez Lo´pez
Mr. Jime´nez graduated with a degree in chemical engineering from the Complutense University
of Madrid, Spain and received a master’s degree in business administration and ﬁnancial management
from the Polytechnic University of Madrid. In addition, he completed the Program of Management
Development (Programa de Desarrollo Directivo) at the Institut Europe´en d’Administration des Affaires
(INSEAD). Mr. Jime´nez began his professional career as a Process and Startup Engineer in 1980 with
a leading engineering and construction company, while also being employed as Professor at the
Complutense University of Madrid. In 1986, he joined Petronor, S.A., part of the Repsol YPF group,
as head of the Department of Technical Studies in the area of commercial planning and coordination.
In 1999, he became Director of Reﬁning in the area of strategic planning and development of Repsol
YPF. During the period 2002 to 2004, he was Director of the Reﬁning and Marketing business unit
in Brazil. From 2004 to 2007, he was Technical Director of Reﬁning and Logistics. In addition, Mr.
Jime´nez is a member of the boards of directors of Oiltanking-Ebytem S.A., Oldelval S.A. and OTA
and OTC S.A. He is also the President of the Reﬁnery Committee of ARPEL. Currently, Mr.
Jimenez is our Director of Management Control.

Carlos Alfonsi
Mr. Carlos Alberto Alfonsi graduated with a chemistry degree from Universidad Tecnolo´ gica of
Mendoza, Argentina, an IMD Managing Corporate Resources degree from Lausanne University and
studied at the Massachusetts Institute of Technology. In 1987, he joined our company and has held

113

several positions in our company and Repsol YPF, including operations manager, director of the La
Plata reﬁnery, operational planning director,
trading and transport director for Latin America,
reﬁnery and marketing director in Peru, country manager for Peru, and R&M for Peru, Chile,
Ecuador and Brazil. He is currently our Downstream Executive Director.

A´ngel Ramos Sa´nchez
Mr. Ramos Sa´ nchez received a degree in Economics and Business Studies from the Universidad
Auto´ noma de Madrid. He has been a director in different areas of Repsol YPF’s ﬁnancial department
since 1992. Mr. Ramos Sa´ nchez is currently our Director of Administration and Tax.

Ezequiel Eskenazi Storey
Mr. Eskenazi Storey serves as vice president of Agro Franca S.A. and Fundacio´ n YPF. He is
also member of the board of directors of Petersen, Thiele y Cruz S.A. and Santa Sylvia S.A. and
alternate member of the board of directors of Los Boulevares S.A. and Petersen Inversiones S.A. Mr.
Eskenazi Storey is the son of Mr. Enrique Eskenazi and the brother of Mr. Sebastia´ n Eskenazi and
Mr. Matı´as Eskenazi Storey.

Mauro Renato Jose´ Dacomo
Mr. Dacomo graduated with a law degree from the University of Buenos Aires, and is Partner
at ABD law ﬁrm. He is also President of Inwell S.A. and Los Boulevares S.A. Mr. Dacomo serves as
General counsel to Fundacio´ n Banco de Santa Cruz S.A., Fundacio´ n Nuevo Banco de Santa Fe S.A.
and Fundacio´ n Nuevo Banco de Entre Rı´os S.A. He is an alternate member of the Board of
Directors of Petersen Energı´a S.A. (Argentina), Arroyo Lindo S.A. and Nuevo Banco de Santa Fe
S.A., and member of the Board of Directors of Inwell S.A. and Nuevo Banco de Entre Rı´os S.A.
Mr. Dacomo is also Director and Secretary of Petersen Energia S.A. (Spain). He is our General
Counsel and Secretary of Board of Directors since February 2010.

Ignacio Cruz Moran
Mr. Moran has received degrees in public accounting from the University of Buenos Aires. He
is an alternate member of the Board of Directors of Banco de Santa Cruz S.A., Nuevo Banco de
Santa Fe S.A. and Red Link S.A. and member of the Board of Directors of Banco de San Juan
S.A., Nuevo Banco de Entre Rı´os S.A., ACH S.A. and Petersen Energı´a S.A. (Spain). Mr. Moran is
currently our Chief Operating Ofﬁcer.

Eduardo A´ngel Garrote
Mr. Garrote graduated with a degree in architecture from the University of Buenos Aires. He is
a member of the Board of Directors of Nuevo Banco de Santa Fe S.A., and alternate member of the
Board of Directors of Nuevo Banco de Entre Rı´os S.A. Mr. Garrote also serves as General Manager
of Petersen, Thiele y Cruz S.A.

Board practices

In accordance with the Argentine Corporations Law, directors have an obligation to perform
their duties with loyalty and with the diligence of a prudent business person. Directors are jointly and
severally liable to us, our shareholders and to third parties for the improper performance of their
duties, for violating the law or our by-laws or regulations, and for any damage caused by fraud,
abuse of authority or gross negligence. Speciﬁc duties may be assigned to a director by the by-laws,
applicable regulations, or by resolution of the shareholders’ meeting. In such cases, a director’s
liability will be determined by reference to the performance of such duties as long as the director’s
appointment and the determination of duties approved by a shareholders’ meeting is registered with
the Superintendency of Corporations.

Only shareholders,

through a shareholders’ meeting may authorize directors to engage in
activities in competition with us. Transactions or contracts between directors and us in connection
with our activities are permitted to the extent they are performed under fair market conditions.
Transactions that do not comply with the above requirements may only be carried out with prior
approval of the Board of Directors or,
in the case of an absence of a quorum in a Board of
Directors meeting, the Supervisory Committee. In addition, these transactions must be subsequently

114

approved by the shareholders at a general meeting. If our shareholders do not approve the relevant
transaction, the directors and members of the Supervisory Committee who approved such transactions
are jointly and severally liable for any damages caused to us.

Any director whose personal interests are adverse to ours shall notify the Board of Directors
and the Supervisory Committee and abstain from voting on such matters. Otherwise, such director
may be held liable to us.

A director will not be liable if, notwithstanding his presence at

the meeting at which a
resolution was adopted or his knowledge of such resolution, a written record exists of his opposition
to such resolution and he reports his opposition to the Supervisory Committee before any complaint
against him is brought before the Board of Directors, the Supervisory Committee, the shareholders’
the appropriate governmental agency or the courts. Any liability of a director to us
meeting,
terminates upon approval of the director’s actions by the shareholders at a general meeting, provided
that shareholders representing at least 5% of our capital stock do not object and provided further
that such liability does not result from a violation of the law, our by-laws or other regulations.

The Audit Committee

The Transparency Decree (as deﬁned in ‘‘Item 9. The Offer and Listing—Argentine Securities
Market’’) and Resolutions No. 400/02 and No. 402/02 of the CNV, require that Argentine public
companies appoint an audit committee (comite´ de auditorı´a) composed of at least three members of
the Board of Directors. The by-laws must set forth the composition and regulations for the operation
of the Audit Committee. A majority of the members of the Audit Committee must be independent
directors. See ‘‘—Independence of the Members of our Board of Directors and Audit Committee’’
below.

Our Audit Committee was created on May 6, 2004. The members of the Audit Committee
currently are: president Mario Va´ zquez, members Mario Blejer, Carlos de la Vega, Federico Man˜ ero
and Carlos Bruno, and alternate member Javier Monzo´ n.

Mario Va´ zquez was determined by our Board of Directors to be an ‘‘Audit Committee

Financial Expert’’ pursuant to the rules and regulations of the SEC.

Executive directors may not sit on the Audit Committee.

Our Audit Committee, among other things:

*

*

*

*

*

*

*

periodically inspects the preparation of our ﬁnancial and economic information;

reviews and opines with respect
to the Board of Directors’ proposals regarding the
designation of the external auditors and the renewal, termination and conditions of their
appointment;

evaluates internal and external audit work, monitors our relationship with the external
auditors, and assures their independence;

provides appropriate disclosure regarding operations in which there exists a conﬂict of
interest with members of the corporate committees or controlling shareholders;

opines on the reasonability of the proposals by the Board of Directors for fees and stock
option plans of the directors and administrators;

veriﬁes compliance with applicable national or international regulations in matters related
to behavior in the stock markets; and

ensures that the internal Code of Ethics complies with normative demands and is adequate.

Activities of the audit committee

The Audit Committee, which pursuant to its regulations meets as many times as needed and at

least once every quarter, held 8 meetings between March 2010 and March 2011.

Performing its basic function of supporting the Board of Directors in its oversight duties, the
information relating to us, supervises

Audit Committee periodically reviews economic and ﬁnancial
the internal ﬁnancial control systems and oversees the independence of the external auditors.

115

Economic and ﬁnancial information

With the help of the Director of Administration and Tax and considering the work performed
by our external and internal auditors, the Audit Committee analyzes the consolidated annual and
quarterly ﬁnancial statements before they are submitted to the Board of Directors.

In addition, because our shares are traded on the NYSE, pursuant to U.S. law we must include
our annual ﬁnancial information in an annual report on Form 20-F, which must be ﬁled with the
SEC. The Audit Committee reviews such annual report before it is submitted to the SEC.

Oversight of the internal control system

To supervise the internal ﬁnancial control

systems and ensure that

appropriate and efﬁcient, the Audit Committee oversees the progress of the annual
which is aimed at identifying our critical risks.

they are sufﬁcient,
internal audit,

Throughout each year, the Audit Committee is informed by our internal audit department of
the

facts and recommendations arising out of

its work, and the status of

the most relevant
recommendations issued in prior years.

We have aligned the internal control system for ﬁnancial reporting with the requirements
established by Section 404 of the Sarbanes-Oxley Act, a process supervised by the Audit Committee.
These regulations require that, along with the annual audit, a report must be presented from our
the internal control
management relating to the design, maintenance and periodic evaluation of
system for ﬁnancial reporting, accompanied by a report from our external auditor. Several of our
departments are involved in this activity,
including the internal audit department. Our external
auditor reported on our internal control system for ﬁnancial reporting as of December 31, 2010.

Relations with the external auditors

The Audit Committee maintains a close relationship with the external auditors, allowing it to
make a detailed analysis of the relevant aspects of the audit of ﬁnancial statements and to obtain
detailed information on the planning and progress of the work.

The Audit Committee also evaluates the services provided by our external auditors, determines
whether the condition of independence of the external auditors, as required by applicable law, is met
and monitors the performance of external auditors to ensure that it is satisfactory.

As of December 31, 2010, and as a consequence of the evaluation process described in the
paragraph above, the Audit Committee had no objections to the designation of Deloitte & Co. S.R.L.
as our external auditors of the ﬁnancial statements for the year ending December 31, 2011. The
shareholders at a meeting which will be held on April 26, 2011 will consider the designation of
Deloitte & Co. S.R.L. as external auditors of the ﬁnancial statements for the year ended December
31, 2011.

Independence of the Members of our Board of Directors and Audit Committee

Pursuant to CNV regulations, a director is not considered independent when such director (i)
owns at least a 35% equity interest in a company, or a lesser interest if the director has the right to
appoint one or more directors of the company, which we refer to as a ‘‘Signiﬁcant Participation,’’ or
has a Signiﬁcant Participation in another company that in turn has a Signiﬁcant Participation in the
is deﬁned by Argentine
company or a signiﬁcant inﬂuence on the company (‘‘signiﬁcant inﬂuence’’
GAAP); (ii) is a member of the Board of Directors of, or depends on, shareholders, or is otherwise
related to shareholders, who have a Signiﬁcant Participation in the company or another company in
which these shareholders have a direct or indirect Signiﬁcant Participation or signiﬁcant inﬂuence; (iii)
is or has been in the previous three years an employee of the company; (iv) has a professional
relationship with, or is a member of a company that maintains professional relationships with, or
receives remuneration (other than that received in consideration of his performance as a director)
from the company or any of its shareholders who has a direct or indirect Signiﬁcant Participation in
or signiﬁcant inﬂuence on the company, or with a third-party company that has a direct or indirect
Signiﬁcant Participation or a signiﬁcant inﬂuence; (v) directly or indirectly sells or provides goods or
services to the company or to any of its shareholders who has a direct or indirect Signiﬁcant
Participation in or signiﬁcant inﬂuence on the company for an amount exceeding his remuneration as

116

a member of the Board of Directors or audit committee; or (vi) is the spouse or parent (up to second
grade of afﬁnity or up to fourth grade of consanguinity) of persons who, if they were members of the
Board of Directors or Audit Committee, would not be independent, according to the above-listed
rules.

As of the date of this annual report, Messrs. Carlos Bruno, Carlos de la Vega, Federico
Man˜ ero, Mario Va´ zquez and Mario Blejer qualiﬁed as independent members of our Board of
Directors under the above-described criteria.

Disclosure Committee

In February 2003, we created a Disclosure Committee to:

*

*

*

*

*

*

*

monitor the overall compliance with regulations and principles of conduct of voluntary
application, especially in relation to listed companies and their corporate governance;

direct, establish and maintain procedures for the preparation of accounting and ﬁnancial
information to be approved and ﬁled by us or which is generally released to the markets;

direct, establish and maintain internal control systems that are adequate and efﬁcient to
ensure that our ﬁnancial statements included in annual and quarterly reports, as well as
any accounting and ﬁnancial
information to be approved and ﬁled by us, are accurate,
reliable and clear;

identify signiﬁcant risks to our businesses and activities that may affect the accounting and
ﬁnancial information to be approved and ﬁled;

assume the activities that, according to U.S. laws and SEC regulations, are applicable to us
and may be assumed by disclosure committees or other internal committees of a similar
nature, especially those activities relating to the SEC regulations dated August 29, 2002
(‘‘Certiﬁcation of Disclosure in Companies’ Quarterly and Prospectus’’ – SEC Release
number 33-8124), in relation to the support for the certiﬁcations by our Chief Executive
Ofﬁcer and Chief Financial Ofﬁcer as to the existence and maintenance by us of adequate
procedures and controls for the generation of the information to be included in its annual
reports on Form 20-F, and other information of a ﬁnancial nature;

take on activities similar to those stipulated in SEC regulations for a disclosure committee
with respect to the existence and maintenance by us of adequate procedures and controls
for the preparation and content of the information to be included in the annual ﬁnancial
statements, and any accounting or ﬁnancial
information to be ﬁled with the CNV and
other regulators of the stock markets on which our stock is traded; and

formulate proposals for an internal code of conduct on the stock markets that follow
applicable rules and regulations or any other standards deemed appropriate.

In addition, the Disclosure Committee reviews and supervises our procedures for the preparation

and ﬁling of:

*

*

*

*

*

ofﬁcial notices to the SEC, the Argentine stock market authorities and other regulators of
the stock markets on which our stock is traded;

interim ﬁnancial reports;

press releases containing ﬁnancial data on results, earnings, large acquisitions, divestitures
or any other information relevant to the shareholders;

general communications to the shareholders; and

presentations to analysts, investors, rating agencies and lending institutions.

The Disclosure Committee is composed of certain of our executive ofﬁcers, some of whom are

also members of our Board of Directors.

The Disclosure Committee is currently composed of the following people:

117

Name

Position

Sebastia´ n Eskenazi ..................................................... Chief Executive Ofﬁcer
Antonio Gomis Sa´ ez .................................................. General Director Repsol Argentina
Ignacio Cruz Moran .................................................. Chief Operating Ofﬁcer
Guillermo Reda ........................................................ Chief Financial Ofﬁcer
Mauro Renato Jose´ Dacomo..................................... General Counsel and Secretary of the Disclosure

Committee

Toma´ s Garcı´a Blanco ................................................ Upstream Executive Director
Alfredo Pochintesta.................................................... Commercial Executive Director
Carlos Alfonsi ............................................................ Downstream Executive Director
Matı´as Eskenazi Storey.............................................. Assistant Director to the CEO
Teodoro Marco´ .......................................................... Director of Industrial Subsidiaries
Carlos Jime´nez ........................................................... Director of Management Control
A´ ngel Ramos Sa´ nchez ............................................... Director of Administration and Tax
Sergio Resumil ........................................................... Director of Communication
Fernando Dasso......................................................... Director of Human Resources
Juan Carlos Miranda ................................................. Media Director
Rube´n Marasca.......................................................... Director of Internal Audit
Aquiles Rattia ............................................................ Director of Reserves Control
Juan Bautista Ordon˜ ez............................................... Director of Institutional Affairs

Guillermo Reda is the President of the Disclosure Committee. Mr. Reda has received degrees in
public accounting from the University of Rosario. He has worked as the Money Desk Manager of
Nuevo Banco de Santa Fe S.A. and served as our ﬁnancial manager until February 2010. Mr. Reda
is currently our Chief Financial Ofﬁcer.

Executive Ofﬁcers

The Chairman of the Board of Directors, who, according to our by-laws, must be a Class D
director, is elected by the Board of Directors to serve for a two-year term, but not to exceed his term
as director. All other ofﬁcers serve at the discretion of the Board of Directors and may be terminated
at any time without notice.

Share Ownership of Executive Ofﬁcers

None of our executive ofﬁcers owned any of our shares or held vested options to purchase YPF

stock as of April 11, 2011.

Compliance with NYSE Listing Standards on Corporate Governance

On November 4, 2003, the SEC approved rules proposed by the NYSE intended to strengthen

corporate governance standards for listed companies.

In accordance with the NYSE corporate governance rules, as of July 31, 2005, all members of
the Audit Committee were required to be independent. Independence is determined in accordance
with highly detailed rules promulgated by the NYSE and SEC. Each of the members of our Audit
Committee was determined to be independent in accordance with the applicable NYSE and SEC
rules.

Signiﬁcant differences between our corporate governance practices and those required by NYSE listing
standards

Non-U.S., NYSE-listed companies may,

follow their home country corporate
governance practices in lieu of most of the NYSE corporate governance requirements. The NYSE
rules, however, require that non-U.S. companies disclose any signiﬁcant ways in which their speciﬁc
corporate governance practices differ from U.S. companies under the NYSE listing standards.

in general,

The following is a summary of the signiﬁcant differences between our corporate governance
practices and those applicable to U.S. companies under the NYSE listing standards. Because more

118

than 50% of our voting stock is held by another company, Repsol YPF, we would not be required to
comply with the following NYSE corporate governance requirements even if we were a U.S.
(ii) corporate governance committee
independent directors,
company:
requirements, and (iii) compensation committee requirements.

(i) having a majority of

Independence of the directors on the Board of Directors
In accordance with the NYSE corporate governance rules, a majority of the board of directors
of U.S. companies
independent directors, whose
independence is determined in accordance with highly detailed rules promulgated by the NYSE. The
relevant Argentine rules for determining director independence are described under ‘‘—Independence
of the Members of our Board of Directors and Audit Committee’’ above.

listed on the NYSE must be composed of

Compensation and nomination committees
In accordance with the NYSE corporate governance rules, all U.S. companies listed on the
NYSE must have a compensation committee and a nominations committee and all members of such
committees must be independent in accordance with highly detailed rules promulgated by the NYSE.
Under Argentine law, these committees are not required.

Separate meetings for non-management directors
In accordance with NYSE corporate governance rules,

independent directors must meet
periodically outside of the presence of the executive directors. Under Argentine law, this practice is
not required and as such, the independent directors on our Board of Directors do not meet outside
of the presence of the other directors, except for the meetings of the Audit Committee, the members
of which are independent directors.

Code of Ethics

We have adopted a code of ethics applicable to the Board of Directors and all employees. Since
its effective date on August 15, 2003, we have not waived compliance with or amended the code of
ethics.

Compensation of Directors and Ofﬁcers

Argentine law provides that the aggregate annual compensation paid to the members of the
Board of Directors (including those directors acting in an executive capacity) with respect to a ﬁscal
year may not exceed 5% of net income for such year if YPF is not paying dividends in respect of
such net income, which percentage is increased up to 25% of net income based on the amount of
dividends,
if any, are paid. The compensation of the president and other directors acting in an
executive capacity, together with the compensation of all other directors, requires the ratiﬁcation of
an ordinary general shareholders’ meeting as provided by Argentine law. The compensation of the
members of
the ordinary
shareholders’ meeting.

the Supervisory Committee

is determined by the

shareholders at

For the period ended December 31, 2010 the aggregate compensation accrued or paid to the
members of the Board of Directors and YPF’s executive ofﬁcers for services in all capacities was
Ps.83.7 million.

During 2010, YPF’s performance-based compensation programs included a bonus plan for
approximately 5,000 employees. This bonus plan provides for cash to be paid to its participants based
on a measurable and speciﬁc set of objectives under Repsol YPF’s Management by Objectives
program and the results of the review of individual performance. All of the participants are non-
unionized YPF employees. The participation of each eligible employee in the bonus plan ranges from
15% to 45% of such employee’s annual base salary. Bonus percentages are ﬁxed by the president of
Repsol YPF with the approval of Repsol YPF’s Compensation Committee at the beginning of each
calendar year. The total amount of bonuses awarded under the bonus plan cannot exceed 90% of the
individual maximum participation and will be linked to Repsol YPF’s net cash ﬂow.

The amount set aside or accrued by YPF to provide pension, retirement or similar beneﬁts to
members of its Board of Directors or ofﬁcers with executive responsibilities amounted to a total of
Ps.20.0 million in 2010.

119

YPF’s directors do not have any service contracts with YPF.

Supervisory Committee

The Supervisory Committee is responsible for overseeing compliance by the management and the
Board of Directors with the Argentine Corporations Law, the by-laws and regulations (if any), and
shareholders’
the Supervisory Committee include, among others,
attending all meetings of the Board of Directors, preparing a report of the ﬁnancial statements for
our shareholders, attending shareholders’ meetings and providing information upon request to holders
of at least 2% of our capital stock.

resolutions. The functions of

The by-laws provide for a Supervisory Committee consisting of three to ﬁve members and three
to ﬁve alternate members, elected to one-year terms. The Class A shares are entitled to elect one
member and one alternate member of the Committee so long as one share of such class remains
outstanding. The holders of Class D shares elect up to four members and up to four alternates.
Under the by-laws, meetings of the Supervisory Committee may be called by any member. The
meeting requires the presence of all members, and a majority vote of the members in order to make a
decision. The members and alternate members of the Supervisory Committee are not members of our
Board of Directors. The role of our Supervisory Committee is distinct from that of the Audit
Committee. See ‘‘—The Audit Committee.’’ For the year 2010, the aggregate compensation paid to
the members of the Supervisory Committee was Ps.1.89 million.

The current members of the Supervisory Committee, the year in which they were appointed and

the year their current term expires are as follows:

Name

Silvana Rosa Lagrosa ..........................
Juan A. Gelly y Obes...........................
Israel Lipsich........................................
Santiago C. Lazzati..............................
Carlos Marı´a Tombeur ........................
Gustavo Adolfo Mazzoni ....................
Arturo F. Alonso Pen˜ a ........................
Oscar Orona´ .........................................
Edgardo A. Sanguineti ........................
Rube´n Laizerowitch.............................

Class of
Shares
Represented

Age

Member
Since

Term Expires

A
D
D
D
D
A
D
D
D
D

52
55
86
73
55
59
60
63
60
56

2007
2005
2008
2005
2008
2010
2007
2008
2008
2008

2011
2011
2011
2011
2011
2011
2011
2011
2011
2011

Silvana Rosa Lagrosa
Mrs. Lagrosa graduated as a certiﬁed public accountant from the University of Buenos Aires.
She has been a member of the National General Audit Ofﬁce (Sindicatura General de la Nacio´n
(SIGEN)) since 2000, for which she acts as statutory auditor of our company, Aerolı´neas Argentinas
S.A., Austral S.A. and Loterı´a Nacional S.E.

Juan A. Gelly y Obes
Mr. Gelly y Obes graduated as a certiﬁed public accountant from the Belgrano University of
Buenos Aires. He is a partner of the consulting ﬁrm Gelly y Obes & Asociados-Accountants, and he
is a consulting accountant in legal matters to the board of directors of the Argentine Republic
Central Bank. Previously, Mr. Gelly y Obes was a member of the statutory audit committees of
Aerolı´neas Argentinas S.A. and Agritech Inversora S.A.

Israel Lipsich
Mr. Lipsich graduated as a certiﬁed public accountant from the University of Buenos Aires. He
is currently a member of the Supervisory Committee of Banco de San Juan S.A., Banco de Santa
Cruz S.A., Nuevo Banco de Santa Fe S.A., Nuevo Banco de Entre Rı´os S.A., Petersen, Thiele y Cruz
S.A., Santa Sylvia S.A., Turfmax S.A., Petersen Inversiones S.A. and Serra Lima S.A.

120

Santiago C. Lazzati
Mr. Lazzati graduated as a certiﬁed public accountant from the University of Buenos Aires. He
was a partner of Arthur Andersen from 1974 until he retired in 1993 and was the head of the Audit
and Business Advisory Division from 1975 to 1987 and Practice Director from 1987 until his
retirement. He is currently working in Argentina and other Latin American countries in consulting,
especially in human capital services. He is a business consultant, specializing in topics related to
management and human behavior. He is the author of ﬁfteen books and many articles on accounting,
the International
auditing and business administration. Additionally, Mr. Lazzatti
Criminal Court
the
is the statutory auditor of Sheraton
Prosecutor in charge, Dr. Luis Moreno Ocampo. Mr. Lazzati
the
Hotels and Telefo´ nica de Argentina and a full-time business administration professor of
Universidad Cato´ lica Argentina.

in the Hague of all matters concerning the organization of

is assessor of

the Ofﬁce of

Carlos Marı´a Tombeur
Mr. Tombeur graduated from the University of Buenos Aires, School of Law and Social
Sciences, with a law degree in 1976. Previously, he was Professor of Economic Law in the School of
Economic Sciences and of Commercial Law in the School of Law, both at the University of Buenos
Aires. Mr. Tombeur was also Professor of Economic Law in the Master’s Degree program in Public
Policy at the University Di Tella. From 1999 to 2005 he served as member of the Board of Directors
(SEDESA)
of YPF S.A. Mr. Tombeur was appointed controller at Seguro de Depo´ sitos S.A.
(Insurance Deposit Company) by the Central Bank for the period 1997-2001. He also served as legal
undersecretary of the Ministry of Economy and Public Works and Services from 1992 until 1996 and
was member of the Board of Directors of the Central Bank of the Argentine Republic, 1991-1992.
Mr. Tombeur was Partner of the ﬁrm Caride Fitte & Tombeur from 1977 until 1991. Mr. Tombeur is
currently Partner with the ﬁrm Severgnini Robiola Grinberg & Larrechea. He is also a member of the
Bar Association of the City of Buenos Aires and the International Bar Association. Mr. Tombeur is
currently the President of the Board of Directors at EMC Computer Systems Argentina S.A. and
Williams Lea Argentina S.A.

Gustavo Adolfo Mazzoni
Mr. Mazzoni graduated as a certiﬁed public accountant from the University of Buenos Aires.
He is a member of the National General Audit Ofﬁce (Sindicatura General de la Nacio´n (SIGEN))
and acts as statutory auditor of our company, Emprendimientos Energe´ticos Binacionales S.A.
(EBISA), Gas Natural Ban, ARSAT and RTA. He is also an assessor of the National General
Auditor.

Arturo F. Alonso Pen˜a
Mr. Pen˜ a received his law degree from the University of Buenos Aires School of Law in 1973.
He was statutory auditor of Banco Hipotecario Nacional from 1995 to 2001. He was partner of
M&M Bomchil
law ﬁrm from 1980 to 1985, Chief of the trademark department of the National
Intellectual Property Registry in 1979, and secretary of the Court of First Instance in commercial
matters of the City of Buenos Aires from 1974 to 1978. He is currently an attorney with Severgnini,
Robiola, Grinberg & Larrechea.

Oscar Alberto Orona´
Mr. Orona´ graduated with a law degree from the Belgrano University of Buenos Aires in 1975.
He is a Consultant Lawyer of Cassagne Abogados Law Firm. In 1991 Mr. Orona´ completed the
Petroleum Management Certiﬁcate Program in Boston, Massachusetts. He previously served as a
the Board of Directors of Astra Compan˜ ı´a Argentina de Petro´ leo S.A., Terminal
member of
Marı´tima Patago´ nica S.A., Pluspetrol Energy S.A., Central Dock Sud S.A., Inversora Dock Sud S.A.,
Empresa Petrolera Andina S.A. (Bolivia), Apex Petroleum Inc., Gas Argentino S.A., Metrogas S.A.,
Petroken Petroquimica Ensenada S.A. and Empresa de Distribucio´ n Ele´ctrica de Entre Rı´os S.A. Mr.
Orona´ was also the Second Vice President of the Ca´ mara de Sociedades Ano´ nimas and President of
the Legal Committee of the Ca´ mara de la Industria del Petro´ leo and of San Isidro Golf Club S.A.
He is a member of the Supervisory Committee of Oleoductos del Valle S.A. and Metrogas S.A., as
well as the Colegio de Abogados de Buenos Aires, the American Bar Association, the Asociacio´ n de

121

Derecho de la Energı´a, the Instituto Argentino del Petro´ leo y Gas (IAPG) and the Association of
International Petroleum Negotiators (AIPN).

Edgardo A. Sanguineti
Mr. Sanguineti graduated from the University of Buenos Aires with a degree in Business
Administration and holds a doctorate in Economic Sciences from the same university, where he was a
professor in the Economic Sciences doctoral program. He is a Certiﬁed Public Accountant and
Partner of Lazzati y Sanguineti – Management Consulting Firm. Mr. Sanguineti is a member of the
Statutory Audit Committee of Telefo´ nica de Argentina, Telefo´ nica Holding de Argentina S.A.,
Televisio´ n Federal S.A.-Telefe´, Atla´ ntida Comunicaciones S.A. and Telefo´ nica Media Argentina S.A.,
among other companies.

Rube´n Laizerowitch
Rube´n Laizerowitch received his law degree at

the University of Buenos Aires. He is an
alternate member of Board of Directors of Petersen, Thiele y Cruz S.A., Estacionamientos Buenos
Aires S.A. Mantenimientos y Servicios S.A., and INWELL S.A., and is a member of Supervisory
Committee of Nuevo Banco de Santa Fe S.A., Banco de San Juan S.A., and Nuevo Banco de Entre
Rı´os S.A. He is also an alternate member of the Supervisory Committee of Banco Santa Cruz S.A.

Employee Matters

As of December 31, 2010, we had 13,370 employees, including 7,022 employees of the Reﬁning
and Marketing business segment, 2,714 employees of
the Exploration and Production business
segment, 156 employees of the Chemicals business segment and 3,479 employees of the Corporate and
Other segment.

Approximately 42% of our employees are represented by the labor union ‘‘Federacio´n Sindicatos
Unidos Petroleros e Hidrocarburı´feros’’ (SUPeH) that negotiates with us labor agreements and salaries
which apply to YPF and OPESSA unionized employees. The SUPeH is permanently negotiating with
labor unions related to the
us, and we maintain a good level of communication. In general,
petrochemical
increases given by the General Unions
industry aligned with general wage
Confederation (Confederacio´n General del Trabajo or ‘‘CGT’’).

At the end of 2006, we began negotiations with the SUPeH, that resulted in our extending our
agreements with such unions until the end of 2010 and, one of them, until the end of 2011. Pending
the outcome of new negotiations with the SUPeH to renew these agreements, those agreements which
expired at the end of 2010 remain temporarily in effect. The negotiations involved the economic and
social conditions for employees of ours and of
third parties that are addressed in the labor
agreement. We consider our current relations with our workforce to be generally good.

In addition,

labor conditions and salaries of third-party employees working with YPF and

OPESSA in reﬁneries, oil ﬁelds and gas stations, are negotiated with sixteen other unions.

As part of its privatization, YPF restructured its internal organization and signiﬁcantly reduced
the number of its employees. YPF reduced its work force from over 51,000 employees (including
approximately 15,000 personnel under contract) at December 31, 1990 to approximately 7,500 at
December 31, 1993. YPF paid to the employees affected by these reductions the termination payments
required under Argentine labor laws which amounted to Ps.686 million. A substantial majority of
lawsuits which were originated as a consequence of said restructuring process have been brought by
former employees who allege that they received insufﬁcient severance payments in connection with
their dismissal and various job-related illnesses, injuries, typically seeking unspeciﬁed relief.

As of December 31, 2010, YPF was a party in approximately 1,774 labor lawsuits which relate
to events or acts that took place after December 31, 1990. The outcome of said lawsuits depends on
factual issues that vary from case to case, and it is not always feasible to predict the outcome of
particular cases. However, based on the number and character of the lawsuits already commenced,
the estimated likelihood of additional claims in view of the number of dismissed employees, applicable
statutes of limitations, the legal principles involved in the suits and the ﬁnancial statement reserves
previously established, our management does not expect the outcome of these lawsuits to have a
material adverse effect on our ﬁnancial condition or future results of operations.

122

Maxus (a YPF subsidiary) has a number of trustee noncontributory pension plans covering
substantially all its full-time employees. The beneﬁts provided by these plans are based on the number
of years of employment and the compensation earned during those years. This company has other
noncontributory pension plans for executive ofﬁcers, selected key employees and former employees of
the Maxus group. The Maxus Energy Corporation career average pension plan was frozen effective
March 1, 2007. The Maxus Energy Corporation savings plan was amended effective March 1, 2007 to
the
through which the plan’s
include a non-elective component,
employees’ annual base salary. Maxus also grants beneﬁts for health care, life insurance and other
social beneﬁts to some of its employees who retire early. The amounts payable accrue over the
employees’ years of service. During March 2008, YPF Holdings purchased a group annuity contract
from an insurance company to settle the liability associated with the beneﬁts under certain of Maxus’
deﬁned beneﬁts plans, with a one-time premium payment of U.S.$115 million. The assumption by the
insurance company of
the date the
premium was paid by YPF Holdings.

liability under the plans was effective on March 20, 2008,

sponsor contributes 7.5% of

As of December 31, 2010 there were also approximately 33,000 third-party employees under
contract, mostly with large international service providers. Although we have policies regarding
compliance with labor and social security obligations by its contractors, we are not in a position to
ensure that contractors’ employees will not initiate legal actions to seek indemniﬁcation from us based
liability
upon a number of Argentine judicial
between the contractor and the entity to which it is supplying services under certain circumstances.

labor court precedents recognizing joint and several

The following table provides a breakdown of our employees by business units as of December

31, 2010.

Employees by Business Units

Exploration and Production ....................................................................................................
Reﬁning and Marketing...........................................................................................................
Chemicals .................................................................................................................................
Corporate and Other(1) ............................................................................................................

2,714
7,022
156
3,479

Total YPF................................................................................................................................

13,370

(1) Includes 2,316 employees of A-Evangelista S.A. and its subsidiaries.

The following table provides a breakdown of our employees by geographic locations.

Employees by geographic location

Argentina .................................................................................................................................
Rest of South America ............................................................................................................
United States............................................................................................................................

Total YPF................................................................................................................................

13,007
333
30

13,370

123

ITEM 7. Major Shareholders and Related Party Transactions

The following table sets forth information relating to the beneﬁcial ownership of our shares as

of March 28, 2011.

Repsol YPF(1) ...........................................................................................
Petersen Group(2) ......................................................................................
Public(3) .....................................................................................................
Argentine federal and provincial governments(4)......................................
Employee fund(5).......................................................................................

Number of
shares

268,358,619
60,813,798
64,062,058
11,388
40,422

(%)

68.23%
15.46%
16.29%
50.01%
0.01%

(1) Share ownership amounts and percentages do not reﬂect the effect of possible future exercise of the remaining options granted by
Repsol YPF to Enrique Eskenazi, Sebastia` n Eskenazi, Ezequiel Eskenazi Storey and Matı´as Eskenazi Storey, shareholders of
Petersen Energı´a, or to companies that are, directly or indirectly, wholly-controlled by any of them, to purchase up to an
additional 10% of our capital stock pursuant to the Second Petersen Option described in further detail below (see ‘‘—Option
Agreements’’). In addition, share ownership percentages do not reﬂect the effect of possible future exercise of the 6,410,257
warrants issued by Repsol YPF to Eton Park Master Fund, Ltd. and Eton Park Fund, L.P. in December 2010, each such warrant
exercisable for one ADS.

(2) Corresponds to Petersen Energı´a (14.90%) and PEISA (0.56%).
(3) According to data provided by The Bank of New York Mellon, as of March 30, 2011, there were 232,665,742 ADSs outstanding
and 87 holders of record of ADSs. Such ADSs represented approximately 59% of the total number of issued and outstanding Class
D shares as of such date. Excluding ADSs owned by Repsol YPF, outstanding ADSs represented 31% of the total number of
outstanding Class D shares as of March 30, 2011. Repsol YPF (including its other subsidiaries) was the holder of 109.3 million of
our ADSs at that date, while Petersen Energı´a and PEISA collectively held 60.8 million of our ADSs.

(4) Reﬂects the ownership of 3,764 Class A shares and 7,624 Class B shares by the Argentine federal government and provincial

governments, respectively.

(5) Reﬂects the ownership of 40,422 Class C shares.

The following are summaries of certain material terms of the agreements entered into by Repsol
their respective afﬁliates in connection with the Petersen

YPF, Petersen Energı´a and certain of
Transaction and the Petersen Options (as deﬁned below), as described in Repsol YPF’s public ﬁlings.

Share Purchase Agreement and Related Financing Agreements

Pursuant to the share purchase agreement entered into by Petersen Energı´a and Repsol YPF in
2008, Petersen Energı´a purchased 58,603,606 ADSs, representing 14.9% of our outstanding capital
stock, from Repsol YPF for a total purchase price of U.S.$2,235 million, or U.S.$38.13758 per ADS
(the ‘‘Petersen Transaction’’). Petersen Energı´a’s purchase of our securities was ﬁnanced by the
drawdown of U.S.$1,026 million under a senior secured term loan facility provided by certain
ﬁnancial
institutions, borrowing of U.S.$1,015 million under a seller credit agreement entered into
with Repsol YPF and equity provided by Petersen Energı´a’s shareholders. The seller credit agreement
matures on February 21, 2018. Principal payments are required to be made at certain periodic
intervals commencing in 2013 until the maturity date. The loan under the seller credit agreement
bears interest at 8.12% per year until May 15, 2013, and thereafter at 7.0% per year, and contains
other customary terms and provisions.

Securities purchased by Petersen Energı´a are pledged as collateral under the senior secured term
loan facility and the seller credit agreement. The seller credit agreement is subordinated to the senior
secured term loan facility.

Option Agreements

Repsol YPF granted certain afﬁliates of Petersen Energı´a, an option to purchase the number of
Class D shares or ADSs amounting to 0.1% of our capital stock, pursuant to the ﬁrst option
agreement (which was exercised in May 2008) (the ‘‘First Petersen Option’’), and an option to
purchase an additional number of Class D shares or ADSs amounting to 10.0% of our capital stock
(collectively, the ‘‘Option Shares’’), pursuant to the second option agreement, subject to certain terms
and conditions (the ‘‘Second Petersen Option’’ and, together with the First Petersen Option, the
‘‘Petersen Options’’). The Second Petersen Option expires on February 21, 2012. The exercise price
per Option Share shall be determined in accordance with the following formula: (i) U.S.$15 billion

124

multiplied by the consumer price index published monthly by the United States Bureau of Labor
Statistics for the period from the date of the option agreements through the exercise date, (ii) plus or
minus our accumulated results from the date of the option agreements through the exercise date (with
certain adjustments for taxes paid), determined based on our ﬁnancial statements for the ﬁscal years
ending after the date of the option agreements, (iii) minus dividends paid from the date of the option
agreements through the exercise date, (iv) plus or minus any changes in our share capital, (v) divided
by the number of shares outstanding on the exercise date.

The beneﬁciaries of the Second Petersen Option may exercise their purchase rights on one or

more occasions during the exercise period of such second option agreement.

Subject to certain terms and conditions contained in the Petersen Options, Repsol YPF has
agreed to provide ﬁnancing of up to 48% of the exercise price required to be paid for the Option
Shares purchased by certain members of the Eskenazi family pursuant to the Petersen Options.
Repsol YPF had also agreed to ﬁnance or guarantee the ﬁnancing of up to 100% of the price that
the members of
family would be required to pay to purchase shares from other
shareholders through a mandatory tender offer as a result of Petersen Energı´a and its afﬁliates,
including certain members of the Eskenazi family, acquiring an interest in our capital stock of more
than 15%. This commitment is limited to a maximum amount equivalent to the price necessary to
purchase Class D shares or ADSs equal to 0.9% of our capital stock, which corresponds to the
percentage of shares that were not owned by Repsol YPF prior to the Petersen Transaction.

the Eskenazi

The beneﬁciaries of the Petersen Options agreed that,

if they exercise the Second Peterson
Option, they will not transfer for a period of ﬁve years the 10% of our outstanding capital stock that
is subject to the second option agreement, but have not made such an agreement as to the 0.1% of
our capital stock that was acquired pursuant to the First Peterson Option.

Shareholders’ Agreement

Petersen Energı´a, Repsol YPF and certain afﬁliates of Repsol YPF entered into a shareholders’
agreement on February 21, 2008 in connection with the Petersen Transaction establishing certain
rights and obligations in connection with our governance and certain procedures for and limitations
on transfers of our shares, among other matters. The following is a summary of certain material
terms of the shareholders’ agreement based on Repsol YPF’s public ﬁlings.

Voting at Shareholders’ Meetings
Repsol YPF and Petersen Energı´a have agreed to discuss and reach agreement on their voting
with respect to proposals presented at shareholders’ meetings involving certain matters,
including
certain increases or any reductions in our capital (except reductions that are legally required), the
merger, divestiture or dissolution of our company or certain of our subsidiaries, the divestiture of
material assets of our company or certain of our subsidiaries, the modiﬁcation of our by-laws, and
the designation or removal of our external auditors, among other matters. In the event that Repsol
YPF and Petersen Energı´a cannot reach an agreement on any of these matters, they have agreed to
vote against such matters.

Composition of our Board of Directors
Repsol YPF and Petersen Energı´a have agreed that the composition of our Board of Directors
shall reﬂect a proportional representation of Repsol YPF’s and Petersen Energı´a’s interests in our
capital stock, with (i) Repsol YPF retaining the right to appoint the majority of the members of our
Board of Directors for so long as it holds the majority of our capital stock, and (ii) Petersen Energı´a
having the right to appoint at least ﬁve members to our Board (or three members in the case that its
interest in our outstanding capital stock falls below 10%).

Appointment of Directors and Ofﬁcers and Certain Board Decisions
Repsol YPF and Petersen Energı´a have agreed that the Chairman of our Board of Directors
and our Chief Operating Ofﬁcer shall be designated by Repsol YPF while our Chief Executive Ofﬁcer
will be designated by Petersen Energı´a.

Certain decisions of our Board of Directors shall require the afﬁrmative vote of the directors
representing Repsol YPF and Petersen Energı´a, including any action that results in any of the speciﬁc

125

matters discussed under ‘‘—Voting at Shareholders’ Meetings’’ above, the reduction of our direct or
indirect interest in certain of our subsidiaries, the contracting of debts, guarantees or investments that
contractually limit the payment of dividends or cause our consolidated debt to EBITDA ratio to
reach or exceed 3:1, undertake non-budgeted investments or acquisitions that individually exceed
U.S.$250 million, and the requesting of the declaration of insolvency or bankruptcy, among other
matters. In the event that Repsol YPF and Petersen Energı´a cannot reach an agreement on any of
these speciﬁc matters, they have agreed to instruct their directors to vote against such matters.

Lock-Ups and Transfer Restrictions
Petersen Energı´a has agreed not to sell any shares of our capital stock for a period of ﬁve
including the condition that Repsol YPF continues to hold at
years, subject to certain exceptions,
least 35% of our outstanding capital stock. In addition, if our dividend payments are insufﬁcient for
Petersen Energı´a to meet its obligations under the senior secured term loan facility, or if Petersen
Energı´a repays the senior secured term loan facility in full, Petersen Energı´a may sell shares of our
capital stock, so long as Petersen Energı´a maintains a minimum interest in our capital stock of
between 10% and 15% (depending on whether the beneﬁciaries of the Petersen Options have fully
exercised the Petersen Options and excluding certain dilution events in respect of capital increases).

Repsol YPF has agreed to hold at least 50.01% of our capital stock for a period of at least ﬁve
years, unless Petersen Energı´a repays the senior secured term loan facility in full. Once the senior
secured term loan facility has been repaid in full, Repsol YPF has agreed to hold at least 35% of our
capital stock, so long as Petersen Energı´a maintains a minimum interest in our capital stock of
between 10% and 15% (depending on whether its afﬁliates that are beneﬁciaries of the Petersen
Options have fully exercised the Petersen Options and excluding certain dilution events in respect of
capital
increases), provided that Repsol YPF may sell shares to a purchaser that is a ‘‘ﬁrst-tier’’
company in the oil and gas industry and agrees to be bound by the terms of the shareholders’
agreement.

After ﬁve years: (i) Petersen Energı´a may transfer its shares without limitation; and (ii) so long
as Petersen Energı´a maintains a minimum interest in our capital stock of between 10% and 15%
(depending on whether its afﬁliates that are beneﬁciaries of the Petersen Options have fully exercised
the Petersen Options and excluding certain dilution events in respect of capital
increases), Repsol
YPF must maintain an interest that, combined with Petersen Energı´a’s holdings, amounts to 40% of
our outstanding capital stock, subject to certain conditions, provided that Repsol YPF may sell shares
to a purchaser that is a ‘‘ﬁrst-tier’’ company in the oil and gas industry and agrees to be bound by
the terms of the shareholders’ agreement.

Tag-Along Rights, Right to Participate in Public Offering and Right of First Refusal
If Petersen Energı´a has repaid the senior secured term loan facility in full, when Repsol YPF
sells more than 5% of our outstanding capital stock, Petersen Energı´a shall have a pro rata tag-along
right with respect to such sale by Repsol YPF. Petersen Energı´a also has a right to participate, on a
pro rata basis, in any public offering of our outstanding capital stock conducted by Repsol YPF.

Additionally, when Repsol YPF or Petersen Energı´a sells a block of our shares representing
greater than 10% of our capital stock, the other party shall have a right of ﬁrst refusal to purchase
such shares, subject to certain terms and conditions.

Acquisition of Certain of Repsol YPF’s Latin American Assets
Repsol YPF and Petersen Energı´a have agreed to allow us to evaluate the possible acquisition,
at market price, of certain speciﬁed Latin American assets of Repsol YPF in order to expand and
diversify our business.

Dividends
Repsol YPF and Petersen Energı´a have agreed to effect the adoption of a dividend policy under
which we would distribute 90% of our net income as dividends, starting with our net income for
2007. They have also agreed to vote in favor of requiring us to distribute an additional dividend of
U.S.$850 million, which was paid jointly with the ordinary dividends in 2008 and 2009.

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Tender Offer by Petersen Energı´a
Repsol YPF agreed not to participate in the tender offer for our shares that Petersen Energı´a or
its afﬁliates were required to make when they acquired 15% or more of our outstanding capital stock
(as a result of its exercise of one of the Petersen Options, or otherwise).

Duration and Termination
The shareholders’ agreement shall remain in effect during our existence, but

to
immediate termination if Repsol YPF’s holdings of our capital stock fall below 12.5% or Petersen
Energı´a’s holdings of our capital stock fall below 10%. The shareholders’ agreement is also subject to
termination if there are certain defaults under the shareholders’ agreement, or if, within thirty days of
the bankruptcy of either party, the bankrupt party cannot provide a sufﬁcient guaranty to the other
party.

is subject

Registration Rights and Related Agreements

Under the terms of the registration rights agreement between us, Repsol YPF and the ﬁnancial
institutions providing the senior secured term loan facility, we have agreed to ﬁle a resale shelf
registration statement under the Securities Act with respect
to the ADSs sold in the Petersen
Transaction, have it declared effective by the SEC, and keep it continuously effective until certain
speciﬁed conditions have been met. On February 20, 2008, we ﬁled such shelf registration statement
on Form F-3 with the SEC. Upon any acceleration of the senior secured term loan facility following
the occurrence and continuation of an event of default under such facility, Credit Suisse, London
Branch, the administrative agent acting on behalf of the lenders under the senior secured term loan
facility as holders of such pledged securities, may sell such securities under the shelf registration
statement after giving us notice, provided that we may suspend the use of the registration statement
upon the occurrence of certain speciﬁed events. Such securities and the associated registration rights
may be transferred by any holder.

In the event that we fail to keep a continuously effective resale shelf registration statement and
an acceleration of the senior secured term loan facility following an occurrence and continuation of
an event of default under such facility occurs, we are required to pay certain speciﬁed damages to the
holders of the securities required to be registered. The registration rights agreement provides that the
selling shareholders and us will indemnify each other and their and our respective directors, ofﬁcers,
agents, employees and controlling persons against speciﬁc liabilities in connection with the offer and
sale of the ADSs, including liabilities under the Securities Act, or will be entitled to contribution in
connection with those liabilities. In addition, Repsol YPF and Petersen Energı´a PTY Ltd., the parent
holding company of Petersen Energı´a, S.A., have agreed in a separate agreement to indemnify us
against certain speciﬁc losses resulting from our agreement to indemnify the selling shareholders and
their directors, ofﬁcers and controlling persons pursuant
to the registration rights agreement
(excluding losses resulting from a ﬁnal judgment determining the existence of a material misstatement
or omission of fact contained in our resale shelf registration statement or a prospectus included
therein, or a settlement based on such claims). Repsol YPF or Petersen Energı´a S.A. will pay all of
our expenses incidental to the registration, offering and sale of the ADSs to the public (subject to the
caps and limitations set forth in the registration rights agreement), and each selling shareholder will
be responsible for payment of commissions, concessions, fees and discounts of underwriters, broker-
dealers and agents.

We have also entered into a separate registration rights agreement with respect to the Option
Shares, with terms and conditions that are substantially similar to those contained in the registration
rights agreement entered into with respect to the ADSs sold in the Petersen Transaction.

Related Party Transactions

All material transactions and balances with related parties are set forth in Note 7 to the
Audited Consolidated Financial Statements. The principal such transactions were our sales of reﬁned
and other products to certain afﬁliates (which amounted to Ps.1,898 million in 2010), our purchase of
petroleum and other products that we do not produce ourselves from certain afﬁliates (which
amounted to Ps.550 million in 2010), and cancellation of loans granted to us by a subsidiary of

127

Repsol (in a net amount of Ps.793 million). The prices of the transactions with related parties
approximate the amounts charged by and/or to us by unrelated third parties.

In addition, Repsol YPF and Petersen Energı´a PTY Ltd., the parent holding company of
Petersen Energı´a, have agreed to indemnify us against certain speciﬁc losses resulting from our
agreement to indemnify the selling shareholders and their directors, ofﬁcers and controlling persons
pursuant to the registration rights agreements we have entered into in connection with the Petersen
Transaction (excluding losses resulting from a ﬁnal judgment determining the existence of a material
misstatement or omission of fact contained in our resale shelf registration statement or a prospectus
included therein, or a settlement based on such claims). Repsol YPF or Petersen Energı´a will pay all
of our expenses incidental to the registration, offering and sale of the securities registered hereby to
the public. See ‘‘—Registration Rights and Related Agreements.’’

For an organizational chart showing our organizational structure, including our interests in our

principal afﬁliates, see ‘‘Item 4. Information on the Company—Overview.’’

Argentine Law Concerning Related Party Transactions

Section 73 of the Transparency Decree provides that before a company whose shares are listed
in Argentina may enter into an act or contract involving a ‘‘signiﬁcant amount’’ with a related party
or parties, such company must obtain approval from its board of directors, and obtain an opinion,
prior to such board approval, from its audit committee or from two independent valuation ﬁrms that
states that the terms of the transaction are consistent with those that could be obtained on an arm’s-
length basis.

For the purpose of Section 73 of the Transparency Decree, as amended by Decree No. 1020/03,
‘‘signiﬁcant amount’’ means an amount that exceeds 1% of the issuer’s net worth as reﬂected in the
latest approved ﬁnancial statements, provided this amount exceeds Ps.300,000. For purposes of the
Transparency Decree,
‘‘related party’’ means (i) directors, members of the supervisory committee,
managers; (ii) the persons or entities that control or hold a signiﬁcant participation in the company
or in its controlling shareholder (at least 35% of its capital stock, or a lesser amount when they have
the right to appoint one or more directors, or have other shareholder agreements related to the
management of the company or its controlling shareholder); (iii) any other company under common
control; (iv) direct relatives of the persons mentioned in (i) and (ii); or (v) companies in which the
persons referred to in (i) to (iv) hold directly or indirectly signiﬁcant participations.

The acts or contracts referred to above,

immediately after being approved by the board of
directors, shall be disclosed to the CNV, making express indication of the audit committee’s or
independent valuation ﬁrm’s opinion, as the case may be. Also, beginning on the business day
following the day the transaction was approved by the board of directors, the audit committee’s or
independent valuation ﬁrm’s reports shall be made available to the shareholders at the company’s
principal executive ofﬁces.

If the audit committee or the two independent valuation ﬁrms do not ﬁnd that the contract is

on arm’s-length terms, prior approval must be obtained at the company’s shareholders’ meeting.

ITEM 8. Financial Information
Financial Statements

See Item 18 for our Audited Consolidated Financial Statements.

Legal Proceedings

Argentina

The Privatization Law provides that the Argentine State shall be responsible, and shall hold us
harmless, for any liabilities, obligations or other commitments existing as of December 31, 1990 that
were not acknowledged as such in the ﬁnancial statements of Yacimientos Petrolı´feros Fiscales
Sociedad del Estado as of that date arising out of any transactions or events that had occurred as of
that date, provided that any such liability, obligation or other commitment is established or veriﬁed
by a ﬁnal decision of a competent judicial authority. In certain lawsuits related to events or acts that
took place before December 31, 1990, we have been required to advance the payment of amounts

128

established in certain judicial decisions, and have subsequently been reimbursed or are currently in the
process of requesting reimbursement from the Argentine government of all material amounts in such
cases. We are required to keep the Argentine government apprised of any claim against us arising
from the obligations assumed by the Argentine government. We believe we have the right to be
reimbursed for all such payments by the Argentine government pursuant to the above-mentioned
indemnity, which payments in any event have to date not been material. This indemnity also covers
in the case of our lawyers and
fees and expenses of lawyers and technical consultants subject,
consultants, to the requirement that such fees and expenses not be contingent upon the amounts in
dispute.

Accrued, probable contingencies
Accruals totaling Ps.2,236 million, Ps.1,769 million, and Ps.1,821 million as of December 31,
2010, 2009 and 2008, respectively, have been provided in connection with contingencies which are
probable and can be reasonably estimated. In the opinion of our management, in consultation with
our external counsel, the amount accrued reﬂects the best estimation, based on the information
available as of
the mentioned
report, of
contingencies. The most signiﬁcant legal proceedings and claims accrued are described in the following
paragraphs.

the probable outcome of

the date of

this annual

Alleged defaults under natural gas supply contracts. Since 2004, the Argentine Secretariat of
Energy and the Undersecretariat of Fuels, through Rule No. 27/04, Resolutions No. 265/04, 659/04,
752/05, 1329/06 and 599/07, have on various occasions instructed us to supply certain quantities of
natural gas to the Argentine domestic market, in each case notwithstanding the lack of a contractual
commitment on our part to do so. In addition, the Argentine government has, at various times since
2004, imposed direct volume limitations on natural gas exports in different ways. As a result of these
measures, from 2004 to the present, we have been forced in many instances to partially or fully
suspend natural gas export deliveries that are contemplated by our contracts with export customers.

We appealed these measures, but, pending favorable ﬁnal resolution of such appeals, we have
been obliged to comply in order to avoid greater losses to us and our export customers that could be
occasioned by the revocation of our export permits or other penalties. We informed our natural gas
export customers of our position that these governmental measures constitute an event of force
majeure that releases us from any contractual or extra-contractual liability deriving from the failure to
deliver the agreed upon volumes of gas. Some of our customers have rejected our position and a
number of them, including Electroandina S.A. and Empresa Ele´ctrica del Norte Grande S.A., have
sought damages and/or penalties for breach of supply commitments under a contractual ‘‘deliver or
pay’’ clause, which claims have been rejected by us.

On November 5, 2010, YPF and Electroandina S.A. and Empresa Ele´ctrica del Norte Grande
S.A. entered into a settlement agreement by which YPF has undertaken to compensate them for an
amount signiﬁcantly lower than the amount originally claimed, and the parties have agreed to (i)
the claims
terminate and resign to all actions, rights or claims that constituted the object of
previously mentioned; and (ii) modify the terms of the relevant natural gas sales contract, which
becomes an interruptible supply contract. On January 7, 2011, the Argentine Secretariat of Energy
approved said settlement.

Additionally, on June 25, 2008, AES Uruguaiana Emprendimientos S.A.

(AESU) claimed
damages in a total amount of U.S.$28.1 million for missed deliveries of natural gas volumes during
the period September 16, 2007 through June 25, 2008. On July 16, 2008, AESU also claimed damages
in a total amount of U.S.$2.7 million for missed deliveries of natural gas volumes during the period
January 18, 2006 through December 1, 2006. We have contested both of these claims. Both parties
have suspended the fulﬁllment of their obligations under the contract. On September 15, 2008, AESU
notiﬁed YPF the interruption of the fulﬁllment of its commitments alleging delay and breach of
YPF’s obligations. YPF has rejected this notiﬁcation. On December 4, 2008, YPF notiﬁed that having
ceased the force majeure conditions, pursuant to the contract in force, it would suspend its delivery
commitments, due to the repeated breaches of AESU’s obligations. This notiﬁcation was also rejected.
On December 30, 2008, AESU rejected YPF’s right to suspend its natural gas deliveries and on
March 20, 2009, AESU notiﬁed YPF that it was terminating the contract. See ‘‘—Arbitration with

129

AES Uruguaiana Emprendimentos S.A. (AESU), Companhia de Ga´ s do Estado do Rı´o Grande do
Sul (Sulga´ s) and Transportadora de Gas del Mercosur S.A. (TGM).’’

In addition, YPF is subject

to certain claims related to transportation fees and charges
exports.
associated with transportation services under
contracts associated with natural gas
initiated
Transportadora de Gas del Norte S.A. (‘‘TGN’’), one of the parties to these contracts,
mediation proceedings with us
its claim. The mediation
proceedings, did not result in an agreement and, on March 12, 2010, YPF was notiﬁed of the lawsuit
ﬁled by such company claiming the fulﬁllment of contractual obligations and the payment of unpaid
invoices while reserving the right to claim for damages. YPF has answered the mentioned lawsuit.
Additionally, the plaintiff notiﬁed us that it was terminating the contract,
invoking YPF’s alleged
breach of such contract due to an alleged lack of payment of the related transportation fees. In the
opinion of our management, this matter will not have a material adverse effect on our results of
operations.

in order to determine the merits of

In connection with the above, on April 8, 2009, YPF ﬁled a complaint against TGN with
ENARGAS, seeking the termination of the natural gas transportation contract with TGN for the
transport of natural gas in connection with the natural gas export contract entered with AESU and
other parties. The complaint is based on the termination of the referenced natural gas export contract
and the legal
impossibility of assigning the transportation contract to other shippers because of
certain changes in law in effect since 2002; as a second order matter, the legal impossibility for TGN
to render the transportation service on a ﬁrm basis because of certain changes in law in effect since
2004; and as a third order matter, the Teorı´a de la Imprevisio´ n (hardship provision under Article
1198 of the Argentine Civil Code) available under Argentine law when extraordinary events render a
party’s obligations excessively burdensome.

La Plata reﬁnery environmental disputes. On June 29, 1999, a group of three neighbors of the La
Plata reﬁnery ﬁled claims for the remediation of alleged environmental damages in the peripheral
water channels of the reﬁnery,
investments related to contamination and compensation for alleged
health and property damages as a consequence of environmental pollution caused by YPF prior to
and after privatization. We notiﬁed the executive branch of the Argentine government that there is a
chance that the tribunal may ﬁnd us responsible for the damages. In such event, due to the indemnity
provided by Law No. 24,145 and in accordance with that law, we shall be allowed to request
the expenses for liabilities existing on or prior to January 1, 1991 (before
reimbursement of
privatization) from the Argentine government.

On December 27, 2002, a group of 264 claimants who resided near the La Plata reﬁnery
requested compensation for alleged quality of
life deterioration and environmental damages
purportedly caused by the operation of the La Plata reﬁnery. The amount claimed is approximately
Ps.81 million. We ﬁled a writ answering the complaint. There are three similar additional claims
raised by three groups of 120, 343, and 126 neighbors, respectively. The ﬁrst group has made a claim
for compensation of approximately Ps.26 million,
the second group has made a claim for
compensation of approximately Ps.72 million and the third one has made a claim of approximately
Ps.26 million, in addition to a request for environmental cleanup.

On December 17, 1999, a group of 37 claimants who resided near La Plata reﬁnery, demanded
the speciﬁc performance by us of different works, installation of equipment, technology and execution
of work necessary to stop any environmental damage, as well as compensation for health damages
alleged to be the consequence of gaseous emissions produced by the reﬁnery, currently under
monitoring.

On January 25, 2011, we entered into an agreement with the Provincial Entity for Sustainable
Development (Organismo Provincial para el Desarrollo Sostenible or ‘‘OPDS’’) of the Government of
the province of Buenos Aires, within the scope of the Remediation, liability and environmental risk
control program, created by Resolution 88/10 of the OPDS. Pursuant to such agreement, YPF and
the relevant authorities agreed to jointly perform an eight-year work program in the canals adjacent
including the conduct of characterization and risk assessment studies of
to the La Plata reﬁnery,
sediments. The agreement provides that when a required remediation action is identiﬁed as a result of
a risk assessment study, different alternatives and available techniques will be considered, as well as
the steps needed for its implementation. Studies to determine how old the contamination is will also

130

be performed pursuant to the agreement,
in order to evaluate whether the Argentine government
should be liable for such contamination pursuant to its obligation to hold us harmless under the
Privatization Law (Law No. 24,145), which established the procedures for our privatization. YPF has
provided an accrual of
the characterization and risk assessment studies
mentioned above. The cost of the remediation actions, if required, will be recorded in those situations
where the loss is probable and can be reasonably estimated.

the estimated cost of

Quilmes claims. We have been notiﬁed of 35 judicial claims ﬁled by neighbors living near the
riverside in Quilmes, in the province of Buenos Aires, as a consequence of a leak related to the La
Plata – Dock Sud pipeline, which occurred in 1988 as third parties damaged and stole fuel from the
pipeline, which was then repaired by Yacimientos Petrolı´feros Fiscales. One of the claims has been
ﬁled by a group of people that allegedly live in this area and have requested the remediation of
environmental damages and the payment of approximately Ps.47 million plus interest as compensation
for alleged personal damages for hydrocarbons exposure. We have answered the complaint requesting
its
rejection and impleading the Argentine government. We have also notiﬁed the Argentine
government of the existence of this claim and that we plan to request that it hold us harmless and
indemnify us against any liability derived from this lawsuit, as provided by Law No. 24,145. The
Argentine government, through an administrative decision, has denied any responsibility to indemnify
us for this matter, and we have sued the Argentine government to obtain a declaratory judgment
declaring this administrative decision null and void. Such declaratory judgment is still pending. There
are 34 other judicial claims that have been brought against us based on similar allegations, amounting
to approximately Ps.17.4 million. Additionally, we are aware of the existence of other actions brought
against us that have not yet been served and which are based on similar allegations. As of the date
of
this annual report, a remediation plan is being performed in the affected area, under the
supervision of the environmental authority of the province of Buenos Aires.

Tax claims. We have received several claims from the Federal Administration of Public Revenue
(Administracio´n Federal de Ingresos Pu´blicos, or ‘‘AFIP’’) and from the provincial and municipal ﬁscal
authorities, which are not individually signiﬁcant, and which have been accrued based on the best
information available as of the date of this annual report.

Non-accrued, possible contingencies
In addition to the probable contingencies described in the preceding paragraphs, we have
received several labor, civil, commercial and environmental claims in respect of which we have not
provided any accrual since management, based on the evidence available to date and upon the
opinion of our external counsel, have considered them to be possible contingencies. The most
signiﬁcant of such contingencies are described below.

Noroeste basin reserves review. The effectiveness after certain speciﬁc dates of natural gas export
authorizations (related to production in the Noroeste basin) granted to us pursuant to Resolution
S.E. Nos. 165/99, 576/99, 629/99 and 168/00, issued by the Argentine Secretariat of Energy, is subject
to an analysis by the Argentine Secretariat of Energy to determine whether sufﬁcient additional
natural gas reserves have been discovered or developed by us in the Noroeste basin. The result of this
ongoing review is uncertain and may have an adverse impact upon the execution of the export gas
sales agreements related to such export authorizations, and may imply signiﬁcant costs and liabilities
for us. We have submitted to the Argentine Secretariat of Energy documentation in order to allow
for the continuation of the authorized exports in accordance with Resolutions SE No. 629/1999, 565/
1999, and 576/1999 (the ‘‘Export Permits’’) from the Noroeste basin. These Export Permits relate to
the long-term natural gas export contracts with Gas Atacama Generacio´ n S.A., Empresa Ele´ctrica del
Norte Grande S.A. and Electroandina S.A. (collectively, the ‘‘Clients’’). On March 29, 2007, an
internal memorandum of the technical sector of the Argentine Secretariat of Energy addressed this ﬁle
and concluded, without resolving the question that we have not included the necessary reserves to
continue with the Export Permits. The ﬁle is currently awaiting decision from the Argentine
Secretariat of Energy. If the Argentine Secretariat of Energy were to determine that the reserves are
not sufﬁcient to continue to comply with our export commitments and other commitments, it could
declare the expiration or suspension of one or more of the Export Permits, which would have a direct
impact on the export contracts, to the injury of the Clients. In the case in which it were determined
that we did not act as a prudent and diligent operator and/or did not have sufﬁcient reserves, we

131

could be responsible for the damages that this situation causes to the Clients. With Gas Atacama
Generacio´ n S.A. we have reached an integral renegotiation agreement, providing for the payment of a
limited compensation in the case of suspension or expiration of the relevant Export Permit. This
agreement has been approved by the Secretariat of Energy. On January 7, 2011 the Argentine
Secretariat of Energy approved the settlement agreements entered into on November 5, 2010 with
Electroandina S.A. and Empresa Ele´ctrica del Norte Grande S.A., respectively, by which the Parties
agree to automatically terminate the agreements with no responsibility derived for such termination in
case of suspension or expiration of the Export Permits.

New Jersey claims. On December 13, 2005,

the New Jersey Department of Environmental
Protection (the ‘‘DEP’’) and the New Jersey Spill Compensation Fund ﬁled a claim with a New
Jersey court against Occidental Chemical Corporation, Tierra, Maxus, Repsol YPF, YPF, YPF
Holdings and CLH Holdings. YPF International S.A. and Maxus Intenational Energy Company were
added to the claim in 2010. The plaintiffs are claiming economic compensation in an undetermined
amount and punitive damages as a consequence of environmental damages, as well as the costs and
fees associated with this proceeding, based on alleged violations of the Spill Compensation and
Control Act, the Water Pollution Control Act and common law claims relating to a facility allegedly
operated by the defendants and located in Newark, New Jersey that allegedly impacted the Passaic
River and Newark Bay. DEP ﬁled its Second Amended Complaint in April 2008; YPF’s motion to
dismiss for lack of personal jurisdiction was denied in September 2008. The decision was afﬁrmed by
the Court of Appeals following an appeal from YPF. Notwithstanding the above, the Court denied
the plaintiffs’ motion to bar third party practice and allowed defendants to ﬁle third-party claims.
Third-party claims against approximately 300 companies and governmental entities (including certain
municipalities) which could have responsibility in connection with the claim were ﬁled by Tierra and
Maxus in February 2009. In September 2010, New Jersey governmental parties, along with other
summoned entities, ﬁled their motions to dismiss, which have been answered by Maxus and Tierra.
The aforementioned motions to dismiss are pending resolution. Simultaneously, a mediator had
prepared a work plan for an alternative dispute resolution process to be presented to the parties
during the ﬁrst quarter of 2011, but this process failed since the parties could not reach a consensus.
For additional information about this legal proceeding, see ‘‘—YPF Holdings-Passaic River/Newark
Bay, New Jersey.’’

the

claiming for

including us,

remediation of

in the Neuquina basin,

Patagonian Association of Land-Owners claims. On August 21, 2003, the Patagonian Association
of Land-Owners (‘‘ASSUPA’’) sued the companies operating production concessions and exploration
permits
the general
environmental damage purportedly caused in the execution of such activities or the establishment of
an environmental restoration fund, and the implementation of measures to prevent environmental
damages in the future. The total amount claimed against all companies is more than U.S.$547.6
million. The plaintiff requested that the Argentine government (Secretariat of Energy), the Federal
Environmental Council (Consejo Federal de Medio Ambiente), the provinces of Buenos Aires, La
Pampa, Neuque´n, Rı´o Negro and Mendoza and the National Ombudsman be summoned. It
requested, as a preliminary injunction,
the defendants refrain from carrying out activities
affecting the environment. Both the Ombudsman’s summons as well as the requested preliminary
injunction were rejected by the Argentine Supreme Court. Once the complaint was notiﬁed, we and
the other defendants ﬁled a motion to dismiss for failure of the plaintiff to state a claim upon which
relief may be granted. The court granted the motion, and the plaintiff had to ﬁle a supplementary
complaint. We requested that the claim be rejected because the defects of the complaint indicated by
the Argentine Supreme Court have not been corrected, but such request was denied. However, we
have also requested its rejection for other reasons, and impleaded the Argentine government, due to
its obligation to indemnify us against any liability and hold us harmless for events and claims arising
prior to January 1, 1991, according to Law No. 24,145 and Decree 546/1993. On February 23, 2009,
the Argentine Supreme Court ordered that certain provinces, the Argentine government and the
the
Federal Environmental Council be summoned. Therefore, pending issues were deferred until
impleaded parties appear before the court and procedural issues are resolved. As of the date of this
annual report, the provinces of Rı´o Negro, Buenos Aires, Neuque´n, Mendoza, and the Argentine
government have presented their arguments to the Supreme Court, which are not available to us. The

that

132

provinces of Neuque´n and La Pampa have claimed lack of jurisdiction, which has been opposed by
the plaintiff, and the claim is pending resolution.

Dock Sud claim. We have been sued in the following environmental lawsuits that have been ﬁled
by residents living near Dock Sud, province of Buenos Aires: (i) ‘‘Mendoza, Beatriz against National
State et al.,’’ a lawsuit before the Argentine Supreme Court, in which the Argentine government, the
province of Buenos Aires, the City of Buenos Aires, 14 municipalities and 44 companies (including
us) were sued. The plaintiffs have requested unspeciﬁed compensation for collective environmental
damage to the Matanza and Riachuelo river basins and for physical and property damage, which
they claim to have suffered. The Argentine Supreme Court declared itself legally competent to settle
only the conﬂict related to the collective environmental damages,
including prevention of future
pollution, remediation of environmental damages already caused and monetary compensation for
irreparable environmental damages, and has requested that the defendants submit speciﬁc reports. In
particular, it has requested that the Argentine government, the province of Buenos Aires, the City of
Buenos Aires and the Federal Environmental Council submit a plan with environmental objectives.
We answered the complaint and requested the impleading of the Argentine government, based on its
obligation to indemnify us against any liability and hold us harmless for events and claims previous
to January 1, 1991, according to Law No. 24,145 and Decree No. 546/1993. In July 2008, the
Argentine Supreme Court decided that
the Basin Authority (Law 26,168) will be in charge of
performing a remediation plan as well as of taking preventive measures in the area. The National
State as well as the Province and City of Buenos Aires will be responsible for the performance of
these measures. It also declared the exclusive competence of the First Instance Federal Court in
Quilmes to hear any claims or disputes arising out of the remediation plan or the preventive measures
and determined that any future action seeking the environmental remediation of the basin will be
dismissed (litis pendentia). Additionally, the Argentine Supreme Court declared that it will determine
whether and how much liability is to be borne by the parties involved; (ii) ‘‘Cicero, Marı´a Cristina
against Antivari S.A.C.I. et al. for damages’’
in which the plaintiffs, who are residents of Villa
Inﬂamable, Dock Sud, also demand the environmental remediation of Dock Sud and Ps.33 million in
compensation for physical and property damages against many companies that have operations there,
including us. We answered the complaint by requesting its rejection and asked the citation of the
Argentine government, due to its obligation to indemnify us against any liability and hold us
harmless for events and claims previous to January 1, 1991, according to Law No. 24,145 and Decree
No. 546/1993.

the

responsibility of

including within the reﬁnery), or,

La Plata reﬁnery environmental claims. On June 6, 2007, we were served with a complaint in
which nine residents of the vicinity of the La Plata reﬁnery request (i) the cessation of contamination
and other harms they claim are attributable to the reﬁnery and (ii) the cleanup of the adjacent canals,
if
Rı´o Santiago and Rı´o de la Plata (water, soils and aquifers,
cleanup is impossible, compensation for environmental and personal damages. The plaintiffs have also
requested physical and property damages of approximately Ps.52 million, or an amount
to be
determined from evidence produced in discovery. We believe that most damages that are alleged by
the plaintiffs, if proven, may be attributable to events that occurred prior to YPF’s privatization and
would therefore be
in accordance with the
Privatization Law of YPF. Notwithstanding the aforesaid, there is the possibility a judgment could
order us to meet the expenses of remedying these liabilities, in which case we could ask the Argentine
government to reimburse the remediation expenses for liabilities existing prior to January 1, 1991
pursuant to Law 24,145. In addition, we believe that this claim partially overlaps with the request
made by a group of neighbors of the La Plata reﬁnery on June 29, 1999, mentioned in preceding
paragraphs. Accordingly, we consider that the cases will need to be partially consolidated to the
extent that the claims overlap. We answered the complaint by requesting its rejection and asked for
the citation of the Argentine government, due to its obligation to indemnify us against any liability
and hold us harmless for events and claims previous to January 1, 1991, according to Law No.
24,145 and Decree No. 546/1993. Additionally, we believe that any contamination that may exist
could be attributable to numerous sources,
including dumping of refuse over many years by other
industrial facilities and by ships.

the Argentine government

Additionally, we are aware of an action in which we have not yet been served, in which the
plaintiff requests the cessation of contamination and the cleanup of the canals adjacent to the La

133

Plata reﬁnery,
in Rı´o Santiago, and other sectors near the coast (removal of mud, drainage of
wetlands, restoration of biodiversity, among other things), and, if such sanitation is not practicable,
compensation of Ps.500 million or an amount to be determined from evidence produced in discovery.
We believe that this claim partially overlaps with the requests made by a group of neighbors of the
La Plata reﬁnery on June 29, 1999 and with the complaint served on June 6, 2007, mentioned in
preceding paragraphs. Accordingly, we consider that if we are served in this proceeding or any other
proceeding related to the same subject matters, the cases will need to be consolidated to the extent
that
to claims that would not be included in the previous
proceedings, for the time being we are unable to estimate the prospects of such claims. Additionally,
we believe that most of the damages that do not overlap with the aforementioned claims may be
to YPF’s privatization and could therefore be the
attributable to events
responsibility of the Argentine government in accordance with the Privatization Law concerning YPF.

the claims overlap. With respect

that occurred prior

In addition to the above, YPF has entered into an agreement with the OPDS in connection with
the claims related to the channels adjacent to the La Plata reﬁnery, which is described in ‘‘—La Plata
reﬁnery environmental disputes’’ above.

Concessions on Hydrocarbon bearing zones – Provincial claims. We have been notiﬁed of
Resolution 433/08 issued by the Ministry of Production, Hydrocarbon Department of the Rı´o Negro
in the
Province concerning compliance with certain obligations by exploitation concessionaires
hydrocarbon bearing zones of Barranca de los Loros, Bajo del Piche, El Medanito and Los Caldenes,
all located in Rı´o Negro Province. This resolution asserts that we, among others, in our capacity as a
concessionaire, are liable for failing to meet certain concession and environmental obligations. If
found liable, we could be at risk of termination of these concession contracts. In light of the above,
and consistent with provisions of the Hydrocarbons Law, we were requested to submit a response.

The Hydrocarbons Law grants the concessionaire and/or licensee the right, prior to termination
based upon contractual provisions, to cure a contractual breach within a certain period of time after
for nulliﬁcation of
receiving notice thereof. Accordingly, on May 29, 2008, we ﬁled a request
Resolution 433/08, since this resolution failed to grant us this right. Additionally, on June 13, 2008,
we submitted a response denying the charges against us and on November 12, 2008, the Ministry of
Production ordered the initiation of the evidence production period. On November 28, 2008, we ﬁled
a writ requesting the production of certain evidence and the appointment of our technical expert. As
of the date of this report, we have argued certain aspects related to the production of evidence. On
May 12, 2009, we were notiﬁed of the issuance of Resolution No. 31/09 dated March 13, 2009 by the
Ministry of Production, Hydrocarbon Department of the Rı´o Negro Province, which ordered an
extension of the evidence production period in this case. On December 1, 2009, we presented the
requested documentary evidence, while stating that the resolution of our claims related to certain
aspects of
the production of evidence are still pending. Finally, on September 16, 2010, YPF
submitted a presentation and requested the termination of this claim based on: (a) the amounts
invested in the four hydrocarbon bearing zones between 2007 and 2010 and (b) the actions taken as
regards to the environmental matters.

Claims related to the gas market and others. In addition to the claims described under ‘‘—
Alleged defaults under natural gas supply contracts’’, we are involved in the following proceedings
also related to the restrictions imposed by the Argentine government in the natural gas market:

*

in connection with the

Arbitration with Transportadora de Gas del Mercosur S.A. (TGM). YPF was notiﬁed by
the International Chamber of Commerce (ICC) of an arbitration brought by TGM against
YPF claiming unpaid and outstanding payments in an approximate amount of U.S.$10
million,
established in the natural gas
transportation fee
transportation contract entered into in September 1998 between YPF and TGM, associated
with the natural gas export contract entered into by YPF, AESU and Companhia de Ga´ s
do Estado do Rı´o Grande do Sul (Sulga´ s), referred below. See ‘‘—Non-accrued, remote
contingencies—Arbitration with AES Uruguaiana Empreendimentos
(AESU),
Companhia de Ga´ s do Estado do Rı´o Grande do Sul (Sulga´ s) and Transportadora de Gas
del Mercosur S.A. (TGM).’’ On April 8, 2009, YPF requested that this claim be rejected

S.A.

134

*

and counterclaimed for the termination of the natural gas transportation contract, based
on its termination rights upon the termination by AESU and Sulga´ s of the natural gas
export contract discussed below.

On July 10, 2009, TGM increased the amount of its claim to approximately U.S.$17.3
million and claimed an additional amount of approximately U.S.$366.4 million for lost
proﬁts, a claim for which we believe YPF should not be responsible. YPF rejected TGM’s
arguments. The Arbitration Tribunal has been constituted. On April 20, 2010, the parties
agreed on the Terms of Reference in coordination with the Arbitration Tribunal. On June
10, 2010, YPF submitted its arguments on procedural grounds before the Arbitration
Tribunal and requested the Arbitration Tribunal to determine that it was not competent to
hear the claim. In case such motion is rejected, YPF has requested the Arbitration
Tribunal to suspend this arbitration until the ongoing arbitration with TGM, AESU and
Sulga´ s is solved. On February 14, 2011, we were notiﬁed of the Arbitration Tribunal’s
decision to sustain our motion, therefore suspending the proceeding until the arbitration
brought by YPF is solved. On April 6, 2009, YPF registered a request for arbitration at
the ICC against TGM, AESU and Sulga´ s, seeking an award declaring the termination of
the gas transportation contract with TGM as a result of the termination of the natural gas
export contract with AESU and Sulga´ s by such parties. On the same date, YPF was
notiﬁed by the ICC of an arbitration brought against it by AESU and Sulga´ s. See ‘‘—
Non-accrued, remote contingencies—Arbitration with AES Uruguaiana Empreendimentos
S.A.
(Sulga´ s) and
Transportadora de Gas del Mercosur S.A. (TGM),’’ below. YPF has requested that the
three proceedings be combined.

(AESU), Companhia de Ga´ s do Estado do Rı´o Grande do Sul

CNDC investigation. On November 17, 2003, the CNDC requested explanations, within the
framework of an ofﬁcial investigation pursuant to Art. 29 of the Antitrust Protection Law,
from a group of almost 30 natural gas production companies, including us, with respect to
the following items: (i) the inclusion of clauses purportedly restraining trade in natural gas
purchase/sale contracts and (ii) gas imports from Bolivia, in particular (a) expired contracts
signed by YPF, when it was state-owned, and YPFB (the Bolivian state-owned oil
company), under which YPF allegedly sold Bolivian gas in Argentina at prices below the
purchase price; and (b) the unsuccessful attempts in 2001 by Duke and Distribuidora de
Gas del Centro to import gas into Argentina from Bolivia. On January 12, 2004, we
submitted explanations in accordance with Art. 29 of
the Antitrust Protection Law,
contending that no antitrust violations had been committed and that there had been no
price discrimination between natural gas sales in the Argentine market and the export
market. On January 20, 2006, we received a notiﬁcation of resolution dated December 2,
2005, whereby the CNDC (i) rejected the ‘‘non bis in idem’’ petition ﬁled by us, on the
grounds that ENARGAS was not empowered to resolve the issue when ENARGAS
Resolution No. 1,289 was enacted; and (ii) ordered that the preliminary opening of the
proceedings be undertaken pursuant to the provisions of Section 30 of Law 25,156. On
January 15, 2007, the CNDC charged us and eight other producers with violations of Law
25,156. We have contested the complaint on the basis that no violation of the Law took
place and that the charges are barred by the applicable statute of limitations, and have
presented evidence in support of our position. On June 22, 2007, without acknowledging
any conduct in violation of the Antitrust Protection Law, we ﬁled with the CNDC a
commitment according to Article 36 of the Antitrust Protection Law requesting that the
CNDC approve the commitment, suspend the investigation and dismiss the proceedings.
We are still awaiting a formal response. On December 14, 2007, the CNDC elevated the
investigation to the Court of Appeals.

In addition, we are subject to other claims before the CNDC which are related to alleged
price discrimination in the sale of fuels. Our management, based on the evidence available
to date and upon the opinion of our external counsel, has considered them to be possible
contingencies.

135

*

*

Users and Consumers’ Association claim. The Users and Consumers’ Association (Unio´ n de
Usuarios y Consumidores) claimed (originally against Repsol YPF before extending its
claim to YPF) the reimbursement of allegedly excessive prices charged to bottled LPG
consumers between 1993 and 2001. The claim is for a sum of Ps.91.2 million for the
period 1993 to 1997 (this sum, in current pesos, would amount to approximately Ps.321
million), together with an undetermined amount for the period 1997 to 2001. We invoked
the statute of limitations, since the applicable two-year statute of limitation had already
elapsed. A ruling is pending on the applicability of
limitations.
Notwithstanding the above, the evidence production period commenced on August 6, 2009.

statute of

the

Alleged defaults under natural gas contracts – Mega. Mega has claimed compensation from
us for failure to deliver natural gas under the contract between us and Mega. We invoked
that natural gas deliveries to Mega pursuant to the contract were affected by the Argentine
government’s interference. Consequently, we believe that we are not liable for such natural
gas delivery deﬁciencies pursuant to the doctrine of ‘‘force majeure’’.

Other claims. Some employees are seeking compensation for allegedly not being able to beneﬁt
from their off-duty time while on guard duty. The labor authority has issued an arbitral award
pursuant to which we will have to compensate guard duty time as actual work time. We submitted a
motion to declare this decision null, which was rejected. We subsequently ﬁled a lawsuit requesting
the judge to declare this decision void as well as a preliminary injunction, which was also rejected.
We appealed said decision. On March 30, 2011, the court admitted the preliminary injunction and
suspended the administrative proceedings. The amount of this claim is to be determined during the
proceedings.

Non-accrued, remote contingencies
Our management,

in consultation with our external counsel, believes

that

the following

contingencies, while individually signiﬁcant, are remote:

this point,

Congressional request for investigation to CNDC. On November 7, 2003, certain former members
of
the Argentine Congress, Arturo Lafalla, Ricardo Falu and others, ﬁled with the CNDC a
complaint against us for abuse of a dominant position in the bulk LPG market during 2002 and part
of 2003. The alleged conduct consisted of selling bulk LPG in the domestic market at prices higher
than the export price, thereby restricting the availability of bulk LPG in the domestic market. On
December 15, 2003, the CNDC decided to forward the complaint to us, and requested explanations
under Art. 29 of the Antitrust Protection Law. On January 21, 2004, we submitted explanations in
accordance with Art. 29 of the Antitrust Protection Law, contending that no antitrust violations had
the CNDC may accept our explanations or begin a criminal
been committed. At
investigation. We contend that we did not restrict LPG supply in the domestic market during the
relevant period, that during this period all domestic demand for LPG could have been supplied by
our competitors and that therefore our market share could not be deemed a dominant position. On
September 2, 2008, the CNDC issued Note No. 1131/08 requesting information in relation to the
prices in the internal and external markets corresponding to the years 2000-2008. On October 7, 2008,
we presented the information. On December 10, 2008, the CNDC requested us to ﬁle the LPG export
contracts signed during the years 2001-2004 as well as to explain the evolution of the prices in the
internal and external markets of propane and butane during the March to December period in the
years 2001-2004. On December 16, 2008, we presented the requested information. Having ﬁled the
requested information, we have become aware that the CNDC has issued an opinion suggesting that
the proceedings be dismissed. However, the matter is still pending before the Secretary of Domestic
Commerce.

Pursuant to the provisions of Resolution No. 189/99, referred to above, certain third parties
have claimed compensation for alleged damages suffered by them as a consequence of our sanctioned
conduct. We have denied these claims and presented our defenses.

Other export tax disputes. Between 2006 and 2009, the Customs General Administrations in
Neuque´n, Comodoro Rivadavia and Puerto Deseado informed us that certain summary proceedings
had been brought against us based on alleged formal misstatements on forward oil deliveries (future
in the loading permits submitted before these agencies. In
commitments of crude oil deliveries)

136

December 2008, the Customs General Administration of Neuque´n rejected our arguments and issued
a resolution against us. We will appeal before the National Fiscal Court. Although our management,
based on the opinion of legal counsel, believes the claim has no legal basis, the potential ﬁnes
imposed could be substantial.

Mendoza royalties dispute. Following certain claims from the province of Mendoza that the
international market price be used in the calculation of
relating to internal market
transactions based on its interpretation of Section 6 of Law No. 25,561, we commenced an
administrative proceeding. Our request is currently pending. Additionally, YPF ﬁled a declaratory
action with the Argentine Supreme Court, with application for an injunction to declare
unconstitutional the interpretation that the province of Mendoza applies to Section 6 of Law No.
the Argentine Supreme Court declared itself
25,561. On April 7, 2009, we were notiﬁed that
competent to hear the case brought by YPF, and issued a preliminary injunction to restrain the
province of Mendoza from applying the international market price in calculating the royalties payable
by YPF. The ﬁnal resolution of this case is still pending.

royalties

Arbitration with AES Uruguaiana Empreendimentos S.A. (AESU), Companhia de Ga´s do Estado
do Rı´o Grande do Sul (Sulga´s) and Transportadora de Gas del Mercosur S.A. (TGM). On April 6,
2009, YPF was notiﬁed by the ICC of an arbitration brought against it by AESU and Sulga´ s
claiming damages in an amount of approximately U.S.$1,052 million, which includes damages for the
in connection with YPF’s alleged liability resulting
matter described above with respect to AESU,
from the termination by AESU and Sulga´ s of
the natural gas export contract entered into in
September 1998. See ‘‘—Alleged defaults under natural gas supply contracts’’ above. YPF denies all
liability arising from such termination. Moreover, YPF believes that AESU’s damages assessment is
far beyond any reasonable assessment, since it exceeds six-fold the maximum aggregate deliver-or-pay
penalties that would have accrued in the event that YPF would breached its delivery obligations for
the maximum daily quantity through the expiration of the term of the natural gas export contract. In
addition, more than 90% of AESU’s damages assessment relates to alleged loss of proﬁts that may be
strongly challenged on the basis that prior to the termination of the natural gas export contract,
AESU voluntarily terminated all of its long term power purchase contracts. Furthermore, on April 6,
2009, YPF registered a request for arbitration against AESU, Sulga´ s and TGM at the ICC seeking a
declaration from the arbitral tribunal that, among other things, AESU and Sulga´ s have repudiated
and unilaterally and illegally terminated the natural gas export contract entered into in September
1998 and declaring AESU and Sulga´ s liable for any damages suffered by the parties because of such
termination, including but not limited to the damages resulting from the termination of the natural
gas transportation contracts associated with the natural gas export contract. See ‘‘—Arbitration with
Transportadora de Gas del Mercosur S.A. (TGM).’’

The Arbitration Tribunal has been constituted in both arbitration proceedings.

In both
proceedings, the parties agreed on the Terms of Reference (on October 1, 2010 in the arbitration
brought against YPF and on October 10, 2010 in the arbitration brought against AESU, Sulga´ s and
TGM) that determine -among other matters- the controversial issues of both claims. Furthermore, the
Arbitration Tribunal ordered to divert proceedings in order to solve jurisdictional oppositions before
ruling on the object of the claims.

Proceedings related to foreign currency proceeds. On December 9, 2002, we ﬁled a declaratory
judgment action (Accio´n Declarativa de Certeza) before an Argentine federal court
requesting
clariﬁcation as to the uncertainty generated by opinions and statements of several organizations
providing ofﬁcial advice that the right of the hydrocarbon industry to freely dispose of up to 70% of
foreign currency proceeds from exports of hydrocarbons products and byproducts, as provided by
Executive Decree No. 1,589/89, had been implicitly abolished by the new exchange regime established
by Executive Decree No. 1,606/01. On December 9, 2002, a federal
judge issued an injunction
ordering the Argentine government, the Central Bank and the Ministry of the Economy to refrain
from interfering with our access to and use of 70% of the foreign exchange proceeds from our
hydrocarbon exports. Following the enactment of Decree No. 2,703/02 in December 2002, we
expanded the scope of the declaratory judgment action before the federal court to clear any doubts
and uncertainty arising after the enactment of
this decree. See ‘‘Item 4. Information on the
Company—Regulatory Framework and Relationship with the Argentine Government—Repatriation

137

of Foreign Currency’’. On December 1, 2003, the National Administrative Court of Appeals decided
that the issuance of Decree No. 2,703/02, which allows companies in the oil and gas sector to keep
abroad up to 70% of the export proceeds, rendered the injunction unnecessary. Nevertheless, the
Court of Appeals’ decision was silent with respect to the availability of the exemption to convert
proceeds from export operations carried out by oil and gas companies into domestic currency prior to
the issuance of Decree No. 2,703/02.

On October 12, 2007, we were notiﬁed of

the initiation of an administrative summary
proceeding for alleged late repatriation of foreign currency proceeds, and the failure to repatriate the
remaining 70%, in connection with some hydrocarbon export transactions made in 2002 (during the
period between the issuance of Decree No. 1,606/01 and the issuance of Decree No. 2,703/02).
Nevertheless, a ﬁnal and unchallenged judicial judgment issued by a First Instance Court in Criminal
Economic Matters in a similar administrative summary proceeding against a different company for
alleged violation of the criminal exchange law (lack of repatriation of 70% of foreign currency
proceeds) regarding export transactions made in 2002 resolved the matter in favor of that company
based on well-founded arguments that were not challenged by the prosecutor. In addition, the Ofﬁce
of the General Prosecutor of Argentina has issued an opinion in a similar administrative summary
proceeding involving another oil company stating that no criminal law violations existed in that case
due to the lack of willful misconduct and the existence of differing regulations
that created
the proceeding should be
uncertainty as to the scope of certain obligations, and stating that
dismissed. On April 30, 2009, in similar administrative proceedings involving another oil company, the
National Administrative Court of Appeals resolved the matter in favor of that company, on the basis
that the free disposal regime of up to 70% of export proceeds was in force during 2002, upon the
publication of Decree No. 1638/01 on December 12, 2001. Extraordinary appeals ﬁled by the
Argentine government and the Central Bank have been rejected. Consequently, YPF considers that
the administrative summary proceeding against YPF is unlikely to be successful.

export authorization granted by Resolution S.E. No. 169/97 (the

Additional information
On August 11, 2006, we received Note SE No. 1009 (the ‘‘Note’’) from the Argentine Secretariat
in
of Energy, which reviewed the progress of reserves in the Ramos Area in the Noroeste basin,
relation to the
‘‘Export
Authorization’’). The Export Authorization concerns the long-term natural gas export contract
between us and Gas Atacama, for a maximum daily volume of 530,000 m3/day. The Note stated that
as a result of the decrease in natural gas reserves supporting the Export Authorization, the domestic
market supply was at risk. The Note preventively provided that the maximum natural gas daily
volumes authorized to be exported under the Export Authorization were to be reduced by 20%,
affecting the export contract. We ﬁled an answer to the Note on September 15, 2006 stating our
allegations and defenses.

CNDC anti-competitive activity disputes. On March 22, 1999, we were notiﬁed of Resolution No.
189/99 from the former Secretariat of Industry, Commerce and Mining of Argentina, which imposed
a ﬁne on us of Ps.109 million, stated Argentine pesos as of that date, based on the interpretation that
we had purportedly abused our dominant position in the bulk LPG market due to the existence of
different prices between the exports of LPG and the sales to the domestic market from 1993 through
1997. In July 2002, the Argentine Supreme Court conﬁrmed the ﬁne, and we made the claimed
payment. Additionally, Resolution No. 189/99 provided for the commencement of an investigation in
order to prove whether the penalized behavior continued from October 1997 to March 1999. On
December 19, 2003, the CNDC completed its investigation and charged us with abuse of dominant
market position during this period. On January 20, 2004, we answered the notiﬁcation by (i) claiming
the application of the statutes of limitations and alleging the existence of defects in the imputation
procedure (absence of majority in the resolution that decided the imputation and prejudgment by its
signers); (ii) arguing the absence of abuse of dominant position; and (iii) offering the corresponding
evidence.

Given that the Argentine Supreme Court has previously established under Law No. 22,262 that
the statute of limitations for administrative infractions is two years, we believe that our defense based
on the statute of limitations is solid. Since the imputed conduct occurred before September 29, 1999,
which is the effective date of the new law, we believe that the law applicable to the proceeding is

138

Law No. 22,262 instead of the new Antitrust Protection Law (No. 25,156). We ﬁled appeals with the
National Economic Criminal Court: (i) on July 29, 2003, in view of the rejection by the CNDC of
the motion to overturn the resolution that ordered the opening of the preliminary investigations
without deciding in advance on the statute of limitations defense claimed by us; and (ii) on February
4, 2004, in view of the rejection by the CNDC of the motion to overturn the resolution that ordered
the charge because of a lack of majority and prejudgment. On April 13, 2004, the National Court of
Appeals in Criminal Economic Matters sustained the appeal ﬁled by us on the grounds of lack of
majority of the CNDC in passing the objected resolution.

On August 31, 2004, we appealed the resolution passed by the CNDC that rejected our statute
of limitations defense. The CNDC accepted the appeal and referred the proceedings to Chamber II of
the National Court of Appeals in Federal Civil and Commercial Matters, which subsequently referred
the proceeding to Chamber B of the National Court of Appeals in Criminal Economic Matters. On
March 3, 2006, the CNDC decided on the evidence that we shall produce during this proceeding.
During August and September 2007, hearings involving the testimony of witnesses proposed by us
took place. On August 12, 2008, Chamber B of the National Court of Appeals in Criminal Economic
Matters rejected our statute of limitations argument. We have appealed this decision. Upon Chamber
B’s conﬁrmation of the CNDC’s resolution, YPF ﬁled a cassation and an extraordinary appeal on the
basis that the CNDC bases its arguments on Law No. 22,262, while Chamber B relies on the
application of Law No. 25,156. Chamber B of the National Court of Appeals in Criminal Economic
Matters rejected both appeals. YPF has consequently presented two complaint appeals: one against
(rejected on December 18, 2008) and another against
the rejection of
the
(rejected on February 17, 2009). Both appeals are under
rejection of
evaluation. Regarding the administrative proceedings before the CNDC,
the evidence production
period has ended. Additionally, on November 25, 2009, we presented our closing statement. On
December 22, 2009, Chamber IV of the Court of Cassation rejected our cassation appeal against
the National Court of Appeals in Criminal Economic Matters’ decision. The
Chamber B of
extraordinary appeal ﬁled against
this decision was rejected on July 14, 2010. Furthermore, on
December 21, 2009, YPF ﬁled another claim concerning the statute of limitations before the CNDC,
which was rejected on April 19, 2010. YPF appealed such decision requesting the intervention of
Chamber B of the National Court of Appeals in Criminal Economic Matters. On December 22, 2010,
we were notiﬁed that Chamber B had ruled in our favor, revoking CNDC’s decision and ordering the
termination of the proceedings. As of the issuance date of this annual report, the judgment is ﬁnal.

the cassation appeal
the extraordinary appeal

YPF Holdings

The following is a brief description of certain environmental and other liabilities related to YPF

Holdings Inc., a Delaware corporation.

In connection with the sale of Maxus’ former chemical subsidiary, Diamond Shamrock Chemical
Company (‘‘Chemicals’’), to Occidental Petroleum Corporation (‘‘Occidental’’) in 1986, Maxus agreed
to indemnify Chemicals and Occidental from and against certain liabilities relating to the business or
activities of Chemicals prior to the Closing Date, including certain environmental liabilities relating to
certain chemical plants and waste disposal sites used by Chemicals prior to the Closing Date. See
‘‘Item 4. Information on the Company—Environmental Matters—YPF Holdings—Operations in the
United States’’.

As of December 31, 2010, YPF Holdings’ accruals for environmental and other contingencies
totaled approximately Ps.586 million. YPF Holdings management believes it has adequately accrued
for all environmental and other contingencies that are probable and can be reasonably estimated
based on information available as of such time; however, many such contingencies are subject to
signiﬁcant uncertainties, including the completion of ongoing studies, the discovery of new facts, and
the issuance of orders by regulatory authorities, which could result in material additions to such
accruals in the future. It is possible that additional claims will be made, and additional information
about new or existing claims (such as results of ongoing investigations, the issuance of court decisions
or the signing of settlement agreements) is likely to develop over time. YPF Holdings’ accruals for
the environmental and other contingencies described below are based solely on currently available
information and as a result, YPF Holdings, Maxus and Tierra may have to incur costs that may be
material, in addition to the accruals already taken.

139

In the following discussion concerning plant sites and third party sites, references to YPF
Holdings include, as appropriate and solely for ease of reference, references to Maxus and Tierra. As
indicated above, Tierra is also a subsidiary of YPF Holdings and has assumed certain of Maxus’
obligations.

Newark, New Jersey. A consent decree, previously agreed upon by the U.S. Environmental
Protection Agency (the ‘‘EPA’’),
the New Jersey Department of Environmental Protection (the
‘‘DEP’’) and Occidental, as successor to Chemicals, was entered in 1990 by the United States District
Court of New Jersey for Chemicals’ former Newark, New Jersey agricultural chemicals plant. The
approved interim remedy has been completed and paid for by Tierra pursuant to the above described
indemniﬁcation agreement with Occidental. Operations and maintenance of the constructed remedy
are ongoing, and as of December 31, 2010, YPF Holdings has accrued approximately Ps.58 million in
connection with such activities.

Passaic River/Newark Bay, New Jersey. Maxus, acting on behalf of Occidental, negotiated an
agreement with the EPA (the ‘‘1994 AOC’’) under which Tierra has conducted testing and studies to
characterize contaminated sediment and biota in a six-mile portion of the Passaic River near the
Newark, New Jersey plant site described above. While some work remains, the work under the 1994
AOC was substantially subsumed by the remedial investigation and feasibility study (‘‘RI/FS’’) being
performed and funded by Tierra and a number of other entities of the lower 17-mile portion of the
to a 2007 administrative
Passaic River (including the six-mile portion already studied) pursuant
settlement agreement (the ‘‘2007 AOC’’). The parties to the 2007 AOC are discussing the possibility
of further work with the EPA. The entities that have agreed to fund the RI/FS have negotiated an
interim allocation of RI/FS costs among themselves based on a number of considerations. The 2007
local and private sector cooperative effort
AOC is being coordinated with a joint federal, state,
designated as the Lower Passaic River Restoration Project (‘‘PRRP’’).

Tierra, acting on behalf of Occidental,

is also performing and funding a separate RI/FS to
characterize sediment contamination and evaluate remedial alternatives in Newark Bay and portions
of the Hackensack River, the Arthur Kill, and the Kill van Kull pursuant to a 2004 administrative
order on consent with EPA (the ‘‘2004 AOC’’). The EPA has issued General Notice Letters to a
series of additional parties concerning the contamination of Newark Bay and the work being
performed by Tierra under the 2004 AOC. In addition, in August 2010, Tierra proposed to the other
parties that, for the third stage of the RI/FS undertaken in Newark Bay, the costs be allocated on a
per capita basis. As of April 2011, the parties are analyzing that proposal. However, YPF Holdings
lacks sufﬁcient information to determine additional costs, if any, it might have with respect to this
matter once the ﬁnal scope of the phase III is approved, as well as the proposed distribution
mentioned above.

In December 2005, the DEP issued a directive to Tierra, Maxus and Occidental directing said
parties to pay the State of New Jersey’s costs of developing a Source Control Dredge Plan focused
on allegedly dioxin-contaminated sediment in the lower six-mile portion of the Passaic River described
above. The development of this Plan was estimated by the DEP to cost approximately U.S.$2.3
million. The DEP has advised the recipients that they are not required to respond to the directive
until otherwise notiﬁed. Also in December 2005, the DEP and the New Jersey Spill Compensation
Fund sued YPF Holdings, Tierra, Maxus and other afﬁliates, as well as Occidental, alleging that
dioxin, DDT and other ‘‘hazardous substances’’ discharged from Chemicals’ former Newark plant and
contaminated the lower 17-mile portion of the Passaic River, Newark Bay, other nearby waterways
and surrounding areas. The plaintiffs seek damages for the past cost of investigation and cleanup of
these waterways, property damage and other economic impacts (such as decreases in tax revenues and
value of real estate and increases in public medical costs, etc.), and punitive damages. The defendants
have made responsive pleadings and/or ﬁlings. In March 2008, the court denied motions to dismiss
for failure to state a claim by Occidental Chemical Corporation, and by Tierra and Maxus. DEP ﬁled
its Second Amended Complaint
in April 2008; YPF’s motion to dismiss for lack of personal
jurisdiction was denied in September 2008. The decision was afﬁrmed by the Court of Appeals
following an appeal by YPF. The Court denied the plaintiffs’ motion to bar third party practice and
allowed defendants to ﬁle third-party claims. Third-party claims against approximately 300 companies
(including certain municipalities) which could have responsibility in
and governmental entities

140

connection with the claim were ﬁled by Tierra and Maxus in February 2009. DEP ﬁled its Third
in August 2010, adding Maxus International Energy Company and YPF
Amended Complaint
its
International S.A. as additional named defendants. DEP has not placed dollar amounts on all
claims, but it has (a) contended that a U.S.$50 million cap on damages under one of the New Jersey
statutes should not be applicable, (b) alleged that it has incurred approximately U.S.$118 million in
past ‘‘cleanup and removal costs,’’ and is seeking an additional award of between U.S.$10 and
U.S.$20 million to fund a study to assess natural resource damages, and (c) notiﬁed Maxus and
Tierra’s legal defense team that DEP is preparing ﬁnancial models of the cost of other economic
impacts. In September 2010, governmental entities of the state of New Jersey and a number of third
party defendants ﬁled motions to dismiss and Maxus and Tierra ﬁled their responses. Except in a few
cases, these motions were rejected in January 2011. In October, 2010, a number of public third-party
defendants ﬁled a motion to sever and stay, which would allow the State of New Jersey to proceed
against
this motion in December 2010.
Certain third-party defendants have appealed the ruling of the special master on their motions to
dismiss and the presiding judge will hold hearings in March and April regarding these appeals. The
next step in the case will be the presiding judge’s entry of a Trial Plan which will set a schedule for
remainder of litigation, from discovery through trial. The presiding judge held a hearing in early
April 2011 regarding the Trial Plan proposals of each of the parties. It is expected that the judge will
issue his Trial Plan by May 2011. At this point in time, it is premature to state when the ﬁrst trial
will take place. See ‘‘—Argentina—New Jersey Claims.’’ Simultaneously, a mediator had prepared a
work plan for an alternative dispute resolution process to be presented to the parties during the ﬁrst
quarter of 2011, but this process failed when the parties could not reach a consensus.

the direct defendants. However,

the judge ruled against

In June 2007, EPA released a draft Focused Feasibility Study (‘‘FFS’’) that outlines several
alternatives for remedial action in the lower eight miles of the Passaic River. These range from no
action (which would result in comparatively little cost) to extensive dredging and capping (which
according to the draft FFS, EPA estimated could cost from U.S.$0.9 billion to U.S.$2.3 billion), and
are all described by EPA as involving proven technologies that could be carried out in the near term,
in conjunction with the other parties working under the 2007
without extensive research. Tierra,
AOC, submitted comments on the draft FFS to EPA, as did a number of other interested parties.
EPA has stated that it expects to issue a revised remedy proposal in September 2011. Tierra plans to
respond to any further EPA proposal as may be appropriate at that time.

In August 2007, the National Oceanic Atmospheric Administration (‘‘NOAA’’), as one of the
Federal Natural Resources Trustees (‘‘Trustees’’), sent a letter to a number of entities that it alleged
have liability for natural resource damages, including Tierra and Occidental, requesting that the group
enter into an agreement to conduct a cooperative assessment of natural resources damages in the
Passaic River and Newark Bay. In January 2008, the NOAA sent a letter to YPF Holdings, CLH
Holdings Inc. and other entities. In November 2008, Occidental and Tierra entered into an agreement
with the Trustees to fund a portion of the Trustees’ past costs and conduct certain assessment
activities during 2009. A group of approximately 20 other parties has also entered into a similar
agreement with the Trustees. In November 2009, Tierra declined to extend this agreement.

In June 2008, the EPA, Occidental, and Tierra entered into an Administrative Order on Consent
(‘‘Removal AOC’’), pursuant to which Tierra (on behalf of Occidental) will undertake the removal of
sediment from a portion of the Passaic River in the vicinity of Chemicals’ former Newark, New
Jersey facility described above. This action will result in the removal of approximately 200,000 cubic
yards of sediment, which will be carried out in two phases. The ﬁeld work on the ﬁrst phase, which
will encompass the removal of 40,000 cubic yards, is scheduled to begin in 2011 and is expected to be
completed in 2012. The second phase, which will encompass the removal of approximately 160,000
cubic yards of sediment, will be completed on a different schedule. Pursuant to the Removal AOC,
the EPA has required the provision of ﬁnancial assurance in the amount of U.S.$80 million for the
performance of the removal work. The Removal AOC provides that the initial form of ﬁnancial
assurance is to be provided through a trust fund. As of the date of this report, U.S.$32 million has
been contributed to the fund; an additional U.S.$10 million must be contributed every six months
until a total of U.S.$80 million has been deposited into the fund. The total amount of required
ﬁnancial assurance may be decreased or increased over time if the anticipated cost of completing the
removal work contemplated by the AOC changes. Tierra may request modiﬁcation of the form and

141

timing of ﬁnancial assurance for the Removal AOC, and during 2010 substituted, with EPA approval,
letters of credit to provide ﬁnancial assurance rather than paying additional funds into the trust. The
removal work will remove a number of contaminants, such as dioxin, PCBs, and mercury, which may
have come from sources other than or in addition to the former Chemicals plant. YPF Holdings may
seek cost recovery from the parties responsible for such contamination; however, at this time it is not
possible to make any predictions regarding the likelihood of success or the funds potentially
recoverable in a cost-recovery action. The removal work required pursuant to the Removal AOC will
be conducted concurrently with and in addition to the other investigations and remedial actions
described above, including those undertaken in connection with the FFS concerning the lower eight
miles of the Passaic River, the RI/FS addressing the lower 17-mile portion of the Passaic River, and
the RI/FS relating to contamination in Newark Bay, portions of the Hackensack River, the Arthur
Kill and the Kill van Kull.

As of December 31, 2010, YPF Holdings has accrued approximately Ps.282 million in
connection with the foregoing matters related to the Passaic River,
the Newark Bay and the
surrounding area comprising the estimated costs for studies, estimated costs in connection with the
Removal AOC, and certain other matters related to the Passaic River and Newark Bay. However, it
is possible that other works, including interim remedial measures, may be ordered. How these matters
are resolved,
the imposition of natural resource
damages or the selection of remedial actions differing from the scenarios we have proposed could
result in Maxus and Tierra incurring material costs in addition to the amount currently accrued.

including the development of new information,

Hudson and Essex Counties, New Jersey. Until the 1970s, Chemicals operated a chromite ore
processing plant at Kearny, New Jersey (the ‘‘Kearny Plant’’). DEP has identiﬁed over 200 sites in
Hudson and Essex Counties alleged to contain chromite ore processing residue either from the
Kearny Plant or from plants operated by two other chromium manufacturers. Tierra, Occidental and
DEP signed an administrative consent order in April 1990 (‘‘ACO’’) which requires remediation at 40
sites in Hudson and Essex Counties alleged to be impacted by the Kearny Plant operations. Tierra,
is providing ﬁnancial assurance in the amount of U.S.$20 million for
on behalf of Occidental,
performance of the work required by the ACO (which is ongoing at all ACO Sites at various stages)
and associated with the issues described below.

In May 2005, the DEP took two actions in connection with the chrome sites in Hudson and
Essex Counties. First, the DEP issued a directive to Maxus, Occidental and two other chromium
manufacturers (the ‘‘Respondents’’) directing them to arrange for the cleanup of chromite ore residue
at three sites in Jersey City and for the conduct of a study by paying the DEP a total of U.S.$19.5
million. Second, the DEP ﬁled a lawsuit against Occidental and two other entities in state court in
Hudson County seeking, among other things, cleanup of various sites where chromite ore processing
residue is allegedly located, recovery of past costs incurred by the state at such sites (including in
excess of U.S.$2.3 million dollars allegedly spent for investigations and studies) and, with respect to
certain costs at 18 sites, treble damages. The DEP claims that the defendants are jointly and severally
liable, without regard to fault, for much of the damages alleged. The parties have come to an
agreement in principle regarding this matter, pursuant to which Tierra will pay U.S.$5 million, and
will remediate 3 sites, at an estimated cost of U.S.$2.1 million, subject to the terms of a Consent
Judgment that is under negotiation.

In November 2005, several environmental groups sent a notice of intent to sue the owner of the
property adjacent to the former Kearny Plant and ﬁve other parties,
including Tierra, under the
Resource Conservation and Recovery Act. The parties have entered into an agreement that addresses
the concerns of the environmental groups and these groups have agreed, at least for now, not to ﬁle
suit. In March 2008, the DEP approved an Interim Response Action work plan for work to be
performed at the Kearny Plant site by Tierra and at the adjacent property by Tierra in conjunction
with other parties. Work on the Interim Response Action has begun. In addition, this adjacent
property was listed by EPA on the National Priority List in 2007. In July 2010, EPA notiﬁed Tierra,
along with three other parties, which are considered potentially responsible for this adjacent property
and requested to conduct a RIFS for the site. The parties have responded and are awaiting discussion
with the EPA as to the scope of activities.

142

Pursuant to a request of the DEP, in the second half of 2006, Tierra and certain other parties
tested the sediments in a portion of the Hackensack River near the former Kearny Plant. A report of
those test results was submitted to the DEP. The DEP has requested additional sampling, and a work
plan to conduct such sampling was prepared and submitted to the DEP in January 2009 for its
approval.As of December 31, 2010, YPF Holdings has accrued a total of approximately Ps.96 million
in connection with the foregoing chrome-related matters. Soil action levels for chromium in New
Jersey have not been ﬁnalized, and the DEP continues to review the proposed action levels. The cost
of addressing these chrome-related matters could increase signiﬁcantly depending upon the ﬁnal soil
action levels, the DEP’s response to Tierra’s studies and reports and other developments.

Painesville, Ohio. From about 1912 through 1976, Chemicals operated manufacturing facilities in
Painesville, Ohio (the ‘‘Painesville Works Site’’). The operations there over the years involved several
discrete but contiguous plant sites over an area of about 1,300 acres. The investigation and
remediation of the Painesville Works Site is governed by agreements and orders in place with the
EPA and the Ohio Environmental Protection Agency (‘‘OEPA’’). The primary area of concern
historically has been Chemicals’ former chromite ore processing plant (the ‘‘Chrome Plant’’). The
OEPA has approved certain work, including the remediation of 20 speciﬁc operable units within the
former Painesville Works Site and work associated with development plans (the ‘‘Remediation
Work’’). The Remediation Work has begun. As each operable unit within the Site receives OEPA
approval for projects related to investigation, Remediation Work, or operation and maintenance
activities, additional orders and agreements will be implemented, and additional amounts may need to
be accrued. YPF Holdings has accrued a total of approximately Ps.59 million as of December 31,
2010 for its estimated share of the cost to perform the remedial investigation and feasibility study, the
Remediation Work and other operation and maintenance activities at this site.

Third Party Sites. Pursuant to settlement agreements with the Port of Houston Authority (the
‘‘Port’’) and other parties, Tierra and Maxus are participating (on behalf of Occidental) in the
remediation of property adjoining Chemicals’ former Greens Bayou facility where dichloro-diphenyl-
in 2007 the
trichloroethane (‘‘DDT’’) and certain other chemicals were manufactured. Additionally,
parties entered into a Memorandum of Agreement (‘‘MOA’’) with federal and state natural resources
trustees in connection with claims for natural resources damages. In 2008,
the Final Damage
Assessment and Restoration Plan/Environmental Assessment was approved specifying the restoration
projects to be implemented. The last restoration project is expected to begin in 2011. As of December
31, 2010, YPF Holdings has accrued approximately Ps.17 million for its estimated share of the
remediation and the MOA associated with the Greens Bayou facility. The remediation activities were
largely ﬁnished in 2009, but some minor closure activities, as well as ongoing operations and
maintenance, are still in progress.

In June 2005, the EPA designated Maxus as a PRP at the Milwaukee Solvay Coke & Gas Site
in Milwaukee, Wisconsin. The basis for this designation is Maxus’ alleged status as the successor to
Pickands Mather & Co. and Milwaukee Solvay Coke Co., companies that the EPA has asserted are
former owners or operators of such site. In 2006, Maxus and four other PRPs entered into a Joint
Participation and Defense Agreement, and in January 2007 those PRPs and EPA entered into an
AOC to perform a RI/FS. The PRP Agreement includes an interim allocation, under which Maxus’s
share is 50%. Preliminary work in connection with the RI/FS in respect of this site commenced in the
second half of 2006. YPF Holdings has accrued approximately Ps.6 million as of December 31, 2010
for its estimated share of the costs of the RI/FS. Maxus lacks sufﬁcient information to determine
additional exposure or costs, if any, it might have in respect of this site.

Maxus is responsible for certain liabilities attributable to Occidental, as successor to Chemicals,
in respect of the Malone Service Company Superfund Site in Galveston County, Texas. This site is a
former waste disposal site where Chemicals is alleged to have sent waste products prior to September
1986.

Chemicals has also been designated as a PRP by the EPA under

the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended (‘‘CERCLA’’) with
respect to a number of third party sites where hazardous substances from Chemicals’ plant operations
allegedly were disposed or have come to be located. Numerous PRPs have been named at
substantially all of these sites. At several of these, Chemicals has no known exposure. At December

143

31, 2010, YPF Holdings had accrued approximately Ps.2 million in connection with its estimated
share of costs related to the Milwaukee Solvay Coke & Gas Site, the Malone Service Company
Superfund Site, and the other sites mentioned in this paragraph.

Dallas Litigation. In 2002, Occidental sued Maxus and Tierra in state court in Dallas, Texas
seeking a declaration that Maxus and Tierra have the obligation under the agreement pursuant to
which Maxus sold Chemicals to Occidental to defend and indemnify Occidental from and against
certain historical obligations of Chemicals, notwithstanding the fact that said agreement contains a
12-year cut-off for defense and indemnity obligations with respect to most litigation. Tierra was
dismissed as a party, and the matter was tried in May 2006. The trial court decided that the 12-year
cut-off period did not apply and entered judgment against Maxus. This decision was afﬁrmed by the
Court of Appeals in February 2008. Maxus’ petition to the Texas Supreme Court for review was
denied. This decision will require Maxus to accept responsibility for various matters for which it has
refused to indemnify Occidental since 1998, which could result in the incurrence of costs in addition
to YPF Holdings’ current accrued for this matter. This decision will also require Maxus to reimburse
the costs
Occidental
Occidental believed to be due under the judgment,
in the amount of U.S.$16.7 million. In March
2009, Maxus paid U.S.$14.9 million in respect of court costs, interests through the end of 2007 and
estimates of future costs for which Maxus could become liable under the declaratory judgment. In
September 2009, Maxus paid to Occidental $1.9 million. As of December 31, 2010, only
approximately U.S.$0.2 million of disputed claims (relating to Occidental’s internal costs) remains
pending. Maxus has allowances for this claimed amount. A signiﬁcant category of claims refused by
the 12-year clause, were claims relating to ‘‘Agent
Maxus on the basis of
Orange’’. All pending Agent Orange litigation was dismissed in December 2009. Although it
is
possible that additional claimants may come forward in the future, it is estimated that no signiﬁcant
liability will result from this category of claims.

for past costs. In 2009, Maxus received a statement

its interpretation of

from Occidental of

The remaining claims refused consist primarily of claims of personal

injury from exposure to
vinyl chloride monomer (‘‘VCM’’), and other chemicals, although they are not expected to result in
signiﬁcant liability. However, the declaratory judgment includes liability for claims arising in the
future, if any, which are currently unknown as of the date of this report, and if such claims arise,
they could result
liability. As of December 31, 2009, YPF Holdings had accrued
approximately Ps.1 million in respect of these matters.

in additional

Turtle Bayou Litigation. In March 2005, Maxus agreed to defend Occidental, as successor to
Chemicals, in respect of an action seeking the contribution of costs for the remediation of the Turtle
Bayou waste disposal site in Liberty County, Texas. Judgment was entered in this action, and Maxus
ﬁled a motion for reconsideration which was partially successful. The court’s decision was appealed
by Maxus In June 2010, the Court of Appeals ruled that the District Court had committed errors in
the admission of certain documents and remanded the case to the District Court
for further
proceedings. A new ruling was issued in January 2011, requiring Maxus to pay, on behalf of
Occidental, 15.86% of the costs incurred by one of the plaintiffs. Maxus is currently evaluating
this decision. As of December, 2010, YPF Holdings has accrued
whether or not
approximately Ps.15 million in respect of this matter.

to appeal

YPF Holdings, including its subsidiaries, is a party to various other lawsuits, the outcomes of
which are not expected to have a material adverse affect on the company’s ﬁnancial condition. YPF
Holdings has established accrued for legal contingencies and environmental issues in those situations
where a loss is probable and can be reasonably estimated.

Dividend Policy

See ‘‘Item 10. Additional Information—Dividends.’’

144

ITEM 9. The Offer and Listing

Shares and ADSs

New York Stock Exchange

The ADSs, each representing one Class D share, are listed on the NYSE under the trading
symbol ‘‘YPF.’’ The ADSs began trading on the NYSE on June 28, 1993, and were issued by The
Bank of New York Mellon as depositary (the ‘‘Depositary’’).

The following table sets forth, for the ﬁve most recent full ﬁnancial years and for the current

ﬁnancial year, the high and low closing prices in U.S. dollars of our ADSs on the NYSE:

2006....................................................................................................................
2007....................................................................................................................
2008....................................................................................................................
2009....................................................................................................................
2010....................................................................................................................
2011(1) ................................................................................................................

High

Low

57.38
50.10
49.00
47.00
50.60
54.58

37.00
34.37
37.75
16.81
33.89
41.43

(1) Through April 6, 2011.

The following table sets forth, for each quarter of the most recent two ﬁnancial years and for
each quarter of the current ﬁnancial year, the high and low closing prices in U.S. dollars of our
ADSs on the NYSE.

High

Low

2009:

First Quarter .................................................................................................
Second Quarter..............................................................................................
Third Quarter ................................................................................................
Fourth Quarter..............................................................................................

2010:

First Quarter .................................................................................................
Second Quarter..............................................................................................
Third Quarter ................................................................................................
Fourth Quarter..............................................................................................

2011:

First Quarter .................................................................................................
Second Quarter(1) ..........................................................................................

47.00
35.90
40.20
44.08

45.80
44.63
43.45
50.60

54.58
46.34

16.81
23.09
30.79
36.35

40.11
33.89
37.52
38.61

41.43
44.77

(1) Through April 6, 2011.

The following table sets forth, for each of the most recent six months and for the current

month, the high and low closing prices in U.S. dollars of our ADSs on the NYSE.

2010:

October..........................................................................................................
November ......................................................................................................
December.......................................................................................................

2011:

January ..........................................................................................................
February ........................................................................................................
March ............................................................................................................
April(1) ...........................................................................................................

(1) Through April 6, 2011.

145

High

Low

39.84
42.99
50.60

54.58
51.65
52.97
46.34

38.61
39.17
39.00

48.72
48.35
41.43
44.77

As of March 30, 2011, there were 232,665,742 ADSs outstanding and 87 holders of record of
ADSs. Such ADSs represented approximately 59% of the total number of issued and outstanding
Class D shares as of such date. Excluding ADSs owned by Repsol YPF, outstanding ADSs
represented 31% of the total number of outstanding Class D shares as of March 30, 2011. Repsol
YPF (including its other subsidiaries) was the holder of 109.3 million of our ADSs at that date, while
Petersen Energı´a and PEISA collectively held 60.8 million of our ADSs.

Buenos Aires Stock Market

The Buenos Aires Stock Market is the principal Argentine market for trading the ordinary

shares.

The Buenos Aires Stock Market (Mercado de Valores de Buenos Aires, or ‘‘MERVAL’’) is the
largest stock market
in Argentina and is afﬁliated with the BASE. MERVAL is a corporation
consisting of 133 shareholders who are the sole individuals or entities authorized to trade, either as
principals or agents, in the securities listed on the BASE. Trading on the BASE is conducted either
through the traditional auction system from 11 a.m. to 5 p.m. on trading days, or through the
Computer-Assisted Integrated Negotiation System (Sistema Integrado de Negociacio´n Asistida por
Computacio´n, or ‘‘SINAC’’). SINAC is a computer trading system that permits trading in both debt
and equity securities and is accessed by brokers directly from workstations located in their ofﬁces.
Currently, all transactions relating to listed negotiable obligations and listed government securities can
be effectuated through SINAC. In order to control price volatility, MERVAL imposes a 15-minute
suspension on trading when the price of a security registers a variation in price between 10% and
15% and between 15% and 20%. Any additional 5% variation in the price of a security will result in
an additional 10-minute successive suspension period.

Investors in the Argentine securities market are mostly individuals and companies. Institutional
trading activity, consist mainly of

investors, which are responsible for a growing percentage of
insurance companies and mutual funds.

Certain information regarding the Argentine stock market is set forth in the table below.

Market capitalization (in billions of pesos)(1) .......
As percent of GDP(1) ............................................
Volume (in millions of pesos)................................
Average daily trading volume (in millions of

2009

2008

2007

2006

2,185
186.9%

1,234
121.6%

1,773
227.2%

1,229
183.4%

133,207

237,790

209,905

131,984

pesos).................................................................

545.93

962.71

849.82

532.19

(1) End-of-period ﬁgures for trading on the BASE.

Source: CNV and Instituto Argentino de Mercado de Capitales.

The following table sets forth, for the ﬁve most recent full ﬁnancial years and for the current
ﬁnancial year, the high and low prices in Argentine pesos of our Class D shares on the Buenos Aires
Stock Market:

High

Low

2006....................................................................................................................
2007....................................................................................................................
2008....................................................................................................................
2009....................................................................................................................
2010....................................................................................................................
2011(1) ................................................................................................................

177.50
153.00
183.00
162.00
205.00
222.60

115.00
110.90
118.00
64.00
137.00
177.00

(1) Through April 6, 2011.

146

The following table sets forth, for each quarter of the most recent two ﬁnancial years and for
each quarter of the current ﬁnancial year, the high and low prices in Argentine pesos of our Class D
shares on the Buenos Aires Stock Market.

2009:

First Quarter .................................................................................................
Second Quarter..............................................................................................
Third Quarter ................................................................................................
Fourth Quarter..............................................................................................

2010:

First Quarter .................................................................................................
Second Quarter..............................................................................................
Third Quarter ................................................................................................
Fourth Quarter..............................................................................................

2011:

First Quarter .................................................................................................
Second Quarter(1) ..........................................................................................

High

Low

162.00
136.00
153.00
162.00

170.00
172.00
167.00
205.00

222.60
195.50

64.00
90.00
119.50
139.00

150.00
137.00
149.70
152.00

177.00
190.25

(1) Through April 6, 2011.

The following table sets forth, for each of the most recent six months and for the current
month, the high and low prices in Argentine pesos of our Class D shares on the Buenos Aires Stock
Market.

2010:

September ......................................................................................................
October..........................................................................................................
November ......................................................................................................
December.......................................................................................................

2011:

January .........................................................................................................
February ........................................................................................................
March ............................................................................................................
April(1) ...........................................................................................................

High

Low

162.00
155.00
177.00
205.00

219.50
216.60
222.60
195.50

153.00
152.00
155.00
155.50

200.00
199.50
177.00
190.25

(1) Through April 6, 2011.

As of December 31, 2010, there were approximately 8,009 holders of Class D shares.

Stock Exchange Automated Quotations System International

The ADSs are also quoted on the Stock Exchange Automated Quotations System International.

Argentine Securities Market

The securities market in Argentina is composed of 10 stock exchanges, which are located in the
City of Buenos Aires (the ‘‘BASE’’), Bahı´a Blanca, Corrientes, Co´ rdoba, La Plata, La Rioja,
Mendoza, Rosario, Santa Fe, and Tucuma´ n. Five of these exchanges (the BASE, Rosario, Co´ rdoba,
Mendoza, and Santa Fe) have afﬁliated stock markets and, accordingly, are authorized to quote
publicly offered securities. Securities listed on these exchanges include corporate equity and bonds and
government securities.

The BASE, which began operating in 1854, is the principal and longest-established exchange in
Argentina. Bonds listed on the BASE may simultaneously be listed on the Argentine over-the-counter
market (Mercado Abierto Electro´nico, or ‘‘MAE’’), pursuant to an agreement between BASE and

147

MAE that stipulates that equity securities are to be traded exclusively on the BASE, while debt
securities (both public and private) may be traded on both the MAE and the BASE. In addition,
through separate agreements with the BASE, all of the securities listed on the BASE may be listed
and subsequently traded on the Co´ rdoba, Rosario, Mendoza, La Plata and Santa Fe exchanges, by
virtue of which many transactions originating on these exchanges relate to BASE-listed companies
and are subsequently settled in Buenos Aires. Although companies may list all of their capital stock
on the BASE, controlling shareholders in Argentina typically retain the majority of a company’s
capital stock, resulting in a relatively small percentage of active trading of the companies’ stock by
the public on the BASE.

Argentina’s equity markets have historically been composed of individual

investors, though in
recent years there has been an increase in the level of investment by banks and insurance companies
in these markets; however, Argentine mutual funds (fondos comunes de inversio´n) continue to have
very low participation.

Regulation of the Argentine securities market

The Argentine securities market is regulated and overseen by the CNV, pursuant to Law No.
17,811, as amended, which, in addition to having created the CNV, governs the regulation of security
exchanges, as well as stockbroker transactions, market operations, the public offering of securities,
corporate governance matters relating to public companies and the trading of futures and options.
Argentine pension funds and insurance companies are regulated by separate government agencies,
whereas ﬁnancial institutions are regulated primarily by the Central Bank.

instructed by their

In Argentina, debt and equity securities traded on an exchange or the over-the-counter market
shareholders, be deposited with Stock Exchange
must, unless otherwise
Incorporated (Caja de Valores S.A.), a corporation owned by the BASE, MERVAL and certain
provincial exchanges. Stock Exchange Incorporated is the central securities depositary of Argentina
and provides central depositary facilities, as well as acting as a clearinghouse for securities trading
and as a transfer and paying agent for securities transactions. Additionally, it handles the settlement
of securities transactions carried out by the BASE and operates SINAC.

Despite a change in the legal framework of Argentine securities trading in the early 1990s,
which permitted the issuance and trading of new ﬁnancial products in the Argentine capital markets,
including commercial paper, new types of corporate bonds and futures and options, there is still a
relatively low level of regulation of the market for Argentine securities and investors’ activities in such
markets and enforcement of them has been extremely limited. Because of the limited exposure and
regulation in these markets,
there may be less publicly available information about Argentine
companies than is regularly published by or about companies in the United States and certain other
countries. However, the CNV has taken signiﬁcant steps to strengthen disclosure and regulatory
standards for the Argentine securities market, including the issuance of regulations prohibiting insider
trading and requiring insiders to report on their ownership of securities, with associated penalties for
noncompliance.

In order to improve Argentine securities market regulation, the Argentine government issued
Decree No. 677/01 on June 1, 2001 (the ‘‘Transparency Decree’’), which provided certain guidelines
and provisions relating to capital markets transparency and best practices. The Transparency Decree
applies to individuals and entities that participate in the public offering of securities, as well as to
stock exchanges. Among its key provisions,
the decree broadens the deﬁnition of a ‘‘security,’’
governs the treatment of negotiable securities, obligates publicly listed companies to form audit
committees composed of three or more members of the Board of Directors (the majority of whom
must be independent under CNV regulations), authorizes market stabilization transactions under
certain circumstances, governs insider trading, market manipulation and securities fraud and regulates
going-private transactions and acquisitions of voting shares,
including controlling stakes in public
companies.

Before offering securities to the public in Argentina, an issuer must meet certain requirements
established by the CNV with regard to the issuer’s assets, operating history and management. Only
securities approved for a public offering by the CNV may be listed on a stock exchange. However,
CNV approval does not imply any kind of certiﬁcation as to the quality of the securities or the

148

solvency of the issuer, even though issuers of listed securities are required to ﬁle unaudited quarterly
ﬁnancial statements and audited annual ﬁnancial statements and various other periodic reports with
the CNV and the stock exchange on which their securities are listed, as well as to report to the CNV
and the relevant stock exchange any event related to the issuer and its shareholders that may affect
materially the value of the securities traded.

Money laundering regulations
Recent modiﬁcations

to Argentine money laundering regulations have

resulted in their

application to increasing numbers and types of securities transactions.

Argentine Law No. 25,246 (as amended by Law No. 26,087 and Law 26,119) categorizes money
laundering as a crime under the Argentine Criminal Code and created the Unidad de Informacio´n
Financiera (‘‘UIF’’), an agency of the Ministry of Justice and Human Rights of Argentina responsible
for investigating questionable transactions. The Argentine Criminal Code deﬁnes money laundering as
the exchange, transfer, management, sale or any other use of money or other assets obtained through
a crime, by a person who did not take part in such crime, with the possible result that such original
assets (or new asset resulting from such original asset) have the appearance of having been obtained
through legitimate sources, provided that
the assets exceeded Ps.50,000,
whether such amount results from one or more connected transactions.

the aggregate value of

including banks, broker-dealers,

The money laundering legal framework assigns control and information reporting duties to
certain private sector entities,
trading companies and insurance
companies, in many cases according to highly general criteria. According to the rules of the Guide to
Unusual or Questionable Financial and Foreign Exchange Transactions (Guı´a de Transacciones
Inusuales o Sospechosas en la O´ rbita del Sistema Financiero y Cambiario) approved by Resolution No.
2/2002 of the UIF (as amended), such entities have an obligation to notify the UIF of transactions
falling into the following general categories: (a) investments in securities in amounts signiﬁcantly
exceeding the amounts normally invested by a particular investor, taking the business of the investor
into account; (b) deposits or back-to-back loans in jurisdictions known as tax havens; (c) requests for
asset management services where the origin of funds is not certain, is unclear or does not relate to
the business of the investor; (d) unusual transfers of large amounts of securities or interests; (e)
unusual and frequent use of special
investment accounts; and (f) frequent purchases and sales of
securities during the same day for the same amount and volume, when such transactions seem
unusual and inadequate considering the business of the investor.

ITEM 10. Additional Information

Capital Stock

Our capital stock consists of Ps.3,933,127,930, divided into 3,764 Class A shares, 7,624 Class B
shares, 40,422 Class C shares and 393,260,983 Class D shares, each fully subscribed and paid, with a
par value of ten pesos each and the right to one vote per share. Our total capital stock has not
changed since December 31, 2004.

In November 1992, the Privatization Law became effective. Pursuant to the Privatization Law,
in July 1993, we completed a worldwide offering of 160 million Class D shares, representing
approximately 45% of our outstanding capital stock, which had been owned by the Argentine
government. Concurrently with the completion of such offering, the Argentine government transferred
approximately 40 million Class B shares to the Argentine provinces, which represented approximately
11% of our outstanding capital stock, and made an offer to holders of pension bonds and certain
other claims to exchange such bonds and other claims for approximately 46.1 million Class B shares,
representing approximately 13% of our outstanding capital stock. As a result of these transactions,
the Argentine government’s ownership percentage of our capital stock was reduced from 100% to
approximately 30%,
including shares that had been set aside to be offered to our employees upon
establishment of the terms and conditions by the Argentine government in accordance with Argentine
law. The shares set aside to be offered to employees represented 10% of our outstanding capital
stock.

In July 1997, the Class C shares set aside for the beneﬁt of our employees in conjunction with
the privatization, excluding approximately 1.5 million Class C shares set aside as a reserve against

149

potential claims, were sold through a global public offering,
increasing the percentage of our
outstanding shares of capital stock held by the public to 75%. Proceeds from the transactions were
used to cancel debt related to the employee plan, with the remainder distributed to participants in the
plan. Additionally, Resolution 1,023/06 of the Ministry of Economy and Production, dated December
21, 2006, effected the transfer to the employees covered by the employee share ownership plan, or
PPP, of 1,117,717 Class C shares, corresponding to the Class C shares set aside as a reserve against
potential claims, and reserving 357,987 Class C shares until a decision was reached in a pending
lawsuit. Subsequently, with a ﬁnal decision having been reached in the lawsuit, and consistent with
the mechanism of conversion of Class C shares into Class D shares established by Decree 628/1997
and its accompanying rules, as of December 31, 2009, 1,447,983 Class C shares had been converted
into Class D shares. In 2010, a former employee of the company who was allegedly excluded from
the National Government’s YPF PPP, ﬁled a claim against YPF seeking recognition of his status as a
shareholder of YPF. In addition, the Federation of Former Employees of YPF joined the proceeding
as a supporting third party claimant, purportedly acting on behalf of other former employees who
were also allegedly excluded from the PPP. Pursuant to the plaintiff’s request, the federal judge of
in the province of Cordoba, granted a preliminary injunction (the
ﬁrst
‘‘Preliminary Injunction’’), ordering that any sale of shares of YPF or any other transaction involving
the sale, assignment or transfer of shares of YPF carried out by Repsol YPF or YPF be suspended,
unless the plaintiff and other beneﬁciaries of the PPP, organized under the Federation of Former
Employees of YPF, are involved or participate in such transactions. We ﬁled an appeal against such
decision, requesting that the Preliminary Injunction be revoked. In addition, we requested the recusal
of the federal
judge of ﬁrst instance of Bell Ville and the issuance of a preliminary injunction
offsetting the effects of the Preliminary Injunction. On March 1, 2011, we were notiﬁed that the
intervening judge had allowed our appeal, suspending the effects of the Preliminary Injunction. In
addition, a preliminary injunction was granted to explicitly allow the free disposition of our shares,
provided that Repsol YPF, directly or indirectly continues to own at least 10% of our shares. Under
the jurisprudence of the Federal Supreme Court of Argentina (upholding numerous decisions of the
relevant Courts of Appeals), YPF should not be held liable for claims of this nature related to the
PPP. Through Law No. 25.471,
the National Government assumed sole responsibility for any
compensation to be received by YPF’s former employees who were excluded from the PPP.

instance of Bell Ville,

The Class A shares held by the Argentine government became eligible for sale in April 1995
upon the effectiveness of legislation which permitted the Argentine government to sell such shares. In
January 1999, Repsol YPF acquired 52,914,700 Class A shares in block (14.99% of our shares) which
were converted to Class D shares. Additionally, on April 30, 1999, Repsol YPF announced a tender
offer to purchase all outstanding Class A, B, C and D shares at a price of U.S.$44.78 per share (the
‘‘Offer’’). Pursuant to the Offer, in June, 1999, Repsol YPF acquired an additional 82.47% of our
outstanding capital stock. On November 4, 1999, Repsol YPF acquired an additional 0.35%. On June
7, 2000, Repsol YPF announced a tender offer to exchange newly issued Repsol YPF’s shares for
2.16% of our Class B, C and D shares held by minority shareholders. Pursuant to the tender offer,
(‘‘Astra’’) and Repsol
and after the merger with Astra Compan˜ ı´a Argentina de Petro´ leo, S.A.
Argentina, S.A., Repsol YPF owned 330,551,981 Class D shares and therefore controlled us through
a 99.04% ownership interest until 2008. On February 21, 2008, Petersen Energı´a S.A. (‘‘Petersen
Energı´a’’) purchased 58,603,606 of our ADSs, representing 14.9% of our capital stock, from Repsol
YPF for U.S.$2,235 million (the ‘‘Petersen Transaction’’). In addition, Repsol YPF granted options to
Enrique Eskenazi, Sebastia´ n Eskenazi, Ezequiel Eskenazi Storey and Matı´as Eskenazi Storey,
shareholders of Petersen Energı´a, or to companies that are, directly or indirectly, wholly-controlled by
any of them to purchase up to an additional 10.1% of our outstanding capital stock within four years
(the ‘‘Petersen Options’’). On May 20, 2008, Petersen Energı´a Inversora S.A. (‘‘PEISA’’) exercised an
option to purchase shares representing 0.1% of our capital stock. Additionally, PEISA launched a
tender offer to purchase all of the shares of YPF that were not already owned by them at a price of
U.S.$49.45 per share or ADS. Repsol YPF, pursuant to its ﬁrst option agreement with Petersen
Energı´a, had stated that it would not tender YPF shares to PEISA. A total of 1,816,879 shares
(including Class D shares and ADSs), representing approximately 0.462% of our total
shares
outstanding, were tendered. Since September 2010, Repsol YPF has sold approximately 15.78% of our
shares.

150

Memorandum and Articles of Association

YPF’s by-laws were approved by National Executive Decree No. 1,106, dated May 31, 1993,
and notarized by public deed No. 175, dated June 15, 1993 at the National Notary Public Ofﬁce,
sheet 801 of the National Registry, and registered at the Inspection Board of Legal Entities of the
Argentine Republic on the same date, June 15, 1993 under number 5,109 of
the book of
Corporations number 113, volume ‘‘A.’’

At a Shareholder’s Meeting on April 14, 2010, YPF’s shareholders approved an amendment to
YPF’s by-laws. Copies of the by-laws, which have been ﬁled as described in ‘‘Item 19. Exhibits’’ in
this annual report, are also available at the ofﬁces of YPF.

For a detailed description of YPF’s object and purpose, see ‘‘Item 4. Information on the

Company.’’ YPF’s object is set forth in Section 4 of its by-laws.

Pursuant to Argentine Corporations Law No. 19,550 (the ‘‘Corporations Law’’), the Board of
Directors or the Supervisory Committee shall call either annual general or extraordinary shareholders’
meetings in the cases provided by law and whenever they consider appropriate. Shareholders
representing not less than 5% of YPF’s capital stock may also request that a shareholders’ meeting be
called.

A shareholders’ meeting shall be called at least twenty days prior to the meeting date by notice
include the
published in the legal publications journal for a period of ﬁve days. The notice shall
nature, date, time and place of the meeting, the agenda to be discussed and the speciﬁc requirements
shareholders must meet to attend the meeting.

In order to attend the meeting, shareholders must obtain a deposit certiﬁcate from a broker or
from the depository trust company. This certiﬁcate will allow each shareholder to be registered in the
attendance book which closes three business days before the date on which the meeting will be held.
YPF will
issue to each shareholder a deposit certiﬁcate required for admission into the meeting.
Shares certiﬁed and registered in the attendance book shall not be disposed of before the meeting is
held unless the corresponding deposit is cancelled.

Directors, members of the Supervisory Committee and senior managers are both entitled and
required to attend all shareholders’ meetings. These persons may only exercise voting power to the
extent
in accordance with the provisions
these persons are not allowed to vote on any
described in the above paragraph. Nevertheless,
proposal regarding to the approval of their management duties or their removal for cause.

they have been previously registered as shareholders,

Shareholders’ Meetings

Pursuant

to the Argentine Corporations Law,

the Board of Directors or the Supervisory
Committee shall call either annual ordinary or extraordinary shareholders’ meetings in the cases
provided by law and whenever they consider appropriate. Shareholders representing not less than 5%
of our capital stock may also request that a shareholders’ meeting be called,
in which case the
meeting must take place within 40 days of such shareholders’ request. If the Board of Directors or
the Supervisory Committee fails to call a meeting following such a request, a meeting may be ordered
by the CNV or by the courts.

Shareholders’ meetings may be ordinary meetings or extraordinary meetings. We are required to
convene and hold an ordinary meeting of shareholders within four months of the close of each ﬁscal
year to consider the matters speciﬁed in the ﬁrst two paragraphs of Section 234 of the Argentine
Corporations Law, such as the approval of our ﬁnancial statements, allocation of net income for such
ﬁscal year, approval of the reports of the Board of Directors and the Audit Committee and election,
performance and remuneration of directors and members of the Supervisory Committee. In addition,
pursuant to the Transparency Decree, at ordinary shareholders’ meetings, shareholders must consider
(i) the disposition of, or creation of any lien over, assets as long as such decision has not been
performed in the ordinary course of business and (ii) the execution of administration or management
agreements and whether to approve any agreement by virtue of which the assets or services provided
to us are paid partial or totally with a percentage of our income, results or earnings, if the payment
is material when measured against
the ordinary course of business and our
shareholders’ equity. Other matters which may be considered at an ordinary shareholders’ meeting

the volume of

151

convened and held at any time include the responsibility of directors and members of the Supervisory
Committee, capital increases and the issuance of certain notes. Extraordinary shareholders’ meetings
may be called at any time to consider matters beyond the authority of an ordinary meeting including,
without limitation, the amendment of our by-laws, issuance of debentures, early dissolution, merger,
spin-off, reduction of capital stock and redemption of shares, transformation from one type of entity
to another and limitation or suspension of shareholders’ preemptive rights.

Notices of meetings

Notice of shareholders’ meetings must be published for ﬁve days in the Ofﬁcial Gazette, in an
Argentina newspaper of wide circulation and in the bulletin of the Buenos Aires Stock Exchange, at
least 20 but not more than 45 days prior to the date on which the meeting is to be held. Such notice
must include information regarding the type of meeting to be held, the date, time and place of such
meeting and the agenda. If a quorum is not available at such meeting, a notice for a meeting on
second call, which must be held within 30 days of the date on which the ﬁrst meeting was called,
must be published for three days at least eight days before the date of the meeting on second call.
The above-described notices of shareholders’ meetings may be effected simultaneously for the meeting
on second call to be held on the same day as the ﬁrst meeting, only in the case of ordinary meetings.
Shareholders’ meetings may be validly held without notice if all the shares of our outstanding share
capital are present and resolutions are adopted by unanimous vote of shares entitled to vote.

Quorum and voting requirements

Except as described below, the quorum for ordinary meetings of shareholders on ﬁrst call is a
majority of the shares entitled to vote, and action may be taken by the afﬁrmative vote of an
absolute majority of the shares present that are entitled to vote on such action. If a quorum is not
available at the ﬁrst meeting, a meeting on second call may be held at which action may be taken by
the holders of an absolute majority of the shares present, regardless of the number of such shares.
The quorum for an extraordinary shareholders’ meeting on ﬁrst call is 60% of the shares entitled to
vote, and if such quorum is not available, a meeting or second call may be held, at which action may
be taken by the holders of an absolute majority of the shares present, regardless of the number of
such shares.

in order to approve (i)

Our by-laws establish that

the transfer of our domicile outside
Argentina, (ii) a fundamental change of the corporate purpose set forth in our by-laws, (iii) delisting
of our shares in the BASE or NYSE, and (iv) a spin-off by us, when as a result of such spin-off
more than 25% of our assets are transferred to the resulting corporations, a majority of the shares
representing 75% or more of our voting shares is required, both in ﬁrst and second call. Our by-laws
also establish that in order to approve (i) certain amendments to our by-laws concerning tender offers
of shares (as described below), (ii) the granting of certain guarantees in favor of our shareholders, (iii)
full
regarding
appointment, election and number of members of our Board of Directors, a majority of the shares
representing 66% or more of our voting shares is required, both in ﬁrst and second call, as is the
afﬁrmative vote of the Class A shares, granted in a special meeting of the holders of such shares.

commercialization and distribution activities and (iv)

stop of

reﬁning,

rules

In order

to attend the meeting,

shareholders must deposit

shares, or a certiﬁcate
representing book-entry shares issued by a bank, clearing house or depository trust company, with us.
This certiﬁcate will allow each shareholder to be registered in the attendance book which closes three
business days before the date on which the meeting will be held. We will issue to each shareholder a
deposit certiﬁcate required for admission into the meeting. Shares certiﬁed and registered in the
attendance book may not be disposed of before the meeting is held unless the corresponding deposit
is cancelled.

their

Under the Argentine Corporations Law, foreign companies that own shares in an Argentine
corporation are required to register with the Superintendent of Corporations (Inspeccio´n General de
Justicia, or IGJ)
including voting rights. Such
if a
registration requires the ﬁling of certain corporate and accounting documents. Accordingly,
shareholder owns Class D shares directly (rather than in the form of ADSs) and it is a non-Argentine
company, and such shareholder fails to register with the IGJ, the ability to exercise its rights as a
holder of Class D shares may be limited.

in order to exercise certain shareholder rights,

152

Directors, members of the Supervisory Committee and senior managers are both entitled and
required to attend all shareholders’ meetings. These persons may only exercise voting power to the
in accordance with the provisions
extent
described in the above paragraph. Nevertheless,
these persons are not allowed to vote on any
proposal regarding the approval of their management duties or their removal for cause.

they have been previously registered as shareholders,

Shareholders who have a conﬂict of interest with us and who do not abstain from voting may
be liable for damages to us, but only if the transaction would not have been approved without such
shareholders’ votes. Furthermore, shareholders who willfully or negligently vote in favor of a
resolution that is subsequently declared void by a court as contrary to the law or our by-laws may be
held jointly and severally liable for damages to us or to other third parties, including shareholders.

Directors

Election of Directors
Our business and affairs are managed by the Board of Directors in accordance with our by-laws
and the Argentine Corporations Law. Our by-laws provide for a Board of Directors of 11 to 21
members, and up to an equal number of alternates. Alternates are those elected by the shareholders
to replace directors who are absent from meetings or who are unable to exercise their duties, when
and for whatever period appointed to do so by the Board of Directors. Alternates have the
responsibilities, duties and powers of directors only if and to the extent they are called upon to
attend board meetings or for such longer period as they may act as replacements.

Directors shall hold ofﬁce from one to three years, as determined by the shareholders’ meetings.
Since the shareholders’ general ordinary and extraordinary meeting held on April 28, 2009, our Board
of Directors is composed of 17 directors and 13 alternates.

In accordance with our by-laws, the Argentine government, sole holder of Class A shares,

is

entitled to elect one director and one alternate.

Under the Argentine Corporations Law, a majority of our directors must be residents of
Argentina. All directors must establish a legal domicile in Argentina for service of notices in
connection with their duties.

Our by-laws require the Board of Directors to meet at least once every quarter in person or by
video conference, and a majority of directors is required in order to constitute a quorum. If a
quorum is not met one hour after the start time set for the meeting, the President or his substitute
may invite alternates of the same class as that of the absent directors to join the meeting, or call a
meeting for another day. Resolutions must be adopted by a majority of the directors present, and the
President or his substitute is entitled to cast the deciding vote in the event of a tie.

The composition of certain of our Board committees, as well as the roles of certain members
thereof, are affected by the implementation of the shareholders’ agreement between Repsol YPF and
Petersen Energı´a. See ‘‘Item 7. Major Shareholders and Related Party Transactions—Shareholders’
Agreement.’’

Duties and liabilities of Directors
In accordance with the Argentine Corporations Law, directors have an obligation to perform
their duties with loyalty and with the diligence of a prudent business person. Directors are jointly and
severally liable to us, our shareholders and to third parties for the improper performance of their
duties, for violating the law or our by-laws or regulations, and for any damage caused by fraud,
abuse of authority or gross negligence. Speciﬁc duties may be assigned to a director by the by-laws,
company regulations, or by resolution of the shareholders’ meeting. In such cases, a director’s liability
will be determined by reference to the performance of such duties.

Only shareholders,

through a shareholders’ meeting may authorize directors to engage in
activities in competition with us. Transactions or contracts between directors and us in connection
with our activities are permitted to the extent they are performed under fair market conditions.
Transactions that do not comply with the Argentine Corporations Law require prior approval of the
Board of Directors or
these transactions must be
subsequently approved by the shareholders at a general meeting. If our shareholders do not approve

the Supervisory Committee.

In addition,

153

the relevant transaction, the directors and members of the Supervisory Committee who approved such
transactions are jointly and severally liable for any damages caused to us.

Any director whose personal interests are adverse to ours shall notify the Board of Directors
and the Supervisory Committee and abstain from voting on such matters. Otherwise, such director
may be held liable to us.

A director will not be liable if, notwithstanding his presence at

the meeting at which a
resolution was adopted or his knowledge of such resolution, a written record exists of his opposition
to such resolution and he reports his opposition to the Supervisory Committee before any complaint
against him is brought before the Board of Directors, the Supervisory Committee, the shareholders’
meeting,
the appropriate governmental agency or the courts. Any liability of a director to us
terminates upon approval of the director’s actions by the shareholders at a general meeting, provided
that shareholders representing at least 5% of our capital stock do not object and provided further
that such liability does not result from a violation of the law, our by-laws or other regulations.

Foreign Investment Legislation

Under the Argentine Foreign Investment Law, as amended, and its implementing regulations
(together, referred to as the ‘‘Foreign Investment Legislation’’),
the purchase of shares of an
Argentine corporation by an individual or legal entity domiciled abroad or by an Argentine company
of ‘‘foreign capital’’ (as deﬁned in the Foreign Investment Legislation) constitutes foreign investment.
Currently, foreign investment in industries other than broadcasting is not restricted, and no prior
approval is required to make foreign investments. No prior approval is required in order to purchase
Class D shares or ADSs or to exercise ﬁnancial or corporate rights thereunder.

Dividends

Under our by-laws, all Class A, Class B, Class C and Class D shares rank equally with respect
to the payment of dividends. All shares outstanding as of a particular record date share equally in
the dividend being paid, except that shares issued during the period to which a dividend relates may
be entitled only to a partial dividend with respect to such period if the shareholders’ meeting that
approved the issuance so resolved. No provision of our by-laws or of the Argentine Corporations
Law gives rise to future special dividends only to certain shareholders.

The amount and payment of dividends are determined by majority vote of our shareholders
voting as a single class, generally, but not necessarily, on the recommendation of the Board of
Directors. In addition, under the Argentine Corporations Law, our Board of Directors has the right
to declare dividends subject to further approval of shareholders at the next shareholders’ meeting.

We have distributed over 85% of our net income attributable to the years 2001 through 2006 in
dividends to our shareholders. We have not adopted a formal dividend policy. Any dividend policy
adopted will be subject to a number of factors,
including our debt service requirements, capital
expenditure and investment plans, other cash requirements and such other factors as may be deemed
relevant at the time. In addition, Repsol YPF and Petersen Energı´a have agreed in the shareholders’
agreement entered into by them in connection with the Petersen Transaction to effect the adoption of
a dividend policy under which we would distribute 90% of our net income as dividends, starting with
our net income for 2007. They also agreed to vote in favor of corporate resolutions requiring us to
distribute a special dividend of U.S.$850 million, which was paid jointly with the ordinary dividends
in 2008 and 2009. See ‘‘Item 7. Major Shareholders and Related Party Transactions—Shareholders’
Agreement.’’

154

The following table sets forth for the periods and dates indicated,

the quarterly dividend

payments made by us, expressed in pesos.

Pesos Per Share/ADS

Year Ended December 31,

1Q

2Q

3Q

4Q

Total

2002 .................................................
2003 .................................................
2004 .................................................
2005 .................................................
2006 .................................................
2007 .................................................
2008 .................................................
2009 .................................................
2010 .................................................

—
—
—
—
—
6.00
10.76
—
—

—
5.00
9.00
8.00
6.00
—
6.50
6.30
5.50

—
2.60
—
—
—
—
—
—
—

4.00
—
4.50
4.40
—
—
6.35
6.15
5.80

4.00
7.60
13.50
12.40
6.00
6.00
23.61
12.45
11.30

Our Board of Directors approved a dividend of Ps.5.50 per share or per ADS, which was paid
out of the reserve for future dividends on April 26, 2010, and a dividend of Ps.5.80 per share or per
ADS, which was paid out of the reserve for future dividends on November 15, 2010. On March 2,
2011, our Board of Director’s meeting decided to propose to the shareholders the creation of a
statutory reserve for future dividends in the amount of Ps.6,622 million, which will be subject to their
consideration in the shareholder’s meeting to be held on April 26, 2011.

Amount Available for Distribution

Under Argentine law, dividends may be lawfully paid only out of our retained earnings reﬂected
in the annual audited ﬁnancial statements prepared in accordance with Argentine GAAP and CNV
regulations and approved by a shareholders’ meeting. The Board of Directors of a listed Argentine
the
company may declare interim dividends,
Supervisory Committee is jointly and severally liable for the repayment of such dividend if retained
earnings at the close of the ﬁscal year in which the interim dividend was paid would not have been
sufﬁcient to permit the payment of such dividend.

in which case each member of

the Board and of

According to the Argentine Corporations Law and our by-laws, we are required to maintain a
legal reserve of 20% of our then-outstanding capital stock. The legal reserve is not available for
distribution to shareholders.

Under our by-laws, our net income is applied as follows:

*

*

*

*

ﬁrst, an amount equivalent to at least 5% of net income, plus (less) prior year adjustments,
is segregated to build the legal reserve until such reserve is equal to 20% of our subscribed
capital;

second, an amount is segregated to pay the accrued fees of the members of the Board of
Directors and of the Supervisory Committee (see ‘‘Item 6. Directors, Senior Management
and Employees—Compensation of Directors and Ofﬁcers’’);

third, an amount is segregated to pay dividends on preferred stock, if any; and

the remainder of net

to common
fourth,
shareholders or allocated for voluntary or contingent reserves as determined by the
shareholders’ meeting.

income may be distributed as dividends

Our Board of Directors submits our ﬁnancial statements for the preceding ﬁscal year, together
with reports thereon by the Supervisory Committee and the auditors, at
the annual ordinary
shareholders’ meeting for approval. Within four months of the end of each ﬁscal year, an ordinary
shareholders’ meeting must be held to approve our yearly ﬁnancial statements and determine the
allocation of our net income for such year.

Under applicable CNV regulations, cash dividends must be paid to shareholders within 30 days
of the shareholders’ meeting approving such dividends or,
in the case in which the shareholders’
meeting delegates the authority to distribute dividends to the Board of Directors, within 30 days of

155

the Board of Directors’ meeting approving such dividends. In the case of stock dividends, shares are
required to be delivered within three months of our receipt of notice of the authorization of the CNV
for the public offering of the shares arising from such dividends. In accordance with the Argentine
Commercial Code, the statute of limitations to the right of any shareholder to receive dividends
declared by the shareholders’ meeting is three years from the date on which it has been made
available to the shareholder.

Owners of ADSs are entitled to receive any dividends payable with respect to the underlying
Class D shares. Cash dividends are paid to the Depositary in pesos, directly or through The Bank of
New York S.A., although we may choose to pay cash dividends outside Argentina in a currency
including U.S. dollars. The deposit agreement provides that the Depositary shall
other than pesos,
in the
convert cash dividends received by the Depositary in pesos to dollars, to the extent that,
judgment of
the Depositary, such conversion may be made on a reasonable basis, and, after
deduction or upon payment of the fees and expenses of the Depositary, shall make payment to the
holders of ADSs in U.S. dollars.

Preemptive and Accretion Rights

Except as described below, in the event of a capital increase, a holder of existing shares of a
given class has a preferential right to subscribe a number of shares of the same class sufﬁcient to
maintain the holder’s existing proportionate holdings of shares of that class. Preemptive rights also
apply to issuances of convertible securities, but do not apply upon conversion of such securities.
Pursuant to the Argentine Corporations Law, in exceptional cases and on a case-by-case basis when
required for our best interest, the shareholders at an extraordinary meeting with a special majority
may decide to limit or suspend shareholders’ preemptive rights, provided that such limitation or
suspension of the shareholders’ preemptive rights is included in the agenda of the meeting and the
shares to be issued are paid in kind or are issued to cancel preexisting obligations.

Under our by-laws, we may only issue securities convertible into Class D shares, and the
issuance of any such convertible securities must be approved by a special meeting of the holders of
Class D shares.

Holders of ADSs may be restricted in their ability to exercise preemptive rights if a registration
statement under the Securities Act relating thereto has not been ﬁled or is not effective. Preemptive
rights are exercisable during the 30 days
following the last publication of notice informing
shareholders of their right to exercise such preemptive rights in the Ofﬁcial Gazette and in an
Argentine newspaper of wide circulation. Pursuant to the Argentine Corporations Law, if authorized
by an extraordinary shareholders’ meeting, companies authorized to make public offering of their
securities, such as us, may shorten the period during which preemptive rights may be exercised from
30 to ten days following the publication of notice of the offering to the shareholders to exercise
preemptive rights in the Ofﬁcial Gazette and a newspaper of wide circulation in Argentina. Pursuant
to our by-laws, the terms and conditions on which preemptive rights may be exercised with respect to
Class C shares may be more favorable than those applicable to Class A, Class B and Class D shares.

Shareholders who have exercised their preemptive rights have the right to exercise accretion
in

in proportion to their respective ownership, with respect

to any unpreempted shares,

rights,
accordance with the following procedure.

*

*

Any unpreempted Class A shares will be converted into Class D shares and offered to
holders of Class D shares that exercised preemptive rights and indicated their intention to
exercise additional preemptive rights with respect to any such Class A shares.

Any unpreempted Class B shares will be assigned to those provinces that exercised
preemptive rights and indicated their intention to exercise accretion rights with respect to
such shares; any excess will be converted into Class D shares and offered to holders of
Class D shares that exercised preemptive rights and indicated their intention to exercise
accretion rights with respect to any such Class D shares.

156

*

*

Any unpreempted Class C shares will be assigned to any PPP participants who exercised
preemptive rights and indicated their intention to exercise accretion rights with respect to
such shares; any excess will be converted into Class D shares and offered to holders of
Class D shares that exercised preemptive rights and indicated their intention to exercise
accretion rights with respect to any such Class C shares.

Any unpreempted rights will be assigned to holders of Class D shares that exercised their
preemptive rights and indicated their intention to exercise accretion rights; any remaining
Class D shares will be assigned pro rata to any holder of shares of another class that
indicated his or her intention to exercise accretion rights.

The term for exercise of additional preemptive rights is the same as that ﬁxed for exercising

preemptive rights.

Voting of the Underlying Class D Shares

Under the by-laws, each Class A, Class B, Class C and Class D share entitles the holder thereof
to one vote at any meeting of the shareholders of YPF, except that a speciﬁed number of Directors is
elected by majority vote of each class (except as provided below). See ‘‘—Directors—Election of
Directors’’ above for information regarding the number of directors that holders of each class of
shares are entitled to elect and certain other provisions governing nomination and election of
directors. The Depositary has agreed that, as soon as practicable after receipt of a notice of any
meeting of shareholders of YPF,
it will mail a notice to the holders of ADRs, evidencing ADSs,
registered on the books of the Depositary which will contain the following:

*

*

a summary in English of the information contained in the notice of such meeting;

a statement that the holders of ADRs at the close of business on a speciﬁed record date
will be entitled, subject to any applicable provisions of Argentine law, the by-laws of YPF
and the Class D shares, to instruct the Depositary to exercise the voting rights,
if any,
pertaining to the Class D shares evidenced by their respective ADSs; and

*

a statement as to the manner in which such instructions may be given to the Depositary.

The Depositary shall endeavor, to the extent practicable, to vote or cause to be voted the
amount of Class D shares represented by the ADSs in accordance with the written instructions of the
holders thereof. The Depositary will vote Class D shares, as to which no instructions are received, in
accordance with the recommendations of the Board of Directors of YPF. The Depositary will not
vote Class D shares, as to which no instructions have been received,
in accordance with the
recommendations of the Board of Directors, however, unless YPF has provided to the Depositary an
opinion of Argentine counsel stating that the action recommended by the Board of Directors is not
illegal under Argentine law or contrary to the by-laws or Board regulations of YPF. In addition, the
Depositary will,
if requested by the Board of Directors and unless prohibited by any applicable
provision of Argentine law, deposit all Class D shares represented by ADSs for purposes of
establishing a quorum at meetings of shareholders, whether or not voting instructions with respect to
such shares have been received.

Voting

Under our by-laws, each Class A, Class B, Class C and Class D share entitles the holder thereof
to one vote at any meeting of our shareholders, except that the Class A shares (i) vote separately
with respect to the election of our Board of Directors and are entitled to appoint one director and
one alternate director and (ii) have certain veto rights, as described below.

Class A Veto Rights

Under the by-laws, so long as any Class A shares remain outstanding, the afﬁrmative vote of
such shares is required in order to: (i) decide upon the merger of the company; (ii) approve any
acquisition of shares by a third party representing more than 50% of the company’s capital; (iii)
transfer to third parties all the exploitation rights granted to YPF pursuant to the Hydrocarbons
Law, applicable regulations thereunder or the Privatization Law, if such transfer would result in the
total suspension of the company’s exploration and production activities; (iv) voluntarily dissolve the

157

company and (v) transfer our legal or ﬁscal domicile outside Argentina. The actions described in
clauses (iii) and (iv) above also require prior approval of the Argentine Congress through enactment
of a law.

Reporting Requirements

Pursuant to our by-laws, any person who, directly or indirectly, through or together with its
afﬁliates and persons acting in concert with it, acquires Class D shares or securities convertible into
Class D shares, so that such person controls more than 3% of the Class D shares,
is required to
notify us of such acquisition within ﬁve days of such acquisition, in addition to complying with any
requirements imposed by any other authority in Argentina or elsewhere where our Class D shares are
if any, acting in
traded. Such notice must include the name or names of the person and persons,
concert with it, the date of the acquisition, the number of shares acquired, the price at which the
acquisition was made, and a statement as to whether it is the purpose of the person or persons to
acquire a greater shareholding in, or control of, us. Each subsequent acquisition by such person or
persons requires a similar notice.

Certain Provisions Relating to Acquisitions of Shares

Pursuant to our by-laws:

*

*

each acquisition of shares or convertible securities, as a result of which the acquirer,
directly or indirectly through or together with its afﬁliates and persons acting in concert
with it (collectively, an ‘‘Offeror’’), would own or control shares that, combined with such
Offeror’s prior holdings, if any, of shares of such class, would represent:

*

*

15% or more of the outstanding capital stock, or

20% or more of the outstanding Class D shares; and

each subsequent acquisition by an Offeror (other than subsequent acquisitions by an
Offeror owning or controlling more than 50% of our capital prior to such acquisition)
(collectively,
in accordance with the
procedure described under ‘‘Restrictions on Control Acquisitions’’ below.

‘‘Control Acquisitions’’), must be carried out

In addition, any merger, consolidation or other combination with substantially the same effect
involving an Offeror that has previously carried out a Control Acquisition, or by any other person or
persons, if such transaction would have for such person or persons substantially the same effect as a
Control Acquisition (‘‘Related Party Share Acquisition’’), must be carried out in accordance with the
‘‘—Restrictions on Related Party Share Acquisitions.’’ The voting,
provisions described under
dividend and other distribution rights of any shares acquired in a Control Acquisition or a Related
Party Share Acquisition carried out other than in accordance with such provisions will be suspended,
and such shares will not be counted for purposes of determining the existence of a quorum at
shareholders’ meetings.

Restrictions on Control Acquisitions
Prior to consummating any Control Acquisition, an Offeror must obtain the approval of the
Class A shares, if any are outstanding, and make a public tender offer for all of our outstanding
shares and convertible securities. The Offeror will be required to provide us with notice of, and
certain speciﬁed information with respect to, any such tender offer at least ﬁfteen business days prior
to the commencement of the offer, as well as the terms and conditions of any agreement with any
send each
shareholder proposed for
shareholder and holder of convertible securities a copy of such notice at the Offeror’s expense. The
Offeror is also required to publish a notice containing substantially the same information in a
newspaper of general circulation in Argentina, New York and each other city in which our securities
are traded on an exchange or other securities market, at least once per week, beginning on the date
notice is provided to us, until the offer expires.

the Control Acquisition (a ‘‘Prior Agreement’’). We will

Our Board of Directors shall call a special meeting of the Class A shares to be held ten business
days following the receipt of such notice for the purpose of considering the tender offer. If the special

158

meeting is not held, or if the shareholders do not approve the tender offer at such meeting, neither
the tender offer nor the proposed Control Acquisition may be completed.

The tender offer must be carried out in accordance with a procedure speciﬁed in our by-laws
and in accordance with any additional or stricter requirements of jurisdictions, exchanges or markets
in which the offer is made or in which our securities are traded. Under the by-laws, the tender offer
must provide for the same price for all shares tendered, which price may not be less than the highest
of the following (the ‘‘Minimum Price’’):

(i) the highest price paid by, or on behalf of, the Offeror for Class D shares or convertible
securities during the two years prior to the notice provided to us, subject to certain antidilution
adjustments with respect to Class D shares;

(ii) the highest closing price for the Class D shares on the BASE during the thirty-day period
immediately preceding the notice provided to us, subject to certain antidilution adjustments;

(iii) the price resulting from clause (ii) above multiplied by a fraction, the numerator of which
shall be the highest price paid by or on behalf of the Offeror for Class D shares during the two
years immediately preceding the date of the notice provided to us and the denominator of which
shall be the closing price for the Class D shares on the BASE on the date immediately
preceding the ﬁrst day in such two-year period on which the Offeror acquired any interest in or
right to any Class D shares, in each case subject to certain antidilution adjustments; and

the net earnings per Class D share during the four most recent

(iv)
full ﬁscal quarters
immediately preceding the date of the notice provided to us, multiplied by the higher of (A) the
price/earnings ratio during such period for Class D shares (if any) and (B) the highest price/
earnings ratio for us in the two-year period immediately preceding the date of
the notice
provided to us, in each case determined in accordance with standard practices in the ﬁnancial
community.

Any such offer must remain open for a minimum of 20 days and a maximum of 30 days
following the provision of notice to the shareholders or publication of the offer, plus an additional
period of a minimum of ﬁve days and a maximum of ten days required by CNV regulations, and
shareholders must have the right to withdraw tendered shares at any time up until the close of the
offer. Following the close of such tender offer, the Offeror will be obligated to acquire all tendered
shares or convertible securities, unless the number of shares tendered is less than the minimum,
if
in which case the Offeror may withdraw the
any, upon which such tender offer was conditioned,
tender offer. Following the close of
the Offeror may consummate any Prior
Agreement within thirty days following the close of the tender offer; provided, however, that if such
tender offer was conditioned on the acquisition of a minimum number of shares, the Prior Agreement
may be consummated only if such minimum was reached. If no Prior Agreement existed, the Offeror
may acquire the number of shares indicated in the notice provided to us on the terms indicated in
such notice, to the extent such number of shares were not acquired in the tender offer, provided that
any condition relating to a minimum number of shares tendered has been met.

the tender offer,

Restrictions on Related Party Share Acquisitions
The price per share to be received by each shareholder in any Related Party Share Acquisition

must be the same as, and must not be less, than the highest of the following:

(i) the highest price paid by or on behalf of the party seeking to carry out the Related Party
Share Acquisition (an ‘‘Interested Shareholder’’) for (A) shares of the class to be transferred in
the Related Party Share Acquisition (the ‘‘Class’’) within the two-year period immediately
preceding the ﬁrst public announcement of the Related Party Share Acquisition or (B) shares of
the Class acquired in any Control Acquisition,
in each case as adjusted for any stock split,
reverse stock split, stock dividend or other reclassiﬁcation affecting the Class;

(ii) the highest closing sale price of shares of the Class on the BASE during the thirty days
immediately preceding the announcement of the Related Party Share Acquisition or the date of
any Control Acquisition by the Interested Shareholder, adjusted as described above;

159

(iii) the price resulting from clause (ii) multiplied by a fraction, the numerator of which shall be
the highest price paid by or on behalf of the Interested Shareholder for any share of the Class
during the two years immediately preceding the announcement of the Related Party Transaction
and the denominator of which shall be the closing sale price for shares of the Class on the date
immediately preceding the ﬁrst day in the two-year period referred to above on which the
Interested Shareholder acquired any interest or right in shares of the Class,
in each case as
adjusted as described above; and

(iv) the net earnings per share of the shares of the Class during the four most recent full ﬁscal
quarters preceding the announcement of the Related Party Transaction multiplied by the higher
of the (A) the price/earnings ratio during such period for the shares of the Class and (B) the
highest price/earnings ratio for us in the two-year period preceding the announcement of the
Related Party Transaction, in each case determined in accordance with standard practices in the
ﬁnancial community.

In addition, any transaction that would result in the acquisition by any Offeror of ownership or
control of more than 50% of our capital stock, or that constitutes a merger or consolidation of us,
must be approved in advance by the Class A shares while any such shares remain outstanding.

Material Contracts
None.

Exchange Controls

See ‘‘Item 3. Key Information—Exchange Controls’’
currency exchange control restrictions in effect in Argentina.

for information on the monetary and

Taxation

Argentine Tax Considerations

The following discussion is a summary of the material Argentine tax considerations relating to

the purchase, ownership and disposition of our Class D shares or ADSs.

Dividends tax

Dividends paid on our Class D shares or ADSs, whether in cash, property or other equity
securities, are not subject to income tax withholding, except for dividends paid in excess of our
taxable accumulated income for the previous ﬁscal period, which are subject to withholding at a rate
of 35% in respect of such excess. This is a ﬁnal tax and it is not applicable if dividends are paid in
shares (acciones liberadas) rather than in cash.

Capital gains tax

Capital gains recognized by non-resident individuals or entities from the sale, exchange or other

disposition of our Class D shares or ADSs are not subject to Argentine income tax.

Personal assets tax

Argentine individuals and undivided estates,

foreign individuals and undivided estates, and
foreign entities, are responsible for the personal assets tax of 0.5% of the value of any shares or
ADSs issued by Argentine entities, held as of December 31 of each year. The tax is levied on
Argentine issuers of such shares or ADSs, such as us, (which must pay this tax in substitution of the
relevant shareholders) and is based on the equity value (valor patrimonial proporcional), or the book
the shares derived from the latest ﬁnancial statements at December 31 of each year.
value, of
Pursuant to the Personal Assets Tax Law, we are entitled and expect to seek reimbursement of such
paid tax from the applicable shareholders, including by withholding, foreclosing on the shares, or by
withholding dividends.

Tax on debits and credits in bank accounts

Tax on debits and credits in bank accounts is levied, with certain exceptions, for debits and
institutions located in Argentina and other

credits on checking accounts maintained at ﬁnancial

160

transactions that are used as a substitute for the use of checking accounts. The general tax rate is
0.6% for each debit and credit, although in certain cases a decreased rate may apply. The account
holder may use up to 34% of the tax paid in respect of credits, as a credit against other federal taxes.

Value added tax

The sale, exchange or other disposition of our Class D shares or ADSs and the distribution of

dividends are exempt from the value added tax.

Transfer taxes

The sale, exchange or other disposition of our Class D shares or ADSs is not subject to transfer

taxes.

Stamp taxes

Stamp taxes may apply in certain Argentine provinces if transfer of our Class D shares or
ADSs is performed or executed in such jurisdictions by means of written agreements. Transfer of our
Class D shares or ADSs is exempt from stamp tax in the City of Buenos Aires.

Other taxes

There are no Argentine inheritance or succession taxes applicable to the ownership, transfer or
disposition of our Class D shares or ADSs. In addition, neither the minimum presumed income tax
nor any local gross turnover tax is applicable to the ownership, transfer or disposition of our Class D
shares or ADSs.

In the case of litigation regarding the Class D shares or ADSs before a court of the City of

Buenos Aires, a 3% court fee would be charged, calculated on the basis of the claim.

Tax treaties

Argentina has tax treaties for the avoidance of double taxation currently in force with Australia,
Austria, Belgium, Bolivia, Brazil, Canada, Chile, Denmark, Finland, France, Germany, Italy, the
Netherlands, Norway, Russia, Spain, Sweden, Switzerland and the United Kingdom. There is
currently no tax treaty or convention in effect between Argentina and the United States. It is not
clear when,
if ever, a treaty will be ratiﬁed or entered into effect. As a result, the Argentine tax
consequences described in this section will apply, without modiﬁcation, to a holder of our Class D
shares or ADSs that is a U.S. resident. Foreign shareholders located in certain jurisdictions with a tax
treaty in force with Argentina may be (i) exempted from the payment of the personal assets tax and
(ii) entitled to apply for reduced withholding tax rates on payments to be made by Argentine parties.

United States Federal Income Tax Considerations

The following are the material U.S. federal income tax consequences of owning and disposing of
our Class D shares or ADSs. This discussion does not purport to be a comprehensive description of
all of the tax considerations that may be relevant to a particular person’s decision to hold such
securities.

This discussion applies only if you are a U.S. Holder (as deﬁned below) and you hold our Class
the tax

D shares or ADSs as capital assets for tax purposes, and it does not describe all of
consequences that may be relevant to holders subject to special rules, such as:

*

*

*

*

*

certain ﬁnancial institutions;

insurance companies;

dealers and traders in securities or foreign currencies, who use a mark-to-market method
of tax accounting;

persons holding Class D shares or ADSs as part of a hedge,
conversion transaction,
into a constructive sale with respect to the Class D shares or ADSs;

‘‘straddle,’’ wash sale,
integrated transaction or similar transaction or persons entering

persons whose functional currency for U.S. federal
dollar;

income tax purposes is not the U.S.

161

*

*

*

*

*

*

entities classiﬁed as partnerships for U.S. federal income tax purposes;

persons liable for the alternative minimum tax;

persons who acquired our Class D shares or ADSs pursuant
employee stock option or otherwise as compensation;

to the exercise of an

persons holding Class D shares or ADSs in connection with a trade or business conducted
outside of the United States;

tax-exempt entities, including ‘‘individual retirement accounts’’ or ‘‘Roth IRAs’’; or

persons holding Class D shares or ADSs that own or are deemed to own ten percent or
more of our voting stock.

If an entity that is classiﬁed as a partnership for U.S. federal income tax purposes holds Class
D shares or ADSs, the U.S. federal income tax treatment of a partner will generally depend on the
status of the partner and upon the activities of the partnership. Partnerships holding Class D shares
or ADSs and partners in such partnerships should consult their tax advisers as to the particular U.S.
federal income tax consequences of holding and disposing of the Class D shares or ADSs.

This discussion is based on the Internal Revenue Code of 1986, as amended (the ‘‘Code’’),
administrative pronouncements,
temporary and proposed Treasury
regulations, all as of the date hereof. These laws are subject to change, possibly on a retroactive
basis. It is also based in part on representations by the Depositary and assumes that each obligation
under the deposit agreement and any related agreement will be performed in accordance with its
terms.

judicial decisions and ﬁnal,

You are a ‘‘U.S. Holder’’ if you are a beneﬁcial owner of Class D shares or ADSs and are, for

U.S. federal income tax purposes:

*

*

*

a citizen or individual resident of the United States;

a corporation, or other entity taxable as a corporation, created or organized in or under
the laws of the United States or any political subdivision thereof; or

an estate or trust the income of which is subject to U.S. federal income taxation regardless
of its source.

In general,

if you own ADSs, you will be treated as the owner of the underlying shares
represented by those ADSs for U.S. federal income tax purposes. Accordingly, no gain or loss will be
recognized if you exchange ADSs for the underlying shares represented by those ADSs.

The U.S. Treasury has expressed concerns that parties to whom American depositary shares are
released before the underlying shares are delivered to the depositary, or intermediaries in the chain of
ownership between U.S. Holders and the issuer of the shares underlying the American depositary
shares, may be taking actions that are inconsistent with the claiming of foreign tax credits by U.S.
Holders of American depositary shares. Such actions would also be inconsistent with the claiming of
the reduced rate of tax, described below, applicable to dividends received by certain non-corporate
holders. Accordingly, the analysis of the creditability of Argentine taxes, and the availability of the
reduced tax rate for dividends received by certain non-corporate holders, each described below, could
be affected by actions taken by such parties or intermediaries.

Please consult your own tax adviser concerning the U.S. federal, state,

local and foreign tax

consequences of owning and disposing of Class D shares or ADSs in your particular circumstances.

This discussion assumes that YPF is not, and will not become, a passive foreign investment

company, as described below.

Taxation of distributions

Distributions paid on Class D shares or ADSs, other than certain pro rata distributions of
ordinary shares, will be treated as dividends to the extent paid out of current or accumulated
income tax principles). Because we do not
earnings and proﬁts (as determined under U.S. federal
maintain calculations of earnings and proﬁts under U.S. federal income tax principles, it is expected
that distributions will generally be reported to U.S. Holders as dividends. Subject to applicable
limitations (including a minimum holding period requirement) and the discussion above regarding

162

concerns expressed by the U.S. Treasury, certain dividends paid by qualiﬁed foreign corporations to
certain non-corporate U.S. Holders in taxable years beginning before January 1, 2013 are taxable at a
maximum rate of 15%. A foreign corporation is treated as a qualiﬁed foreign corporation with
respect to dividends paid on stock that is readily tradable on an established securities market in the
United States, such as the NYSE, where our ADSs are listed. You should consult your own tax
adviser to determine whether the favorable rate may apply to dividends you receive in respect of our
Class D shares or ADSs and whether you are subject to any special rules that limit your ability to be
taxed at this favorable rate. The amount of a dividend will include any amounts withheld by us in
respect of Argentine income taxes. The dividends will be treated as foreign-source dividend income
and will not be eligible for the dividends-received deduction generally allowed to U.S. corporations
under the Code.

Any dividends paid in Argentine pesos will be included in your income in a U.S. dollar amount
calculated by reference to the exchange rate in effect on the date of your, or in the case of ADSs, the
Depositary’s, receipt of the dividend, regardless of whether the payment is in fact converted into U.S.
dollars. If the dividend is converted into U.S. dollars on the date of receipt, you generally would not
recognize foreign currency gain or loss in respect of the dividend income. You may have foreign
currency gain or loss if the dividend is converted into U.S. dollars after the date of receipt. Foreign
currency gain or loss that you recognize will generally be treated as U.S.-source ordinary income.

Subject to applicable limitations (including a minimum holding period requirement) that may
vary depending upon your circumstances and, in the case of ADSs, subject to the discussion above
regarding concerns expressed by the U.S. Treasury, Argentine income taxes,
if any, withheld from
dividends on Class D shares or ADSs will be creditable against your U.S. federal income tax liability.
Amounts paid on account of the Argentine personal assets tax will not be eligible for credit against
your U.S. federal
income tax liability. You should consult your tax adviser to determine the tax
consequences applicable to you as a result of the payment of the Argentine personal assets tax or the
withholding of the amount of such tax from distributions,
including whether such amounts are
includible in income or are deductible for U.S. federal income tax purposes. The rules governing the
foreign tax credit are complex. You are urged to consult your tax adviser regarding the availability of
the foreign tax credit under your particular circumstances.

Sale or other disposition of Class D shares or ADSs

For U.S. federal income tax purposes, gain or loss you realize on the sale or other disposition
of Class D shares or ADSs will be capital gain or loss, and will be long-term capital gain or loss if
you held the Class D shares or ADSs for more than one year. The amount of your gain or loss will
be equal to the difference between the amount realized on the disposition and your tax basis in the
relevant Class D shares or ADSs, each as determined in U.S. dollars. Such gain or loss will generally
be U.S.-source gain or loss for foreign tax credit purposes. The deductibility of capital
losses is
subject to limitations.

Passive foreign investment company rules

YPF believes that it was not a ‘‘passive foreign investment company’’ (‘‘PFIC’’) for U.S. federal
income tax purposes for the taxable year of 2010 and does not expect
to be a PFIC in the
foreseeable future. However, since PFIC status depends upon the composition of a company’s income
less than 25 percent
and assets and the market value of its assets (including, among other things,
owned equity investments) from time to time, there can be no assurance that YPF will not be
considered a PFIC for any taxable year. If YPF were treated as a PFIC for any taxable year during
which you held a Class D share or ADS, certain adverse consequences could apply to you.

If YPF were treated as a PFIC for any taxable year during which you held a Class D share or
ADS, any gain you recognized on a sale or other disposition of the Class D share or ADS would be
allocated ratably over your holding period for the Class D share or ADS. The amounts allocated to
the taxable year of the disposition and to any year before YPF became a PFIC would be taxed as
ordinary income. The amount allocated to each other taxable year would be subject to tax at the
highest rate in effect for individuals or corporations, as appropriate, and an interest charge would be
imposed on the resulting tax liability. Further, the portion of any distribution in respect of Class D
shares or ADSs that is in excess of 125 percent of the average of the annual distributions that you

163

received on Class D shares or ADSs during the preceding three years or your holding period,
whichever is shorter, would be subject to taxation in the same manner as gains. Certain elections
might be available that would result in alternative treatments (such as mark-to-market treatment).
U.S. Holders should consult their tax advisers to determine whether any of these elections would be
available and, if so, what the consequences of the alternative treatments would be in their particular
circumstances.

In addition, if YPF were to be treated as a PFIC in a taxable year in which it paid a dividend
or the prior taxable year, the 15% dividend rate discussed above with respect to dividends paid to
certain non-corporate holders would not apply.

Recently enacted legislation creates an additional annual ﬁling requirement for U.S. Holders of
a PFIC. The legislation does not describe what information will be required to be included in the
additional annual ﬁling, but rather grants the Secretary of the U.S. Treasury authority to decide what
information must be included in such annual ﬁling. If we are a PFIC for any taxable year, then you
should consult your tax adviser concerning your annual ﬁling requirements.

Information reporting and backup withholding

Payments of dividends and sales proceeds that are made within the United States or through
certain U.S.-related ﬁnancial intermediaries generally are subject to information reporting and may be
subject to backup withholding unless (i) you are an exempt recipient or (ii) in the case of backup
withholding, you provide a correct taxpayer identiﬁcation number and certify that you are not subject
to backup withholding.

The amount of any backup withholding from a payment to you will be allowed as a credit
income tax liability and may entitle you to a refund, provided that the

against your U.S. federal
required information is timely furnished to the Internal Revenue Service.

New reporting requirements

For taxable years beginning after March 18, 2010, new legislation requires certain U.S. Holders
who are individuals to report information relating to stock of a non-U.S. person, subject to certain
exceptions (including an exception for stock held in custodial accounts maintained by a U.S. ﬁnancial
institution). U.S. Holders are urged to consult their tax advisers regarding the effect, if any, of this
legislation on their ownership and disposition of Class D shares or ADSs.

Available Information
YPF is subject

the U.S. Securities Exchange Act

to the information requirements of

(the
‘‘Exchange Act’’), except that as a foreign issuer, YPF is not subject to the proxy rules or the short-
swing proﬁt disclosure rules of the Exchange Act. In accordance with these statutory requirements,
YPF ﬁles or furnishes reports and other information with the SEC. Reports and other information
ﬁled or furnished by YPF with the SEC may be inspected and copied at the public reference facilities
maintained by the SEC at 100 F Street, N. E., Washington, D.C. 20549. Copies of such material may
be obtained by mail
the SEC at 100 F Street, N.E.,
Washington, D.C. 20549, at prescribed rates. You may obtain information on the operation of the
Public Reference Section by calling the SEC at +1-800-732-0330. The SEC maintains a World Wide
Web site on the Internet at http://www.sec.gov that contains reports and information statements and
other information regarding us. Such reports and other information may also be inspected at the
ofﬁces of the New York Stock Exchange, 11 Wall Street, New York, New York 10005, on which
YPF’s American Depositary Shares are listed.

from the Public Reference Section of

ITEM 11. Quantitative and Qualitative Disclosures about Market Risk

The following quantitative and qualitative information is provided about ﬁnancial instruments to
which we are a party as of December 31, 2010, and from which we may incur future gains or losses
from changes in market, interest rates, foreign exchange rates or commodity prices. We do not enter
into derivative or other ﬁnancial instruments for trading purposes.

164

This discussion contains forward-looking statements that are subject to risks and uncertainties.
Actual results could vary materially as a result of a number of factors including those set forth in
‘‘Item 3. Key Information—Risk Factors.’’

Foreign currency exposure

We generally follow a policy of not hedging our debt obligations in U.S. dollars. In addition,
our costs and receipts denominated in currencies other than the Argentine peso, including the U.S.
dollar, often do not match. As a result, we are currently exposed to risks associated with changes in
foreign currency exchange rates. See ‘‘Item 3. Key Information—Risk Factors—Risks Relating to
Argentina—We may be exposed to ﬂuctuations in foreign exchange rates.’’

The table below provides information about our assets and liabilities denominated in currencies
other than pesos (principally U.S. dollars) that may be sensitive to changes in foreign exchange rates,
as of December 31, 2010.

Expected Maturity Date

Less than 1
year

1-3 years

3-5 years

More than 5
years and
undetermined

Total

Assets....................................
Accounts payable .................
Debt......................................
Other Liabilities....................

1,546
1,084
1,254
57

(in millions of U.S. dollars)
291
159
141
6

—
108
113
6

9
449
129
433(1)

1,846
1,800
1,637
502

(1) Includes U.S.$411 million corresponding to accruals for contingencies with undetermined maturity.

Interest rate exposure

The objective of our ﬁnancing strategy is to satisfy capital requirements while minimizing our
exposure to interest rate ﬂuctuations. To realize such objective, we have borrowed under ﬁxed rate
debt instruments, based on the availability of capital and prevailing market conditions. We generally
follow a policy of not hedging our interest rate exposure.

165

The table below provides information about our assets and liabilities as of December 31, 2010

that may be sensitive to changes in interest rates.

Less than 1
year

1 - 2
years

2 - 3
years

3 - 4
years

4 - 5
years

More than
5 years

Total

Fair
Value

Expected Maturity Date

(in millions of pesos)

—

13

244
0.35-5.11%

19
0.35%

17

17

—

17

—

17

—

47

263

257

128

128

CER(1)+8% CER(1)+8% CER(1)+8% CER(1)+8% CER(1)+8% CER(1)+8%

—

59

2.35-14%
5,324
0.80-14%

—

97
2.35%
260

1.44-9.38%

348
BADLAR(2)

+1.75-2.00%

398

Libor +2%

—

—

—

57

Libor+5.25%

277

4%
—

19
9.38%

—

—

—

—

—

—

—

348
10%
—

625

156

708

156

466

4.3-9.38%

19
9.38%

212

4.8-9.38%

6,299

6,338

—

—

—

—

—

—

—

—

—

348

398

57

348

398

57

Assets
Fixed rate
Other Receivables.....................
Interest rate ..............................

Variable rate
Other Receivables.....................
Interest rate ..............................

Liabilities
Fixed rate
YPF’s Negotiable Obligations..
Interest rate ..............................
Related Parties .........................
Interest rate ..............................
Other debt ................................
Interest rate ..............................

Variable rate
YPF’s Negotiable Obligations..

Interest rate ..............................
Related parties..........................
Interest rate ..............................
Other debt ................................
Interest rate ..............................

(1) Coeﬁciente de Estabilizacio´n de Referencia (CER), a reference stabilization index established by the Public Emergency Law

and published by the Argentine Central Bank.

(2) Refers to the average interest rate that banks pay for deposits of more than Ps.1 million.

Crude oil and other hydrocarbon product price exposure

Our results of operations are also exposed to volatility mainly in the prices of crude oil and oil
products, especially in the export market. Although we have occasionally contracted ﬁnancial
derivatives in the past with the aim of decreasing exposure to these commodities price risks, as of the
date of
this annual report YPF was not a party to any commodity hedging instruments. For
information on our hydrocarbons delivery commitments as of December 31, 2010, see ‘‘Item 4.
Information on the Company—Exploration and Production—Delivery commitments’’ and Note 10 to
the Audited Consolidated Financial Statements.

ITEM 12. Description of Securities Other than Equity Securities

American Depositary Shares

Our ADSs are listed on the NYSE under the symbol ‘‘YPF’’. The Bank of New York Mellon is
(the ‘‘Depositary’’). Each ADS
to our deposit agreement

the depositary issuing ADSs pursuant
represents the right to receive one share.

The Depositary collects its fees for delivery and surrender of ADSs directly from investors
depositing shares or surrendering ADSs for the purpose of withdrawal or from intermediaries acting
for them. The Depositary collects fees for making distributions to investors by deducting those fees
from the amounts distributed or by selling a portion of distributable property to pay the fees. The
Depositary may collect its annual fee for depositary services by deductions from cash distributions or
by directly billing investors or by charging the book-entry system accounts of participants acting for
them. The Depositary may generally refuse to provide fee-attracting services until its fees for those
services are paid.

166

The table below sets forth the fees payable, either directly or indirectly, by a holder of ADSs as

of the date of this annual report.

Persons depositing or withdrawing shares must pay:

For:

U.S.$5.00 (or less) per 100 ADSs (or portion of 100

ADSs)

A fee equivalent to the fee that would be payable if
securities distributed to a holder had been shares
and the shares had been deposited for issuance of
ADSs

Transfer fees, as may from time to time be in effect

Expenses of the depositary

Issuance of ADRs (including, without limitation,
issuance pursuant to a stock dividend or stock split
declared by YPF, an exchange of stock or a
distribution of rights) and surrender of ADRs

Cancellation of ADSs for the purpose of
withdrawal

Sale, on behalf of the holder, of rights to subscribe
for additional shares or any right of any nature
distributed by YPF

Transfer and registration of shares on YPF share
register to or from the name of the depositary or
its agent when a holder deposits or withdraws
shares

Cable, telex and facsimile transmission expenses,
as provided in the deposit agreement

Expenses incurred by the depositary in the
conversion of foreign currency(1)

Taxes and other governmental charges the depositary
or the custodian have to pay on any ADS or share
underlying an ADS, for example, stock transfer
taxes, stamp duty or withholding taxes

As necessary

(1) Pursuant to our deposit agreement, whenever the depositary shall receive foreign currency, as a cash dividend or other distribution
which, in the judgment of the depositary, can be converted on a reasonable basis into U.S. dollars and transferred to the United
States, it will convert such foreign currency into U.S. dollars and transfer the resulting U.S. dollars (after deduction of its
customary charges and expenses in effecting such conversion) to the United States.

In 2010, the Depositary made no direct or indirect payments to YPF.

167

ITEM 13. Defaults, Dividend Arrearages and Delinquencies

None.

PART II

ITEM 14. Material Modiﬁcations to the Rights of Security Holders and Use of Proceeds

None.

ITEM 15. Controls and Procedures

Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures
As of December 31, 2010, YPF, under the supervision and with the participation of YPF’s
management,
including our Chief Executive Ofﬁcer and Chief Financial Ofﬁcer, performed an
evaluation of the effectiveness of the design and operation of our disclosure controls and procedures
(as deﬁned in Rule 13a-15(f) under the Exchange Act). There are, as described below,
inherent
including disclosure controls and procedures.
limitations to the effectiveness of any control system,
Accordingly, even effective disclosure controls and procedures can provide only reasonable assurance
of achieving their control objectives.

Based on such evaluation, YPF’s Chief Executive Ofﬁcer and Chief Financial Ofﬁcer concluded
in
that YPF’s disclosure controls and procedures were effective at the reasonable assurance level
ensuring that information relating to YPF, required to be disclosed in reports it ﬁles under the
Exchange Act is (1) recorded, processed, summarized and reported within the time periods speciﬁed in
the SEC’s rules and forms, and (2) accumulated and communicated to our management,
including
our Chief Executive Ofﬁcer and Chief Financial Ofﬁcer, as appropriate to allow timely decisions
regarding required disclosure.

Management’s Report on Internal Control Over Financial Reporting
Management of YPF is responsible for establishing and maintaining adequate internal control
over ﬁnancial reporting (as deﬁned in Rule 13a-15(f) under the Exchange Act). YPF’s internal control
over ﬁnancial reporting is a process designed to provide reasonable assurance regarding the reliability
of ﬁnancial reporting and the preparation of ﬁnancial statements for external purposes in accordance
with generally accepted accounting principles in Argentina including the reconciliation to U.S. GAAP
and includes those policies and procedures that:

*

*

*

Pertain to the maintenance of records that,
reﬂect the transactions and dispositions of the assets of YPF;

in reasonable detail, accurately and fairly

transactions are recorded as necessary to permit
Provide reasonable assurance that
preparation of ﬁnancial statements in accordance with generally accepted accounting
principles, and that our receipts and expenditures are being made only in accordance with
authorizations of YPF’s management and directors; and

Provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use or disposition of our assets that could have a material effect on the
ﬁnancial statements.

Because of its inherent limitations, any system of internal control over ﬁnancial reporting, no
matter how well designed, may not prevent or detect misstatements, due to the possibility that a
control can be circumvented or overridden or that misstatements due to error or fraud may occur
that are not detected. Also, projections of any evaluation of effectiveness to future periods are subject
to the risk that controls may become inadequate because of changes in conditions, or that the degree
of compliance with the policies or procedures may deteriorate.

Under the supervision and with the participation of YPF’s management,

including the Chief
Executive Ofﬁcer and Chief Financial Ofﬁcer, we conducted an evaluation of the effectiveness of our
internal control over ﬁnancial reporting based on the criteria established in Internal Control-Integrated
Framework issued by the Committee of Sponsoring Organizations of
the Treadway Commission
(‘‘COSO’’). Based on this assessment, our management concluded that, as of December 31, 2010, our
internal control over ﬁnancial reporting was effective based on those criteria.

168

Our internal control over ﬁnancial reporting as of December 31, 2010 has been audited by
Deloitte & Co. S.R.L., an independent registered public accounting ﬁrm, as stated in their report
included in the F-pages.

Changes in Internal Control Over Financial Reporting

There has been no change in YPF’s internal control over ﬁnancial reporting (as deﬁned in Rule
13a-15(f) under the Exchange Act) that occurred during the period covered by this annual report on
Form 20-F that has materially affected, or is reasonably likely to materially affect, internal control
over ﬁnancial reporting.

ITEM 16.

ITEM 16A. Audit Committee Financial Expert

The Board of Directors has designated Mario Va´ zquez as YPF’s Audit Committee Financial

Expert at the meeting held on April 14, 2010.

YPF believes that Mr. Va´ zquez, a member of YPF’s Audit Committee, possesses the attributes
of an Audit Committee Financial Expert set forth in the instructions to Item 16A of Form 20-F. Mr.
Va´ zquez is an independent director.

ITEM 16B. Code of Ethics

YPF has adopted a Code of Ethics applicable to all employees of YPF and the Board of
Directors. Since its effective date on August 15, 2003, we have not waived compliance with, nor made
any amendment to, the Code of Ethics. A copy of our Code of Ethics is ﬁled as an Exhibit to this
annual report. YPF undertakes to provide to any person without charge, upon request, a copy of
such Code of Ethics. A copy of the Code of Ethics can be requested in writing by telephone or
facsimile from us at the following address:

YPF S.A.
Ofﬁce of Shareholders Relations
Macacha Gu¨ emes 515
C1106BKK Buenos Aires, Argentina
Tel. (011-54-11) 5441-5531
Fax (011-54-11) 5441-2113

ITEM 16C. Principal Accountant Fees and Services

The following table provides

information on the aggregate fees billed by our principal
accountants, Deloitte & Co. S.R.L. and afﬁliates by type of service rendered for the periods indicated.

Services Rendered

2010

2009

Audit Fees .............................................................
Audit-Related Fees(1).............................................
Tax Fees ................................................................
All Other Fees .......................................................

Fees

Expenses

Fees

Expenses

11,531
120
—
—

11,651

(in thousands of pesos)

73
—
—
—

73

8,022
617
—
—

8,639

72
—
—
—

72

(1) Includes the fees for the issuance of agreed upon procedures reports.

The annual shareholders’ meeting of YPF appoints the external auditor of YPF, along with the
submitted for consideration to the annual

Audit Committee’s non-binding opinion, which is
shareholders’ meeting.

169

The Audit and Control Committee of Repsol YPF has a pre-approval policy regarding the
contracting of Repsol YPF’s external auditor, or any afﬁliate of the external auditor, for professional
services. The professional services covered by such policy include audit and non-audit services
provided to Repsol YPF or any of its subsidiaries reﬂected in agreements dated on or after May 6,
2003.

The pre-approval policy is as follows:

1. The Audit and Control Committee must pre-approve all audit and non-audit services to be
provided to Repsol YPF or any of its subsidiaries by the external auditor (or any of its afﬁliates) of
Repsol YPF.

2. The Chairman of the Audit and Control Committee has been delegated the authority to
approve the hiring of Repsol YPF’s external auditor (or any of its afﬁliates) without ﬁrst obtaining
the approval of the Audit and Control Committee for any of the services which require pre-approval
as described in (1) above.

Services approved by the Chairman of the Audit and Control Committee as set forth above

must be ratiﬁed at the next plenary meeting of the Audit and Control Committee.

All of the services described in the table above were approved by the Audit and Control

Committee.

ITEM 16D. Exemptions from the Listing Standards for Audit Committees

None.

ITEM 16E. Purchases of Equity Securities by the Issuer and Afﬁliated Purchasers

In 2010, neither YPF nor any of its afﬁliates purchased any of YPF’s equity securities.

ITEM 16F. Change in Registrant’s Certifying Accountant

During the years ended December 31, 2009 and 2010 and through the date of this annual
report, the principal independent accountant engaged to audit our ﬁnancial statements, Deloitte & Co
S.R.L., has not resigned, indicated that it has declined to stand for re-election after the completion of
its current audit or been dismissed.

ITEM 16G. Corporate Governance

See ‘‘Item 6. Directors, Senior Management and Employees—Compliance with NYSE Listing

Standards on Corporate Governance’’.

170

PART III

ITEM 17. Financial Statements

The registrant has responded to Item 18 in lieu of responding to this Item.

ITEM 18. Financial Statements

The following ﬁnancial statements are ﬁled as part of this annual report:

Reports of Independent Registered Public Accounting Firm .................................................
Consolidated Statements of Income of YPF S.A. for the Years Ended December 31, 2010,
2009 and 2008......................................................................................................................
Consolidated Balance Sheets of YPF S.A. as of December 31, 2010, 2009 and 2008............
Consolidated Statements of Cash Flows of YPF S.A. for the Years Ended December

31, 2010, 2009 and 2008 ......................................................................................................

Consolidated Statements of Changes in Shareholders’ equity of YPF S.A. for the Years

Ended December 31, 2010, 2009 and 2008 .........................................................................
Notes to the Audited Consolidated Financial Statements of YPF S.A. for the Years Ended
December 31, 2010, 2009 and 2008.....................................................................................

F-2

F-5
F-6

F-7

F-8

F-9

ITEM 19. Exhibits

1.1
1.2
11.1
12.1
12.2

13.1
23.1
23.2
23.3
99.1
99.2
99.3

By-laws (Estatutos) of YPF S.A. as amended (Spanish Version)*
By-laws (Estatutos) of YPF S.A. as amended (English Version)**
Code of Ethics***
Section 302 Certiﬁcation by the Chief Executive Ofﬁcer
Section 302 Certiﬁcation by the Chief Financial Ofﬁcer and the Director of Administration and
Tax
Section 906 Certiﬁcation
Consent of Independent Registered Public Accounting Firm
Consent of Gaffney, Cline & Associates Inc.
Consent of Degolyer & MacNaughton
Reserves Audit Report of Gaffney, Cline & Associates Inc.
Reserves Audit Report of DeGolyer & MacNaughton
Reserves Audit Report of DeGolyer & MacNaughton

*
Filed as Exhibit 1.1 to YPF’s 2009 Annual Report on Form 20-F ﬁled on June 29, 2010.
** Filed as Exhibit 1.2 to YPF’s 2009 Annual Report on Form 20-F ﬁled on June 29, 2010.
*** Incorporated by reference to YPF’s 2004 Annual Report on Form 20-F ﬁled on June 30, 2005.

171

The registrant hereby certiﬁes that it meets all of the requirements for ﬁling on Form 20-F and

that it has duly caused and authorized the undersigned to sign this annual report on its behalf.

SIGNATURES

YPF SOCIEDAD ANO´ NIMA

By:

/s/ Guillermo Reda
_________________________________________
Name: Guillermo Reda
Title:

Chief Financial Ofﬁcer

YPF SOCIEDAD ANO´ NIMA

By:

/s/ A´ ngel Ramos Sa´ nchez
_________________________________________
Name: A´ ngel Ramos Sa´ nchez
Title: Director of Administration and Tax

Dated: April 12, 2011

172

YPF SOCIEDAD ANONIMA AND CONTROLLED AND
JOINTLY CONTROLLED COMPANIES INDEX

Reports of independent registered public accounting ﬁrm......................................................

Consolidated statements of income for the years ended December 31, 2010, 2009 and 2008

Consolidated balance sheets as of December 31, 2010, 2009 and 2008 ..................................

Consolidated statements of cash ﬂows for the years ended December 31, 2010, 2009 and 2008

Consolidated statements of changes in shareholders’ equity for the years ended December 31,
2010, 2009 and 2008 ................................................................................................................

Notes to consolidated ﬁnancial statements for the years ended December 31, 2010, 2009 and
2008..........................................................................................................................................

Supplemental information on oil and gas producing activities (unaudited) ...........................

Page

F-2

F-5

F-6

F-7

F-8

F-9

F-60

F-1

Report of Independent Registered Public Accounting Firm
To the Board of Directors and Shareholders of YPF SOCIEDAD ANONIMA:

We have audited the accompanying consolidated balance sheets of YPF SOCIEDAD ANONIMA (an
Argentine Corporation) and its controlled and jointly controlled companies (the ‘‘Company’’) as of
December 31, 2010, 2009 and 2008, and the related consolidated statements of income, cash ﬂows and
changes in shareholders’ equity for each of the three years in the period ended December 31, 2010.
These consolidated ﬁnancial statements are the responsibility of the Company’s Management. Our
responsibility is to express an opinion on these consolidated ﬁnancial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting
Oversight Board (United States of America). Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the ﬁnancial statements are free of material
misstatements. An audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the ﬁnancial statements. An audit also includes assessing the accounting principles used
and signiﬁcant estimates made by Management, as well as evaluating the overall ﬁnancial statements
presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated ﬁnancial statements referred to above present fairly, in all material
respects,
the ﬁnancial position of YPF SOCIEDAD ANONIMA and its controlled and jointly
controlled companies as of December 31, 2010, 2009 and 2008, and the results of their operations and
their cash ﬂows for each of the three years in the period ended December 31, 2010, in conformity
with generally accepted accounting principles applicable to consolidated ﬁnancial
statements in
Argentina.

Accounting principles generally accepted in Argentina vary in certain signiﬁcant respects from
accounting principles generally accepted in the United States of America (‘‘U.S. GAAP’’).
Information relating to the nature and effect of such differences is presented in Notes 12, 13 and 14
to the consolidated ﬁnancial statements.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight
Board (United States of America), the Company’s internal control over ﬁnancial reporting as of
December 31, 2010, based on the criteria established in Internal Control—Integrated Framework issued
by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated
April 12, 2011 expressed an unqualiﬁed opinion on the Company’s internal control over ﬁnancial
reporting.

Buenos Aires City, Argentina
April 12, 2011

Deloitte & Co. S.R.L.

Diego O. De Vivo
Partner

F-2

Report of Independent Registered Public Accounting Firm
To the Board of Directors and Shareholders of YPF SOCIEDAD ANONIMA:

We have audited the internal control over ﬁnancial reporting of YPF SOCIEDAD ANONIMA (an
Argentine Corporation) and its controlled and jointly controlled companies (the ‘‘Company’’) as of
December 31, 2010, based on the criteria established in Internal Control—Integrated Framework issued
the Treadway Commission. The Company’s
by the Committee of Sponsoring Organizations of
management is responsible for maintaining effective internal control over ﬁnancial reporting and for
its assessment of
internal control over ﬁnancial reporting included in the
accompanying Management’s Report on Internal Control over Financial Reporting (Item 15). Our
responsibility is to express an opinion on the Company’s internal control over ﬁnancial reporting
based on our audit.

the effectiveness of

in accordance with the standards of

We conducted our audit
the Public Company Accounting
Oversight Board (United States of America). Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether effective internal control over ﬁnancial reporting
was maintained in all material respects. Our audit included obtaining an understanding of internal
control over ﬁnancial reporting, assessing the risk that a material weakness exists,
testing and
evaluating the design and operating effectiveness of internal control based on the assessed risk, and
performing such other procedures as we considered necessary in the circumstances. We believe that
our audit provides a reasonable basis for our opinion.

A company’s internal control over ﬁnancial reporting is a process designed by, or under the
supervision of,
the company’s principal executive and principal ﬁnancial ofﬁcers, or persons
performing similar functions, and effected by the company’s board of directors, management, and
other personnel to provide reasonable assurance regarding the reliability of ﬁnancial reporting and the
preparation of ﬁnancial statements for external purposes in accordance with generally accepted
accounting principles. A company’s internal control over ﬁnancial reporting includes those policies
and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately
and fairly reﬂect
(2) provide
reasonable assurance that transactions are recorded as necessary to permit preparation of ﬁnancial
statements
receipts and
expenditures of the company are being made only in accordance with authorizations of management
and directors of the company; and (3) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a
material effect on the ﬁnancial statements.

in accordance with generally accepted accounting principles, and that

the transactions and dispositions of

the company;

the assets of

the inherent

limitations of

including the
Because of
possibility of collusion or improper management override of controls, material misstatements due to
error or fraud may not be prevented or detected on a timely basis. Also, projections of any
evaluation of the effectiveness of the internal control over ﬁnancial reporting to future periods are
subject to the risk that the controls may become inadequate because of changes in conditions, or that
the degree of compliance with the policies or procedures may deteriorate.

internal control over ﬁnancial

reporting,

In our opinion, the Company maintained,
in all material respects, effective internal control over
ﬁnancial reporting as of December 31, 2010, based on the criteria established in Internal Control—
Integrated Framework issued by the Committee of Sponsoring Organizations of
the Treadway
Commission.

the consolidated ﬁnancial

We have also audited, in accordance with the standards of the Public Company Accounting Oversight
statements of YPF SOCIEDAD
Board (United States of America),
ANONIMA and its controlled and jointly controlled companies as of and for the year ended
December 31, 2010 and our report dated April 12, 2011 expressed an unqualiﬁed opinion on those
consolidated ﬁnancial statements and included an explanatory paragraph stating that the accounting
from accounting
principles generally accepted in Argentina vary in certain signiﬁcant
principles generally accepted in the United States of America (‘‘U.S. GAAP’’) and that
the
information related to the nature and effect of such differences is presented in Notes 12, 13, and 14
to the consolidated ﬁnancial statements of the Company.

respects

F-3

Buenos Aires City, Argentina
April 12, 2011

Deloitte & Co. S.R.L.

Diego O. De Vivo
Partner

F-4

YPF SOCIEDAD ANONIMA AND CONTROLLED AND JOINTLY CONTROLLED COMPANIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 2010, 2009 AND 2008
(Amounts expressed in million of Argentine pesos, except for per share amounts in Argentine pesos – Note 1.a)

Net sales (Note 3.k).....................................................................
Cost of sales (Note 15.d) .............................................................

44,162
(29,899)

34,320
(23,177)

34,875
(24,013)

Gross proﬁt ..............................................................................

14,263

11,143

10,862

2010

2009

2008

Selling expenses (Note 15.f).........................................................
Administrative expenses (Note 15.f)............................................
Exploration expenses (Note 15.f) ................................................

Operating income.....................................................................

Income (loss) on long-term investments ......................................
Other (expense) income, net (Note 3.i)........................................
Financial income (expense), net and holding gains (losses):
Gains (losses) on assets

Interests ...................................................................................
Exchange differences ...............................................................
Holding gains (losses) on inventories......................................

Losses on liabilities

Interests ...................................................................................
Exchange differences ...............................................................

Net income before income tax..................................................
Income tax (Note 3.j) ..................................................................

Net income...............................................................................

Earnings per share (Note 1.a)..................................................

(3,015)
(1,429)
(344)

9,475

79
(155)

118
202
676

(931)
(444)

9,020
(3,230)

5,790

14.72

(2,490)
(1,102)
(552)

6,999

(9)
159

109
182
(11)

(958)
(564)

5,907
(2,218)

(2,460)
(1,053)
(684)

6,665

97
(376)

134
416
476

(492)
(708)

6,212
(2,311)

3,689

3,901

9.38

9.92

The accompanying notes are an integral part of these statements.

F-5

YPF SOCIEDAD ANONIMA AND CONTROLLED AND JOINTLY CONTROLLED COMPANIES
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 2010, 2009 AND 2008
(Amounts expressed in million of Argentine pesos – Note 1.a)

2010

2009

2008

Current Assets
Cash .............................................................................................
Investments (Note 3.a) ................................................................
Trade receivables (Note 3.b)........................................................
Other receivables (Note 3.c) ........................................................
Inventories (Note 3.d)..................................................................

570
1,957
3,322
3,089
3,865

669
1,476
2,831
2,490
3,066

Total current assets .................................................................

12,803

10,532

Noncurrent Assets
Trade receivables (Note 3.b)........................................................
Other receivables (Note 3.c) ........................................................
Investments (Note 3.a) ................................................................
Fixed assets (Note 3.e) ................................................................
Intangible assets...........................................................................

Total noncurrent assets ...........................................................

Total assets..............................................................................

Current Liabilities
Accounts payable (Note 3.f)........................................................
Loans (Note 3.g)..........................................................................
Salaries and social security ..........................................................
Taxes payable ..............................................................................
Contingencies (Notes 10 and 15.c) ..............................................

28
1,587
594
31,567
10

33,786

46,589

7,639
6,176
421
2,571
295

22
527
661
27,993
12

29,215

39,747

5,863
4,679
298
1,437
341

391
825
2,702
1,861
3,449

9,228

24
391
741
28,028
6

29,190

38,418

6,763
3,219
284
1,132
588

Total current liabilities ............................................................

17,102

12,618

11,986

Noncurrent Liabilities
Accounts payable (Note 3.f)........................................................
Loans (Note 3.g)..........................................................................
Salaries and social security ..........................................................
Taxes payable ..............................................................................
Contingencies (Notes 10 and 15.c) ..............................................

Total noncurrent liabilities......................................................

Total liabilities.........................................................................

Shareholders’ Equity (per corresponding statements)....................

Total liabilities and shareholders’ equity ................................

5,616
1,613
168
523
2,527

10,447

27,549

19,040

46,589

4,391
2,140
110
828
1,959

9,428

22,046

17,701

39,747

3,473
1,260
116
753
1,857

7,459

19,445

18,973

38,418

The accompanying notes are an integral part of these statements.

F-6

YPF SOCIEDAD ANONIMA AND CONTROLLED AND JOINTLY CONTROLLED COMPANIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2010, 2009 AND 2008
(Amounts expressed in million of Argentine pesos – Note 1.a)

Cash Flows from Operating Activities
Net income ..................................................................................
Adjustments to reconcile net income to net cash ﬂows provided

by operating activities:
(Income) loss on long-term investments .................................
Depreciation of ﬁxed assets.....................................................
Consumption of materials and ﬁxed assets retired, net of

allowances............................................................................
Increase in allowances for ﬁxed assets ....................................
Income tax...............................................................................
Increase in accruals .................................................................

Changes in assets and liabilities:

Trade receivables .....................................................................
Other receivables .....................................................................
Inventories...............................................................................
Accounts payable ....................................................................
Salaries and social security......................................................
Taxes payable ..........................................................................
Net advances from crude oil purchasers.................................
Decrease in reserves ................................................................
Interests, exchange differences and others ..............................
Dividends from long-term investments........................................
Income tax payments...................................................................

2010

2009

2008

5,790

3,689

3,901

(79)
5,273

572
72
3,230
1,310

(407)
(1,575)
(799)
1,809
181
(259)
—
(788)
498
40
(2,142)

9
4,832

645
1
2,218
1,062

(21)
(725)
383
(461)
43
(762)
—
(1,207)
746
38
(1,076)

(97)
4,775

647
2
2,311
862

704
2,401
(876)
1,486
(21)
(507)
(10)
(736)
1,052
51
(2,387)

Net cash ﬂows provided by operating activities .....................

12,726(1)

9,414(1)

13,558(1)

Cash Flows from Investing Activities
Acquisitions of ﬁxed assets..........................................................
Stock redemption in long-term investments ................................
Investments (non cash and equivalents) ......................................

(8,729)(2)
—
105

(5,636)(2)

3
30

(7,035)(2)
—
(8)

Net cash ﬂows used in investing activities ..............................

(8,624)

(5,603)

(7,043)

Cash Flows from Financing Activities
Payment of loans .........................................................................
Proceeds from loans ....................................................................
Dividends paid.............................................................................

(13,454)
14,178
(4,444)

(13,870)
15,886
(4,897)

(5,400)
8,540
(9,287)

Net cash ﬂows used in ﬁnancing activities..............................

(3,720)

(2,881)

(6,147)

Increase in Cash and Equivalents .................................................

Cash and equivalents at the beginning of year ...........................
Cash and equivalents at the end of year .....................................

Increase in Cash and Equivalents .................................................

382

2,145
2,527

382

930

1,215
2,145

930

368

847
1,215

368

For supplemental information on cash and equivalents, see Note 3.a.

(1) Includes (344), (372) and (155) corresponding to interest payments for the years ended December 31, 2010, 2009 and 2008,

respectively.

(2) Includes 146, 529 and 111 corresponding to payments related with the extension of certain exploitation concessions in the Province

of Neuque´n (Note 10.c), for the years ended December 31, 2010, 2009 and 2008, respectively.

The accompanying notes are an integral part of these statements.

F-7

YPF SOCIEDAD ANONIMA AND CONTROLLED AND JOINTLY CONTROLLED COMPANIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2010, 2009 AND 2008
(Amounts expressed in million of Argentine pesos except for per share amount in pesos – Note 1.a)

Shareholders’ Contributions

Subscribed
capital

Adjustment to
contributions

Issuance
premiums

Total

Legal
reserve

Deferred
earnings

Reserve for
future
dividends

Unappropriated
retained
earnings

Total
shareholders’
equity

Balance as of December

31, 2007

As decided by the Board of Directors’

meeting of February 6, 2008:
– Cash dividends (10.76 per share).........

As decided by the Ordinary and

Extraordinary Shareholders’ meeting of
April 24, 2008:
– Cash dividends (6.50 per share) ..........
– Appropriation to Legal reserve ...........
– Reversal of Reserve for future
dividends ................................................
– Appropriation to Reserve for future
dividends ................................................

As decided by the Board of Directors’

meeting of November 6, 2008:
– Cash dividends (6.35 per share) ..........
Net decrease in deferred earnings (Note 2.i)
Net income .................................................

Balance as of December 31, 2008
As decided by the Ordinary Shareholders’

meeting of April 28, 2009:
– Reversal of Reserve for future
dividends ................................................
– Appropiation to Legal reserve.............
– Appropiation to Reserve for future
dividends ................................................

As decided by the Board of Directors’

meeting of May 5, 2009:
– Cash dividends (6.30 per share) ..........

As decided by the Board of Directors’

meeting of November 4, 2009:
– Cash dividends (6.15 per share) ..........
Net decrease in deferred earnings (Note 2.i)
Net income .................................................

Balance as of December 31, 2009
As decided by the Ordinary and

Extraordinary Shareholders’ meeting of
April 14, 2010:
– Reversal of Reserve for future
dividends ................................................
– Appropiation to Reserve for future
dividends ................................................

As decided by the Board of Directors’

meeting of April 14, 2010:
– Cash dividends (5.50 per share) ..........

As decided by the Board of Directors’

meeting of November 5, 2010:
– Cash dividends (5.80 per share) ..........
Net decrease in deferred earnings (Note 2.i)
Net income .................................................

Balance as of December

3,933

7,281

640

11,854

2,020

(135)

4,584

6,093

24,416

—

—
—

—

—

—
—
—

—

—
—

—

—

—
—
—

—

—
—

—

—

—
—
—

—

—
—

—

—

—
—
—

—

—
204

—

—

—
—
—

—

—
—

—

—

—
(57)
—

(4,232)

—

(4,232)

—
—

(352)

4,003

(2,498)
—
—

(2,557)
(204)

352

(4,003)

—
—
3,901

(2,557)
—

—

—

(2,498)
(57)
3,901

3,933

7,281

640

11,854

2,224

(192)

1,505

3,582

18,973

—
—

—

—

—
—
—

—
—

—

—

—
—
—

—
—

—

—

—
—
—

—
—

—

—

—
—
—

—
19

—

—

—
—
—

—
—

—

—

—
(64)
—

(1,505)
—

1,505
(19)

5,901

(5,901)

—
—

—

(2,478)

—

(2,478)

(2,419)
—
—

—
—
3,689

(2,419)
(64)
3,689

3,933

7,281

640

11,854

2,243

(256)

1,004

2,856

17,701

—

—

—

—
—
—

—

—

—

—
—
—

—

—

—

—
—
—

—

—

—

—
—
—

—

—

—

—
—
—

—

—

—

—
(7)
—

(1,004)

1,004

5,040

(5,040)

—

—

(2,163)

—

(2,163)

(2,281)
—
—

—
—
5,790

(2,281)
(7)
5,790

31, 2010 ..................................................

3,933

7,281

640

11,854

2,243

(263)

596

4,610

19,040

The accompanying notes are an integral part of these statements.

F-8

YPF SOCIEDAD ANONIMA AND CONTROLLED AND JOINTLY CONTROLLED COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2010, 2009 AND 2008
(Amounts expressed in millions of Argentine pesos, except where otherwise indicated – Note 1.a)

SIGNIFICANT ACCOUNTING POLICIES AND CHANGE IN ACCOUNTING POLICY
Signiﬁcant accounting policies

1.
a)
The ﬁnancial statements of YPF Sociedad Ano´ nima (‘‘YPF’’) and its controlled and jointly controlled
companies (the ‘‘Company’’) have been prepared in accordance with generally accepted accounting
principles applicable to consolidated ﬁnancial statements in Argentina (‘‘Argentine GAAP’’), and
taking into consideration the regulations of the National Securities Commission (‘‘CNV’’).

In accordance with generally accepted accounting principles and current Argentine legislation, the
presentation of individual ﬁnancial statements is mandatory. Consolidated ﬁnancial statements are to
be included as supplementary information to the individual ﬁnancial statements. For the purpose of
individual ﬁnancial statements have been omitted since they are not required for the
this ﬁling,
United States Securities and Exchange Commission (‘‘SEC’’) reporting purposes.

Furthermore, certain disclosures related to formal legal requirements for reporting in Argentina have
been omitted for purposes of these consolidated ﬁnancial statements, since they are not required for
SEC reporting purposes.

(‘‘IFRS’’) of

On March 20, 2009,
the Argentine Federation of Professional Councils in Economic Sciences
(‘‘FACPCE’’) approved the Technical Resolution No. 26 ‘‘Adoption of the International Financial
Reporting Standards
International Accounting Standards Board (‘‘IASB’’)’’,
subsequently modiﬁed by Technical Resolution No. 29 dated December 3, 2010. Such resolution was
approved by the CNV through General Resolution No. 562/09 dated December 29, 2009 (modiﬁed by
General Resolution No. 576/10 dated July 1, 2010), for certain publicly-traded entities under Law No.
17,811. The application of such rules will be mandatory for the Company for the ﬁscal year
beginning on January 1, 2012. On April 14, 2010, the Board of Directors has approved a speciﬁc
IFRS implementation plan.

the

Presentation of ﬁnancial statements in constant Argentine pesos
The ﬁnancial statements reﬂect the effect of changes in the purchasing power of money by the
application of
forth in Technical
Resolution No. 6 of the FACPCE and taking into consideration General Resolution No. 441 of the
CNV, which established the discontinuation of the restatement of ﬁnancial statements in constant
Argentine pesos as from March 1, 2003.

in constant Argentine pesos set

the method for restatement

Basis of consolidation
Following the methodology established by Technical Resolution No. 21 of the FACPCE, YPF has
consolidated its balance sheets and the related statements of income and cash ﬂows as follows:

*

*

Investments and income (loss) related to controlled companies in which YPF has the number of
votes necessary to control corporate decisions are substituted for such companies’ assets,
liabilities, net revenues, cost and expenses, which are aggregated to YPF’s balances after the
elimination of intercompany proﬁts, transactions, balances and other consolidation adjustments
and minority interest if applicable.

Investments and income (loss) related to companies in which YPF holds joint control are
consolidated line by line on the basis of YPF’s proportionate share in their assets, liabilities, net
revenues, cost and expenses, considering the elimination of intercompany proﬁts, transactions,
balances and other consolidations adjustments. The effect of this proportional consolidation for
the year ended December 31, 2010 and comparative information, is disclosed in Note 12.b.

Foreign subsidiaries are deﬁned as integrated companies when they carry out their operations as an
extension of the parent company’s operations or as non-integrated companies when they collect cash
and other monetary items, incur expenses, generate income and are ﬁnanced principally through their
own resources. Assets and liabilities of non-integrated foreign subsidiaries are translated into
Argentine pesos at the exchange rate prevailing as of the end of each year. Income statements are

F-9

‘‘Deferred Earnings’’, which are maintained until

translated using the relevant exchange rate at the date of each transaction. Exchange differences
arising from the translation process are included as a component of shareholder’s equity in the
complete or partial
account
reimbursement of capital of the related investment occurs. Assets, liabilities and income statements of
integrated foreign subsidiaries are translated at
the date of each
transaction. Exchange differences arising from the translation process are credited (charged) to the
income statement in the account ‘‘Gains (losses) on assets—Exchange differences’’.

the relevant exchange rate at

sale or

the

The consolidated ﬁnancial statements are based upon the latest available ﬁnancial statements of those
companies in which YPF holds control or joint control, taking into consideration,
if applicable,
signiﬁcant subsequent events and transactions, available management information and transactions
between YPF and the related company, which could have produced changes on the latter’s
shareholders’ equity.

The valuation methods employed by the controlled and jointly controlled companies are consistent
with those followed by YPF. If necessary, adjustments to the accounting information have been made
to conform the accounting principles used by these companies to those of YPF. Main adjustments are
related to the application of
the general accepted accounting principles in Argentina to foreign
subsidiaries’ ﬁnancial statements and the recognition of the deferred income tax liability related to the
difference between the book value of ﬁxed assets remeasured into constant Argentine pesos and the
corresponding historical cost used for tax purposes (Note 1.b).

Cash and equivalents
In the statements of cash ﬂows, the Company considers cash and all highly liquid investments with
an original maturity of less than three months to be cash and equivalents.

Revenue recognition criteria
Revenue is recognized on sales of crude oil, reﬁned products and natural gas, in each case, when title
and risks are transferred to the customer.

Subsidies and incentives are recognized as sales in the income statement in the year in which the
conditions for obtaining them are accomplished.

Revenues and costs related to construction activities, performed by a domestic subsidiary of YPF, are
accounted by the percentage of completion method. When adjustments in contract values or estimated
costs are determined, any change from prior estimates is reﬂected in earnings in the current year.
Anticipated losses on contracts in progress are expensed as soon as they become evident.

Joint ventures and other agreements
The Company’s interests in oil and gas related joint ventures and other agreements involved in oil
and gas exploration and production, have been consolidated line by line on the basis of
the
Company’s proportional share in their assets, liabilities, revenues, costs and expenses (Note 6).

Production concession and exploration permits
According to Argentine Law No. 24,145 issued in November 1992, YPF’s areas were converted into
production concession and exploration permits under Law No. 17,319, which has been amended by
Law No. 26,197. Pursuant to these laws, the hydrocarbon reservoirs located in Argentine onshore
territories and offshore continental shelf, belong to the Provinces or the Nation, depending on the
location. Exploration permits may have a term of up to 17 years and production concessions have a
term of 25 years, which may be extended for an additional ten-year term (Note 10.c).

Fair value of ﬁnancial instruments and concentration of credit risk
The carrying value of cash, current investments, trade receivables, other receivables and liabilities
approximates its fair value due to the short maturity of these instruments. As of December 31, 2010,
2009 and 2008 the fair value of loans payable estimated based on market prices or current interest
rates at the end of each year amounted to 7,862 , 6,827 and 4,399, respectively.

Financial
instruments that potentially expose the Company to concentration of credit risk consist
primarily of cash, current investments, trade receivables and other receivables. The Company invests
cash excess primarily in high liquid investments in ﬁnancial institutions both in Argentina and abroad

F-10

with strong credit rating. In the normal course of business, the Company provides credit based on
ongoing credit evaluations to its customers and certain related parties. Additionally, the Company
accounts for credit losses based on speciﬁc information of its clients. Appart from the receivables with
the Argentine Government related to the subsidies on gas oil sales provided by the Argentine
Government
to the public transportation according to Executive Decree No. 652/02 and its
amendments, and the participation in the Petroleum and Reﬁning Plus Programs established by
Decree No. 2014/2008 and its regulations, among others, included in Note 3.c ‘‘Tax credits, export
rebates and production incentives’’, the Company’s customer base is dispersed.

As of December 31, 2010, YPF does not hold derivative ﬁnancial instruments.

Use of estimates
The preparation of ﬁnancial statements in conformity with generally accepted accounting principles
requires Management
liabilities,
revenues and expenses and disclosure of contingencies. Future results could differ from the estimates
made by Management.

to make estimates and assumptions that affect reported assets,

Earnings per share
Earnings per share have been calculated based on the 393,312,793 shares outstanding during the years
ended as of December 31, 2010, 2009 and 2008.

Change in accounting policy

b)
IFRS above mentioned, General Resolution No. 576/10
In relation to the implementation of
establishes that companies which,
in accordance with generally accepted accounting principles in
Argentina, had adopted the option to disclose in a note to the ﬁnancial statements the deferred
income tax liability originated in the difference between the book value of ﬁxed assets remeasured
into constant Argentine pesos and their corresponding historical cost used for tax purposes shall
recognize such liability with a debit
to unappropriated retained earnings. The resolution also
establishes that such recognition may be recorded in any interim or annual period until the transition
date to IFRS is met, inclusive. Additionally, the resolution above mentioned establishes that, as an
exception, the Ordinary Shareholders´ meeting that considers the ﬁnancial statements for the ﬁscal year
in which the deferred income tax liability is accounted for, can record such debit in unappropriated
retained earnings into capital accounts not represented by shares (capital stock) or into retained
earnings accounts, not providing a predetermined order for such accounting.

During the year ended December 31, 2010, the Company has recorded the deferred income tax
liability originated in the difference between the book value of ﬁxed assets remeasured into constant
Argentine pesos and their corresponding historical cost used for tax purposes. According to generally
accepted accounting principles in Argentina, the effect of changes in the accounting policies must be
recorded with retrospective effect as of the beginning of the ﬁrst ﬁscal year presented. As a result of
the adoption of the resolution above mentioned, the unappropriated retained earnings as of the end
of each year have been modiﬁed as follows:

Deferred income tax liability—YPF and controlled and jointly
controlled companies...............................................................

Deferred income tax liability—Investments in signiﬁcant

Unappropriated retained earnings

(Loss)

2008

2007

2009

(1,086)

(1,276)

(1,523)

inﬂuence companies.................................................................

(94)

(107)

(121)

(1,180)

(1,383)

(1,644)

As a result of this change in accounting policy, net income for the years ended December 31, 2009
and 2008 increased by 203 and 261, respectively.

F-11

The ﬁnancial statements as of December 31, 2009, 2008 and 2007, have been amended to give
retrospective effect to the change in accounting policy previously mentioned, and have been ﬁled with
the SEC in the Form 6K dated March 14, 2011 (SEC Accession No. 0001208646-11-000114).

information regarding the ﬁnancial statements as of December 31, 2009 and 2008,
Consequently,
presented in these ﬁnancial
to the amounts
presented in the mentioned Form 6K. The modiﬁcation of comparative information does not imply
any change to statutory decisions already taken.

for comparative purposes, corresponds

statements

VALUATION CRITERIA

2.
The principal valuation criteria used in the preparation of the ﬁnancial statements are as follows:

a)

Cash, current investments, trade and other receivables and payables:
–

Amounts in Argentine pesos have been stated at face value, which includes accrued interest
if applicable. Investments with price quotation have been
through the end of each year,
valued at fair value as of the end of each year.

–

Amounts in foreign currencies have been valued at the relevant exchange rates as of the
end of each year, including accrued interest, if applicable. Investments with price quotation
have been valued at fair value at the relevant exchange rate in effect as of the end of each
year. Exchange differences have been credited (charged) to current income. Additional
information on assets and liabilities denominated in foreign currency is disclosed in Note
15.e.

When generally accepted accounting principles require the valuation of receivables or payables at
their discounted value, that value does not differ signiﬁcantly from their face value.

If applicable, allowances have been made to reduce receivables to their estimated realizable
value.

b)

c)

Inventories:
–

Reﬁned products, products in process, crude oil and natural gas have been valued at
current production cost or replacement cost, as applicable, as of the end of each year.

–

Raw materials and packaging materials have been valued at cost, which does not differ
signiﬁcantly from its replacement cost as of the end of each year.

Valuation of inventories does not exceed their estimated realizable value.

Noncurrent investments:
These include the Company’s investments in companies under signiﬁcant inﬂuence and holdings
in other companies. These investments are detailed in Note 15.b and have been valued using the
equity method, except
for holdings in other companies, which have been valued at cost
remeasured as detailed in Note 1.a.

Investments in Gasoducto del Pacı´ﬁco (Argentina) S.A., Gasoducto del Pacı´ﬁco (Cayman) Ltd.
and Oleoducto Trasandino (Chile) S.A., where less than 20% direct or indirect interest is held,
are accounted by the equity method since the Company exercises signiﬁcant inﬂuence over these
companies in making operation and ﬁnancial decisions based on its representation on the
Boards of Directors and/or the signiﬁcant transactions between YPF and such companies.

If applicable, allowances have been made to reduce investments to their estimated recoverable
value. The main factors for the recognized impairment were the devaluation of the Argentine
peso, lower activity expectations, events of default on certain debts and the de-dollarization and
freezing of certain utility rates.

Holdings in preferred shares have been valued at equity method considering the provisions
deﬁned in the respective bylaws.

F-12

Investments in companies with negative shareholders’ equity are disclosed in the ‘‘Accounts
payable’’ account in the balance sheet, provided that the Company has the intention to provide
the corresponding ﬁnancial support.

If necessary, adjustments have been made to the accounting information to conform the
accounting principles used by companies under signiﬁcant inﬂuence to those of the Company.
Main adjustments are
tax liability
corresponding to the companies under signiﬁcant inﬂuence related to the difference between the
book value of ﬁxed assets remeasured into constant Argentine pesos and their corresponding
historical cost used for tax purposes (Note 1.b).

the deferred income

related to the

recognition of

Investments in companies under signiﬁcant inﬂuence, have been valued based upon the latest
available ﬁnancial statements of
taking into
consideration, if applicable, signiﬁcant subsequent events and transactions, available management
information and transactions between the Company and the related companies which have
produced changes on the latter shareholders’ equity.

the end of each year,

these companies as of

As from the effective date of Law No. 25,063, dividends, either in cash or in kind, that the
Company receives from investments in other companies and which are in excess of
the
accumulated taxable income that these companies carry upon distribution shall be subject to a
35% income tax withholding as a sole and ﬁnal payment. The Company has not recorded any
charge for this tax since it has estimated that dividends from earnings recorded by the equity
method will not be subject to such tax.

d)

Fixed assets:
Fixed assets have been valued at acquisition cost remeasured as detailed in Note 1.a, less related
accumulated depreciation. Depreciation rates, representative of the useful life assigned, applicable
to each class of asset, are disclosed in Note 15.a. For those assets whose construction requires
an extended period of time, ﬁnancial costs corresponding to third parties’ ﬁnancing have been
capitalized during the assets’ construction period.

the ‘‘successful effort’’ method of accounting for

Oil and gas producing activities
its oil and gas
The Company follows
exploration and production operations. Accordingly, exploratory costs, excluding the costs of
exploratory wells, have been charged to expense as incurred. Costs of drilling exploratory wells,
including stratigraphic test wells, have been capitalized pending determination as to whether the
wells have found proved reserves that justify commercial development. If such reserves were not
found, the mentioned costs are charged to expense. Occasionally, an exploratory well may be
determined to have found oil and gas reserves, but classiﬁcation of those reserves as proved
cannot be made when drilling is completed. In those cases, the cost of drilling the exploratory
well shall continue to be capitalized if the well has found a sufﬁcient quantity of reserves to
justify its completion as a producing well and the enterprise is making sufﬁcient progress
assessing the reserves and the economic and operating viability of the project. If any of the
mentioned conditions are not met, cost of drilling exploratory wells is charged to expense. As of
the issuance date of these ﬁnancial statements, there are no exploratory wells for more than one
year after the completion of the drilling.

–

–

–

Intangible drilling costs applicable to productive wells and to developmental dry holes, as
well as tangible equipment costs related to the development of oil and gas reserves, have
been capitalized.

The capitalized costs related to producing activities have been depreciated by ﬁeld on the
unit-of-production basis by applying the ratio of produced oil and gas to estimate
recoverable proved and developed oil and gas reserves.

The capitalized costs related to acquisitions of properties and extension of concessions with
proved reserves have been depreciated by ﬁeld on the unit-of-production basis by applying
the ratio of produced oil and gas to proved oil and gas reserves.

F-13

–

–

–

The capitalized costs related to areas with unproved reserves are periodically reviewed by
Management to ensure that the carrying value does not exceed their estimated recoverable
value.

Revisions of crude oil and natural gas proved reserves are considered prospectively in the
calculation of depreciation. Revisions in estimates of reserves are performed at least once a
year. Additionally, estimates of reserves are audited by independent petroleum engineers on
a three-year rotation plan.

Costs related to hydrocarbon wells abandonment obligations are capitalized at
their
discounted value along with the related assets, and are depreciated using the unit-of-
production method. As compensation, a liability is recognized for this concept at the
estimated value of the discounted payable amounts. Revisions of the payable amounts are
performed upon consideration of the current costs incurred in abandonment obligations on
a ﬁeld-by-ﬁeld basis or other external available information if abandonment obligations
were not performed. Due to the number of wells in operation and/or not abandoned and
likewise the complexity with respect to different geographic areas where the wells are
located, the current costs incurred in plugging are used for estimating the plugging costs of
the wells pending abandonment. Current costs incurred are the best source of information
in order to make the best estimate of asset retirement obligations.

Other ﬁxed assets
–

The Company’s other ﬁxed assets are depreciated using the straight-line method, with
depreciation rates based on the estimated useful life of each class of property.

Fixed assets’ maintenance and repairs have been charged to expense as incurred.

Major inspections, necessary to continue to operate the related assets, are capitalized and
depreciated using the straight-line method over the period of operation to the next major
inspection.

Renewals and betterments that extend the useful life and/or increase the productive capacity of
properties are capitalized. As ﬁxed assets are retired,
the related cost and accumulated
depreciation are eliminated from the balance sheet.

The Company capitalizes the costs incurred in limiting, neutralizing or preventing environmental
pollution only in those cases in which at least one of the following conditions is met: (a) the
expenditure improves the safety or efﬁciency of an operating plant (or other productive asset);
(b) the expenditure prevents or limits environmental pollution at operating facilities; or (c) the
expenditures are incurred to prepare assets for sale and do not raise the assets’ carrying value
above their estimated recoverable value.

The carrying value of the ﬁxed asset of each business segment, as deﬁned in Note 8, does not
exceed their estimated recoverable value.

e)

Salaries and Social Security – Pension Plans and other Postretirement and Postemployment beneﬁts:
YPF Holdings Inc., which has operations in the United States of America, has certain deﬁned-
beneﬁt plans and postretirement and postemployment beneﬁts.

In March 2008, YPF Holdings Inc. acquired certain contracts from Prudential Insurance
Company (‘‘Prudential’’) to settle the liability associated with two deﬁned-beneﬁt plans, paying a
premium amount of US$ 115 million. Prudential assumed the liabilities under these pension
plans as of March 20, 2008.

The funding policy related to the deﬁned-beneﬁt plans as of December 31, 2010, is to contribute
amounts to the plan sufﬁcient to meet the minimum funding requirements under governmental
regulations, plus such additional amounts as Management may determine to be appropriate.

In addition, YPF Holdings Inc. provides certain health care and life insurance beneﬁts for
eligible retired employees, and also certain insurance, and other postemployment beneﬁts for
eligible individuals in case employment is terminated by YPF Holdings Inc. before their normal
retirement. Employees become eligible for these beneﬁts if they meet minimum age and years of

F-14

service requirements. YPF Holdings Inc. accounts for beneﬁts provided when payment of the
beneﬁt is probable and the amount of the beneﬁt can be reasonably estimated. No assets were
speciﬁcally reserved for the postretirement and postemployment beneﬁts, and consequently,
payments related to them are funded as claims are notiﬁed.

During the year 2008, YPF Holdings Inc. curtailed postretirement health care beneﬁts to certain
retiree, some of which were reincorporated to the plan during 2010. The effect on net income of
the curtailment and the mentioned reincorporation, has not been material.

The plans mentioned above are valued at net present value, are accrued on the years of active
service of employees and are disclosed as non-current liabilities in the ‘‘Salaries and social
security’’ account. Actuarial losses and gains related to the changes in actuarial assumptions are
included in the ‘‘Other (expense) income, net’’ account of the statement of income.

The additional disclosures
postemployment beneﬁts, are included in Note 3.h.

related to the pension plans and other postretirement and

f)

Taxes, withholdings and royalties:
Income tax and tax on minimum presumed income
The Company recognizes the income tax applying the liability method, which considers the
effect of the temporary differences between the ﬁnancial and tax basis of assets and liabilities
and the tax loss carryforwards and other tax credits, which may be used to offset future taxable
income, at the current statutory rate of 35%.

In deferred income tax computations, the difference between the book value of ﬁxed assets
remeasured into constant Argentine pesos and their corresponding historical cost used for tax
purposes is a temporary difference to be considered in deferred income tax computations. As of
December 31, 2010, and as indicated in Note 1.b, the Company has retrospectively recorded the
deferred income tax liability above mentioned.

Additionally, the Company calculates tax on minimum presumed income applying the current
1% tax rate to taxable assets as of the end of each year. This tax complements income tax. The
Company’s tax liability will coincide with the higher between the determination of tax on
minimum presumed income and the Company’s tax liability related to income tax, calculated
applying the current 35% income tax rate to taxable income for the year. However, if the tax on
minimum presumed income exceeds income tax during one tax year, such excess may be
computed as prepayment of any income tax excess over the tax on minimum presumed income
that may be generated in the next ten years.

For the years ended December 31, 2010, 2009 and 2008, the amounts determined as current
income tax were higher than tax on minimum presumed income and they were included in the
‘‘Income tax’’ account of the statement of income of each year.

Royalties and withholding systems for hydrocarbon exports
A 12% royalty is payable on the estimated value at the wellhead of crude oil production and
the commercialized natural gas volumes (see additionally Note 10.c ‘‘Agreements of extension of
concessions’’). The estimated value is calculated based upon the approximate sale price of the
less the costs of transportation and storage. To calculate the
crude oil and gas produced,
royalties, the Company has considered price agreements according to crude oil buying and
selling operations obtained in the market for certain qualities of such product, and has applied
these prices, net of the discounts mentioned above, according to regulations of Law No. 17,319
and its amendments.

Royalty expense is accounted for as a production cost.

Law No. 25,561 on Public Emergency and Exchange System Reform, issued in January 2002,
established duties for hydrocarbon exports for a ﬁve-year period. In January 2007, Law No.
26,217 extended this export withholding system for an additional ﬁve-year period and also
established speciﬁcally that this regime is also applicable to exports from ‘‘Tierra del Fuego’’
province, which were previously exempted. On November 16, 2007, the Ministry of Economy
and Production (‘‘MEP’’) published Resolution No. 394/2007, modifying the withholding regime

F-15

on exports of crude oil and other reﬁned products. The new regime provides that when the WTI
international price exceeds the reference price which is ﬁxed at US$ 60.9 barrel, the producer
shall be allowed to collect at US$ 42 barrel, depending on the quality of the crude oil sold, with
the remainder being withheld by the Argentine government as an export
tax. If the WTI
international price is under the reference price but over US$ 45 barrel, a 45% withholding rate
will apply. If such price is under US$ 45 barrel, the applicable export tax is to be determined by
the Argentine government within a term of 90 business days. The withholding rate determined
as indicated above also currently applies to diesel, gasoline and other crude derivative products.
In addition the calculation procedure described above also applies to other petroleum products
and lubricants based upon different withholding rates, reference prices and prices allowed to
in March 2008, Resolution No. 127/2008 of the MEP increased the
producers. Furthermore,
natural gas export withholding rate to 100% of the highest price from any natural gas import
contract. This resolution has also established a variable withholding system applicable to
liqueﬁed petroleum gas, similar to the one established by the Resolution No. 394/2007.

Hydrocarbon export withholdings are charged to the ‘‘Net sales’’ account of the statement of
income.

Allowances and accruals for contingencies:
–

trade
Allowances: amounts have been provided in order to reduce the valuation of
receivables, other receivables, noncurrent investments and ﬁxed assets based on the analysis
of doubtful accounts and on the estimated recoverable value of these assets.

–

Accruals for losses: amounts have been provided for various contingencies which are
probable and can be reasonably estimated, based on Management’s expectations and in
consultation with legal counsels. Accruals for losses are required to be accounted at the
discounted value as of the end of each year, however, as their face value does not differ
signiﬁcantly from discounted values, they are recorded at face value.

The evolution in the allowances and accruals for contingencies accounts is set forth in Note
15.c.

Environmental liabilities:
Environmental
liabilities are recorded when environmental assessments and/or remediation are
probable and can be reasonably estimated. Such estimates are based on either detailed feasibility
studies of remediation approach and cost for individual sites or on the Company’s estimate of
costs to be incurred based on historical experience and available information based on the stage
of assessment and/or remediation of each site. As additional
information becomes available
regarding each site or as environmental standards change, the Company revises its estimate of
costs to be incurred in environmental assessment and/or remediation matters.

Shareholder’s equity accounts:
These accounts have been remeasured in Argentine pesos as detailed in Note 1.a, except for
‘‘Subscribed Capital’’ account, which is stated at its historical value. The adjustment required to
state this account in constant Argentine pesos is disclosed in the ‘‘Adjustment to Contributions’’
account.

The account ‘‘Deferred Earnings’’ includes the exchange differences generated by the translation
into pesos of the investments in non-integrated foreign companies.

Statement of income accounts:
The amounts included in the income statement accounts have been recorded by applying the
following criteria:

–

–

Accounts which accumulate monetary transactions at their face value.

Cost of
replacement cost of that month.

sales has been calculated by computing units

sold in each month at

the

F-16

g)

h)

i)

j)

–

–

–

Depreciation of non-monetary assets, valued at acquisition cost, has been recorded based
on the remeasured cost of such assets as detailed in Note 1.a.

Holding gains (losses) on inventories valued at replacement cost have been included in the
‘‘Holding gains (losses) on inventories’’ account.

Income (loss) on long-term investments in which signiﬁcant inﬂuence is held, has been
calculated on the basis of the income (loss) of those companies and was included in the
‘‘Income (loss) on long-term investments’’ account.

3.

ANALYSIS OF THE MAIN ACCOUNTS OF THE CONSOLIDATED FINANCIAL
STATEMENTS

Details
statements are as follows:

regarding the signiﬁcant accounts

included in the accompanying consolidated ﬁnancial

a)

Investments:

2010

2009

2008

Short-term investments .....................
Long-term investments (Note 15.b) .
Allowance for reduction in value of
holdings in long-term investments
(Note 15.c) ........................................

Current

Noncurrent

Current

Noncurrent

Current

Noncurrent

1,957(1)
—

45(2)
628

1,476(1)
—

150(2)
636

825(1)
—

179(2)
783

—

1,957

(79)

594

—

1,476

(125)

661

—

825

(221)

741

(1) Includes 1,957, 1,476 and 824 as of December 31, 2010, 2009 and 2008, respectively, with an original maturity of less than

three months.

(2) Corresponds to restricted cash as of December 31, 2010, 2009 and 2008, which represents bank deposits used as guarantees

given to government agencies.

b)

Trade receivables:

2010

2009

2008

Accounts receivable ..........................
Related parties (Note 7)...................

Allowance
trade
receivables (Note 15.c)......................

doubtful

for

Current

Noncurrent

Current

Noncurrent

Current

Noncurrent

3,450
339

3,789

(467)

3,322

28
—

28

—

28

2,963
281

3,244

(413)

2,831

22
—

22

—

22

2,813
306

3,119

(417)

2,702

24
—

24

—

24

F-17

b) Other receivables:

2010

2009

2008

Current

Noncurrent

Current

Noncurrent

Current

Noncurrent

Tax credits, export rebates and

production incentives ....................
Trade .................................................
Prepaid expenses ...............................
Concessions charges..........................
Related parties (Note 7)
Loans to clients ................................
Trust contributions – Obra Sur .......
Advances to suppliers.......................
Collateral deposits ............................
Advances and loans to employees ...
From joint ventures and other

agreements .....................................
Miscellaneous ....................................

Allowance for other doubtful

accounts (Note 15.c) .....................

Allowance for valuation of other
receivables to their estimated
realizable value (Note 15.c) ..........

1,882
178
174
17
151
26
13
250
165
51

78
197

814
—
78
27
256
70
115
—
56
—

—
187

1,403
105
208
17
192
30
—
125
177
42

100
185

3,182

1,603

2,584

(93)

—

(94)

—

(16)

—

3,089

1,587

2,490

16
—
82
38
74
69
119
—
4
—

—
142

544

—

(17)

527

749
217
154
17
178
29
—
160
91
69

101
230

1,995

(134)

—

1,861

19
—
80
50
109
79
—
—
18
—

—
84

439

—

(48)

391

d)

Inventories:

2010

2009

2008

Finished products ...............................................................
Crude oil and natural gas ..................................................
Products in process ............................................................
Raw materials, packaging materials and others................

e)

Fixed assets:

Net book value of ﬁxed assets (Note 15.a).......................
Allowance for unproductive exploratory drilling

(Note 15.c) ......................................................................

Allowance for obsolescence of materials and equipment

(Note 15.c) ......................................................................

2,377
1,061
67
360

3,865

1,715
989
59
303

3,066

1,941
1,110
69
329

3,449

2010

2009

2008

31,669

28,033

28,073

(3)

(99)

(3)

(37)

(3)

(42)

31,567

27,993

28,028

F-18

f)

Accounts payable:

2010

2009

2008

Trade .................................................
Hydrocarbon wells abandonment

obligations .....................................
Related parties (Note 7)...................
Investments in companies with

negative shareholder’s equity ........

Extension of Concessions –

Province of Neuque´n (Note 10.c)

From joint ventures and other

agreements .....................................

Environmental liabilities (Note

10.b)...............................................
Miscellaneous ....................................

Current

Noncurrent

Current

Noncurrent

Current

Noncurrent

6,170

34

4,576

40

4,841

45

243
309

5

—

409

302
201

5,228
—

—

—

—

205
149

238
249

6

142

358

179
115

4,016
—

—

—

—

285
50

547
166

—

483

334

172
220

3,130
—

—

—

—

257
41

7,639

5,616

5,863

4,391

6,763

3,473

g)

Loans:

2010

2009

2008

Interest
rate(1)

Principal
maturity

Current

Noncurrent

Current

Noncurrent

Current

Noncurrent

Negotiable Obligations(2) ...
Related parties (Note 7) ....
Other ﬁnancial debts .........

4.00 – 12.78% 2011 – 2028
2.35 – 14.00% 2011 – 2012
0.80 – 14.25% 2011 – 2012

361
458
5,357

626
97
890

6
912
3,761

547
380
1,213

364
94
2,761

224
1,036
—

6,176

1,613

4,679

2,140

3,219

1,260

(1) Annual interest rates as of December 31, 2010.
(2) Disclosed net of 52, 38 and 548, corresponding to YPF outstanding Negotiable Obligations, repurchased through open

market transactions as of December 31, 2010, 2009 and 2008, respectively.

The maturities of the Company’s noncurrent loans, as of December 31, 2010, are as follows:

From 1
to 2 years

From 2
to 3 years

From 3
to 4 years

Over
5 years

Total

Noncurrent loans....................

388

278

448

499

1,613

Details regarding the Negotiable Obligations of YPF are as follows:

(in million)

M.T.N. Program

Issuance

2010

Book value

2009

2008

Year

Amount

Year

Principal Value

Interest
Rate(1)

Principal
Maturity

Current Noncurrent Current Noncurrent Current Noncurrent

1997 ...........
1998 ...........
2008 ...........
2008 ...........
2008 ...........

US$ 1,000
US$ 1,000
US$ 1,000
US$ 1,000
US$ 1,000

1998
1999
2009
2010
2010

US$ 100
US$ 225
$ 205
$ 143
US$ 70

10.00%
—

12.53%(2)
12.78%(3)
4.00%

2028
—
2011
2011
2013

7
—
205
144
5

361

348
—
—
—
278

626

6
—
—
—
—

6

342
—
205
—
—

547

4
360
—
—
—

364

224
—
—
—
—

224

(1) Annual interest rate as of December 31, 2010.
(2) Accrues interest at a variable interest rate of Buenos Aires Deposits of Large Amount Rate (‘‘BADLAR’’) plus 1.75%.
(3) Accrues interest at a variable interest rate of BADLAR plus 2%.

In connection with the issued Negotiable Obligations, YPF has agreed for itself and its
controlled companies to certain covenants, including among others, to pay all liabilities at their
maturity and not to create other encumbrances that exceed 15% of total consolidated assets. If

F-19

the Company does not comply with any covenant, the trustee or the holders representing a
percentage that varies between 10% and 25% of the total principal amount of the outstanding
Negotiable Obligations may declare the principal and accrued interest immediately due and
payable.

Financial debt contains customary covenants for contracts of this nature,
including negative
pledge, material adverse change and cross-default clauses. Almost all of YPF’s outstanding debt
is subject to this kind of clauses.

The Shareholders’ meeting held on January 8, 2008, approved a Notes Program for an amount
up to US$ 1,000 million. Proceeds from this program shall be used exclusively to invest in ﬁxed
assets and working capital
in Argentina. On September 24, 2009, YPF issued under the
mentioned program the Negotiable Obligations ‘‘Class I’’ at variable interest, with ﬁnal maturity
in 2011, for an amount of 205 million of Argentine pesos. Additionally, on March 4, 2010, the
Company issued under the mentioned program the Negotiable Obligations ‘‘Class II’’ at variable
interest, with ﬁnal maturity in 2011, for an amount of 143 million of Argentine pesos and the
Negotiable Obligations ‘‘Class III’’ at ﬁxed interest, with ﬁnal maturity in 2013, for an amount
of US$ 70 million. All the mentioned securities are authorized to be traded on the Buenos Aires
Stock Exchange (Bolsa de Comercio de Buenos Aires) and the Electronic Open Market
(Mercado Abierto Electro´ nico) in Argentina.

h)

Beneﬁt plans:
Deﬁned – beneﬁt obligations

2010

2009

2008

Net present value of obligations.........................................
Fair value of assets .............................................................
Deferred actuarial losses .....................................................

Recognized net liabilities ....................................................

130
—
—

130

93
—
—

93

117
—
(1)

116

Changes in the fair value of the deﬁned-beneﬁt obligations

2010

2009

2008

Liabilities at the beginning of the year...............................
Settlement of obligations – Prudential (Note 2.e) ..............
Translation differences........................................................
Service cost .........................................................................
Interest cost.........................................................................
Actuarial losses (gains) .......................................................
Beneﬁts paid, settlements and amendments........................

93
—
4
—
7
21
5

Liabilities at the end of the year.........................................

130

117
—
14
—
8
(33)
(13)

93

472
(319)
16
1
10
16
(79)

117

Changes in the fair value of the plan assets

2010

2009

2008

Fair value of assets at the beginning of the year ...............
Settlement of obligations – Prudential (Note 2.e) ..............
Employer and employees contributions..............................
Beneﬁts paid and settlements..............................................

Fair value of assets at the end of the year .........................

—
—
13
(13)

—

—
—
13
(13)

—

247
(242)
19
(24)

—

F-20

(Expense) Income

Amounts recognized in the Statement of Income

2010

2009

2008

Service cost .........................................................................
Interest cost.........................................................................
Actuarial (losses) gains recognized in the year...................
(Losses) gains on settlements and amendments..................

Total recognized as other income (expenses), net (Note 3.i)

—
(7)
(21)
(17)

(45)

—
(8)
33
—

25

(1)
(10)
—
29

18

Actuarial assumptions

2010

2009

2008

Discount rate ......................................................................
Expected return on assets ...................................................
Expected increase on salaries..............................................

4.7%
N/A
N/A

5.5%
N/A
N/A

6.2%
N/A
N/A

Health care cost trend
For measurement purposes, an 8.4% annual rate of increase in the per capita cost of covered
health care beneﬁts was assumed for the year ended December 31, 2010. The rate is assumed to
decrease by 0.3% each year until reaching 4.5% in 2024 and remain in that level thereafter.

Expected employer’s contributions and estimated future beneﬁt payments for the remaining plans
are:

Expected employer’s contributions for next year .....................................
Estimated future beneﬁt payments are as follows:
2011...........................................................................................................
2012...........................................................................................................
2013...........................................................................................................
2014...........................................................................................................
2015 – 2019 ...............................................................................................

Other
Beneﬁts

Gross
Beneﬁts
Payments

Pension
Beneﬁts

2

2
2
2
2
7

11

11
11
11
11
45

i)

Other (expense) income, net:

(Expense) Income

(Accrual) recovery for pending lawsuits and other claims .
Environmental remediation – YPF Holdings Inc...............
Insurance recovery ..............................................................
Deﬁned beneﬁt pension plans and other postretirement

beneﬁts (Note 3.h)...........................................................
Miscellaneous......................................................................

2010

2009

2008

(138)
(124)
55

(45)
97

(155)

106
(134)
98

25
64

159

(104)
(303)
—

18
13

(376)

F-21

j)

Income tax:

2010

2009

2008

Current income tax .............................................................
Deferred income tax ...........................................................

(3,577)
347

(2,302)
84

(2,595)
284

(3,230)(1)

(2,218)(1)

(2,311)(1)

(1)

Corresponds to income tax incurred in Argentina as of December 31, 2010, 2009 and 2008, respectively.

The reconciliation of pre-tax income at the statutory tax rate, to the income tax as disclosed in
the income statements for the years ended December 31, 2010, 2009, and 2008, is as follows:

2010

2009

2008

Net income before income tax............................................
Statutory tax rate................................................................

9,020
35%

5,907
35%

6,212
35%

Statutory tax rate applied to net income before income tax

(3,157)

(2,067)

(2,174)

Permanent differences:
Income (loss) on long-term investments(2)..........................
Income from tax free jurisdiction – Law N8 19,640 (Tierra
del Fuego) .......................................................................
Tax amnesty – Law No. 26,476..........................................
Non taxable foreign source income ....................................
Miscellaneous......................................................................
Increase of valuation allowance for temporary differences
and tax loss and credit carryforwards(1) .........................

28

55
—
—
(60)

(96)

(3)

29
(97)
—
53

34

22
—
1
(2)

(133)

(192)

(3,230)

(2,218)

(2,311)

(1) Relates to changes in circumstances and prospects that affect the future use of the temporary differences, tax loss and

(2)

credit carryforwards.
The Company does not provide for income taxes on the unremitted earnings of equity method investees as it anticipates
that they will be remitted in a tax free liquidation.

The breakdown of the net deferred tax liability as of December 31, 2010, 2009 and 2008, is as
follows:

Deferred tax assets

Tax loss and credit carryforwards ..................................
Non deductible allowances and reserves and other

liabilities......................................................................
Miscellaneous ..................................................................

Total deferred tax assets .....................................................

Deferred tax liabilities

Fixed assets .....................................................................
Miscellaneous ..................................................................

Total deferred tax liabilities................................................
Valuation allowances ..........................................................

2010

2009

2008

1,352(1)

1,154

1,050

1,119
180

2,651

(1,230)
(24)

(1,254)
(1,688)

963
220

970
116

2,337

2,136

(1,445)
(10)

(1,455)
(1,520)

(1,495)
(85)

(1,580)
(1,278)

Net deferred tax liability .............................................

(291)

(638)

(722)

F-22

(1)

Tax loss and credit carryforwards will expire as follows: 1,246 after ﬁve years and 106 that carry forward indeﬁnitely.

As explained in Note 1.b, 2.c and 2.f, the Company has recorded a deferred income tax liability
corresponding to the difference between the book value of ﬁxed assets remeasured into constant
Argentine pesos and their corresponding historical cost used for tax purposes.

k) Net sales:

2010

2009

2008

Sales ....................................................................................
Turnover tax .......................................................................
Hydrocarbon export withholdings......................................

47,277
(1,204)
(1,911)

36,978
(835)
(1,823)

39,314
(795)
(3,644)

44,162

34,320

34,875

CAPITAL STOCK

4.
YPF’s subscribed capital as of December 31, 2010, 2009 and 2008 was 3,933 and was represented by
393,312,793 shares of common stock and divided into four classes of shares (A, B, C and D), with a
par value of Argentine pesos 10 and one vote per share. These shares are fully subscribed, paid-in
and authorized for stock exchange listing.

As of December 31, 2010, Repsol YPF S.A. (‘‘Repsol YPF’’) controls the Company, directly and
indirectly, through a approximately 79.81% shareholding while Petersen Energı´a S.A. (‘‘PESA’’) and
its afﬁliates exercise signiﬁcant inﬂuence through a 15.46% shareholding. Additionally, Repsol YPF
granted certain afﬁliated of PESA an option, which expires on February 21, 2012, to purchase from
Repsol YPF up to an additional 10% of YPF’s outstanding capital stock.

Additionally, since September 2010, Repsol YPF has sold approximately 15.78% of YPF’s capital
stock and granted an option to acquire from Repsol YPF additional shares representing 1.6% of the
Company’s capital stock. As of the date of this annual report, Repsol YPF controlled approximately
68.23% of the Company’s capital stock and voting rights.

Repsol YPF and PESA have signed a shareholders’ agreement establishing, among other things, the
adoption of a dividend policy to distribute 90% of the annual net income.

Repsol YPF’s legal address is Paseo de la Castellana 278, 28046 Madrid, Spain. Repsol YPF’s
principal business is the exploration, development and production of crude oil and natural gas,
transportation of petroleum products,
liqueﬁed petroleum gas and natural gas, petroleum reﬁning,
production of a wide range of petrochemicals and marketing of petroleum products, petroleum
derivatives, petrochemicals, liqueﬁed petroleum gas and natural gas.

As of December 31, 2010, there are 3,764 Class A outstanding shares. As long as any Class A share
remains outstanding, the afﬁrmative vote of Argentine Government is required for: 1) mergers, 2)
acquisitions of more than 50% of YPF shares in an agreed or hostile bid, 3) transfers of all the
YPF’s production and exploration rights, 4) the voluntary dissolution of YPF or 5) change of
corporate and/or tax address outside the Argentine Republic. Items 3) and 4) will also require prior
approval by the Argentine Congress.

RESTRICTED ASSETS AND GUARANTEES GIVEN

5.
As of December 31, 2010, YPF has signed guarantees in relation to the ﬁnancing activities of
Pluspetrol Energy S.A. and Central Dock Sud S.A. in an amount of approximately US$ 3 million
and US$ 14 million, respectively. The corresponding loans have ﬁnal maturity in 2011 and 2013,
respectively.

Additionally, as of December 31, 2010, the Company has issued letters of credit in an amount of
US$ 44 million to guarantee
in an amount of
approximately US$ 24 million to guarantee the enforcement of contracts from certain controlled
companies.

environmental obligations; and guarantees

F-23

PARTICIPATION IN JOINT VENTURES AND OTHER AGREEMENTS

6.
As of December 31, 2010, the main exploration and production joint ventures and other agreements
in which YPF participates are the following:

Name and Location

Acambuco
Salta ...............................................................
Aguada Pichana
Neuque´n..........................................................
Aguaragu¨ e
Salta ...............................................................
CAM-2/A SUR
Tierra del Fuego .............................................
Campamento Central / Can˜ ado´ n Perdido
Chubut............................................................
Consorcio CNQ7/A
La Pampa and Mendoza ................................
El Tordillo
Chubut............................................................
La Tapera y Puesto Quiroga
Chubut............................................................
Llancanelo
Mendoza.........................................................
Magallanes
Santa Cruz, Tierra del Fuego and National
Continental Shelf ............................................
Palmar Largo
Formosa and Salta .........................................
Puesto Herna´ ndez
Neuque´n and Mendoza ...................................
Ramos
Salta ...............................................................
San Roque
Neuque´n..........................................................
Tierra del Fuego
Tierra del Fuego .............................................
Yacimiento La Ventana – Rı´o Tunuya´ n
Mendoza.........................................................
Zampal Oeste
Mendoza.........................................................

Ownership
Interest

Operator

22.50% Pan American Energy LLC

27.27% Total Austral S.A.

30.00% Tecpetrol S.A.

50.00% Enap Sipetrol Argentina S.A.

50.00% YPF S.A.

50.00% Petro Andina Resources Ltd. Sucursal

Argentina

12.20% Tecpetrol S.A.

12.20% Tecpetrol S.A.

51.00% YPF S.A.

50.00% Enap Sipetrol Argentina S.A.

30.00% Pluspetrol S.A.

61.55% Petrobra´ s Energı´a S.A.

15.00%(1) Pluspetrol Energy S.A.

34.11% Total Austral S.A.

30.00% Petrolera L.F. Company S.R.L.

60.00% YPF S.A.

70.00% YPF S.A.

(1) Additionally, YPF has a 27% indirect ownership interest through Pluspetrol Energy S.A.

Additionally, Energı´a Argentina S.A.
(‘‘ENARSA’’) and YPF have formed the joint venture
‘‘Proyecto GNL Escobar – Unio´ n Transitoria de Empresas’’, which aims to develop a project for
storage, regasiﬁcation and distribution of liqueﬁed natural gas (LNG) in the surroundings of the
in order to optimize and
distribution area in Buenos Aires, the main center of gas consumption,
increase the regasiﬁcation capacity. As of the date of issuance of these ﬁnancial statements, the
project is under construction and is expected to start operations during the month of May 2011.

Additionally, certain YPF’s subsidiaries participate in exploration and production agreements in the
Gulf of Mexico.

Furthermore, as of December 31, 2010, the Company tendered and resulted awarded, individually or
associated with third parties, of exploration licenses in several areas.

F-24

The assets and liabilities as of December 31, 2010, 2009 and 2008 and production costs of the joint
ventures and other agreements for the years ended December 31, 2010, 2009 and 2008 included in the
ﬁnancial statements are as follows:

2010

2009

2008

Current assets ..............................................................................
Noncurrent assets ........................................................................

Total assets ..............................................................................

Current liabilities .........................................................................
Noncurrent liabilities ...................................................................

Total liabilities .........................................................................

Production costs ..........................................................................

321
4,012

4,333

584
854

1,438

2,476

272
3,817

4,089

483
641

1,124

2,049

256
4,206

4,462

501
541

1,042

1,685

Participation in joint ventures and other agreements have been calculated based upon the latest
available ﬁnancial statements as of the end of each year, taking into account signiﬁcant subsequent
events and transactions as well as available management information.

BALANCES AND TRANSACTIONS WITH RELATED PARTIES

7.
The principal outstanding balances as of December 31, 2010, 2009 and 2008 from transactions with
inﬂuence, main shareholders and other
jointly controlled companies, companies under signiﬁcant
related parties under their control are as follows:

2010

2009

2008

Trade
receivables

Other receivables

Accounts
payable

Loans

Trade
receivables

Other receivables

Accounts
payable

Loans

Trade
receivables

Other receivables

Accounts
payable

Loans

Current

Current Noncurrent

Current

Current Noncurrent

Current

Current Noncurrent

Current

Current Noncurrent

Current

Current Noncurrent

Current

Current Noncurrent

Jointly controlled companies:
Profertil S.A. .................................................
Compan˜ ı´a Mega S.A. (‘‘Mega’’) ...................
Reﬁnerı´a del Norte S.A. (‘‘Reﬁnor’’) ............

Companies under signiﬁcant inﬂuence: ...........

Main shareholders and other related parties

under their control:

Repsol YPF ...................................................
Repsol YPF Transporte y Trading S.A. .......
Repsol YPF Gas S.A. ...................................
Repsol YPF Brasil S.A..................................
Repsol International Finance B.V.................
Repsol Netherlands Finance B.V. .................
Repsol YPF Venezuela S.A...........................
Repsol YPF Ecuador S.A. ............................
Repsol Comercial S.A.C................................
Repsol Exploracio´ n S.A. ...............................
Repsol YPF Bolivia S.A. ..............................
Repsol Butano S.A........................................
Nuevo Banco de Entre Rı´os S.A. .................
Nuevo Banco de Santa Fe S.A. ....................
Others ............................................................

14
184
29

227

50

—
—
34
—
—
—
—
—
—
—
—
—
—
—
28

62

339

1
—
10

11

—
—
—

—

1(1)

256(1)

38
—
1
5
1
—
6
6
7
12
18
19
—
—
26

139

151

—
—
—
—
—
—
—
—
—
—
—
—
—
—
—

—

256

40
6
6

52

46

122
—
4
—
—
—
6
5
—
8
23
—
—
—
43

211

309

—
—
—

—

—

—
—
—
—
—
400
—
—
—
—
—
—
27
9
22

458

458

—
—
—

—

—

—
—
—
—
—
—
—
—
—
—
—
—
28
69
—

97

97

5
152
43

200

22

—
—
35
7
—
—
—
—
—
—
—
—
—
—
17

59

1
—
—

1

—
—
—

—

168(1)

74(1)

8
—
3
—
1
—
—
—
—
—
5
—
—
—
6

23

—
—
—
—
—
—
—
—
—
—
—
—
—
—
—

—

74

281

192

6
5
16

27

25

112
—
2
—
—
—
6
4
—
9
22
—
—
—
42

197

249

—
—
—

—

—

—
—
—
—
—
766
—
—
—
—
—
—
50
75
21

912

912

—
—
—

—

—

—
—
—
—
—
380
—
—
—
—
—
—
—
—
—

380

380

4
124
70

198

16

—
4
22
13
—
—
—
—
—
—
—
—
—
—
53

92

2
—
—

2

—
—
—

—

99(1)

109(1)

7
—
2
2
1
—
—
—
—
—
—
—
—
—
65

77

—
—
—
—
—
—
—
—
—
—
—
—
—
—
—

—

306

178

109

2
—
4

6

36

68
5
1
—
—
—
6
4
—
8
20
—
—
—
12

124

166

—
—
—

—

—

—
—
—
—
—
13
—
—
—
—
—
—
23
45
13

94

94

—
—
—

—

—

—
—
—
—
—
1,036
—
—
—
—
—
—
—
—
—

1,036

1,036

(1) Includes mainly 257, 234 and 200 with Central Dock Sud S.A. as of December 31, 2010, 2009 and 2008, respectively.

F-25

The Company maintains purchase, sale and ﬁnancing transactions with related parties. The principal
purchase, sale and ﬁnancing transactions with these companies for the years ended December 31,
2010, 2009 and 2008, include the following:

Jointly controlled companies:
Profertil S.A. .............................................
Mega..........................................................
Reﬁnor.......................................................

Companies under signiﬁcant inﬂuence: .......

Main shareholders and other related parties

under their control:

Repsol YPF...............................................
Repsol YPF Transporte y Trading S.A. ...
Repsol YPF Brasil S.A. ............................
Repsol YPF Gas S.A. ...............................
Repsol International Finance B.V. ...........
Repsol Netherlands Finance B.V. .............
Repsol YPF Venezuela S.A. .....................
Repsol YPF Ecuador S.A. ........................
Repsol Comercial S.A.C. ..........................
Repsol Exploracio´ n S.A. ...........................
Repsol YPF Bolivia S.A. ..........................
Repsol Butano S.A....................................
Nuevo Banco de Entre Rı´os S.A. .............
Nuevo Banco de Santa Fe S.A. ................
Others ........................................................

2010

2009

Purchases
and services

Sales

Loans
obtained
(paid), net

Interests and
Commissions
gains (losses),
net

Purchases and
services

Sales

Loans
obtained
(paid), net

Interests and
Commissions
gains (losses),
net

Purchases and
services

Sales

2008

Loans
(granted)
collected,
net

Loans
obtained
(paid), net

Interests
gains
(losses), net

46
787
213

1,046

187

31
2
53
304
—
—
6
6
7
12
18
19
—
1
206

665

117
36
75

228

208

14
—
—
8
—
—
—
—
—
—
—
—
—
—
47

69

1,898

505

—
—
—

—

(12)

—
—
—
—
—
(793)
—
—
—
—
—
—
(23)
3
2

(811)

(823)

—
—
—

—

12

(24)
—
—
—
—
(20)
—
—
—
—
—
—
—
(2)
(5)

(51)

(39)

29
622
201

852

116

—
—
96
162
—
—
—
—
—
—
—
—
—
—
152

410

71
20
84

175

194

35
4
—
5
—
—
—
—
—
—
—
—
—
—
33

77

1,378

446

—
—
—

—

(13)

—
—
—
—
—
—
—
—
—
—
—
—
27
30
8

65

52

—
—
—

—

12

—
—
—
—
—
(51)
—
—
—
—
—
—
—
(4)
(1)

(56)

(44)

20
900
140

1,060

82

—
737
158
198
—
—
—
—
—
—
—
—
—
—
212

1,305

2,447

83
11
62

156

168

26
1,123
—
4
—
—
—
—
—
—
—
—
—
—
11

1,164

1,488

—
—
—

—

(173)

—
—
1,103
—
1,437
56
—
—
—
—
—
—
—
—
—

2,596

2,423

—
—
—

—

—

—
—
—
—
—
1,036
—
—
—
—
—
—
23
45
13

1,117

1,117

—
—
—

—

11

—
—
3
—
28
(20)
—
—
—
—
—
—
—
(3)
—

8

19

F-26

CONSOLIDATED BUSINESS SEGMENT INFORMATION

8.
The Company organizes its reporting structure into four segments which comprise: the exploration
and production, including contractual purchases of natural gas and crude oil purchases arising from
service contracts and concession obligations, as well as crude oil intersegment sales, natural gas and
its derivatives sales and electric power generation (‘‘Exploration and Production’’);
the reﬁning,
transport, purchase and marketing of crude oil and reﬁned products (‘‘Reﬁning and Marketing’’); the
petrochemical operations (‘‘Chemical’’); and other activities, not falling into these categories, are
classiﬁed under ‘‘Corporate and Other’’, which principally includes corporate administrative costs and
assets, and construction activities.

Operating income (loss) and assets for each segment have been determined after intersegment
adjustments.

Exploration
and
Production

Reﬁning and
Marketing

Chemical

Corporate
and Other

Consolidation
Adjustments

Total

Year ended December 31, 2010
Net sales to unrelated parties..........
Net sales to related parties..............
Net intersegment sales.....................

4,611
981
17,428

34,209
917
1,668

Net sales ......................................

23,020

36,794

Operating income (loss)
Income on long-term investments ...
Depreciation ....................................
Acquisitions of ﬁxed assets .............
Assets...............................................

Year ended December 31, 2009
Net sales to unrelated parties..........
Net sales to related parties..............
Net intersegment sales.....................

6,210
69
4,497
6,790
26,245

4,757
751
14,473

3,313
10
551
1,826
14,043

25,733
627
1,202

Net sales ......................................

19,981

27,562

Operating income (loss)
(Loss) income on long-term

investments

Depreciation ....................................
Acquisitions of ﬁxed assets .............
Assets...............................................

Year ended December 31, 2008
Net sales to unrelated parties..........
Net sales to related parties..............
Net intersegment sales.....................

5,379

1,896

(33)
4,073
3,879
23,753

4,016
939
12,663

24
527
1,177
11,255

25,364
1,508
1,145

Net sales ......................................

17,618

28,017

Operating income (loss)
Income on long-term investments ...
Depreciation ....................................
Acquisitions of ﬁxed assets .............
Assets...............................................

3,315
77
4,111
6,290
21,670

3,089
20
467
1,013
10,223

2,445
—
1,871

4,316

874
—
105
712
2,779

1,932
—
1,105

3,037

559

—
121
155
2,066

2,829
—
1,094

3,923

1,178
—
119
148
2,295

999
—
358

—
—
(21,325)

42,264
1,898
—

1,357

(21,325)

44,162

(952)
—
120
149
4,624

520
—
350

870

(820)

—
111
178
3,421

219
—
461

680

(815)
—
78
511
4,711

30
—
—
—
(1,102)

—
—
(17,130)

9,475
79
5,273
9,477
46,589

32,942
1,378
—

(17,130)

34,320

(15)

—
—
—
(748)

—
—
(15,363)

6,999

(9)
4,832
5,389
39,747

32,428
2,447
—

(15,363)

34,875

(102)
—
—
—
(481)

6,665
97
4,775
7,962
38,418

Export sales, net of withholdings taxes, for the years ended December 31, 2010, 2009 and 2008 were
5,678, 4,904 and 7,228, respectively. Export sales were mainly to the United States of America and
Brazil.

F-27

9.

a)

b)

SOCIAL AND OTHER EMPLOYEE BENEFITS

Performance Bonus Programs:
These programs cover certain YPF and its controlled companies’ personnel. These bonuses are
based on compliance with business unit objectives and performance. They are calculated
considering the annual compensation of each employee, certain key factors related to the
fulﬁllment of these objectives and the performance of each employee and will be paid in cash.

The amount charged to expense related to the mentioned Performance Bonus Programs was 133,
89 and 72 for the years ended December 31, 2010, 2009, and 2008, respectively.

Retirement Plan:
Effective March 1, 1995, YPF established a deﬁned contribution retirement plan that provides
beneﬁts for each employee who elects to join the plan. Each plan member will pay an amount
between 2% and 9% of his monthly compensation and YPF will pay an amount equal to that
contributed by each member.

The plan members will receive the YPF’s contributed funds before retirement only in the case of
voluntary termination under certain circumstances or dismissal without cause and, additionally,
in case of death or incapacity. YPF has the right to discontinue this plan at any time, without
incurring termination costs.

The total charges recognized under the Retirement Plan amounted approximately 25, 15 and 13,
for the years ended December 31, 2010, 2009 and 2008, respectively.

10. COMMITMENTS AND CONTINGENCIES

a)

Pending lawsuits and contingencies:
As of December 31, 2010, the Company has accrued 2,822 in connection with the pending
lawsuits, claims and contingencies which are probable and can be reasonably estimated. The
most signiﬁcant pending lawsuits and contingencies accrued are described in the following
paragraphs.

–

–

Pending lawsuits: In the normal course of its business, the Company has been sued in
numerous labor, civil and commercial actions and lawsuits. Management, in consultation
with the external counsels, has accrued an allowance considering its best estimation, based
on the information available as of the date of the issuance of these ﬁnancial statements,
including counsel fees and judicial expenses.

Liabilities and contingencies assumed by the Argentine Government: The YPF Privatization
Law provided for the assumption by the Argentine Government of certain liabilities of the
predecessor as of December 31, 1990. In certain lawsuits related to events or acts that took
place before December 31, 1990, YPF has been required to advance the payment
established in certain judicial decisions. YPF has the right to be reimbursed for these
payments by the Argentine Government pursuant to the above-mentioned indemnity.

–

Natural gas market:

the Secretariat of Energy,

to Resolution No. 265/2004 of

the Under-Secretariat of Fuels, which was

Pursuant
the Argentine
Government created a program of ‘‘useful’’ curtailment of natural gas exports and their
associated transportation service. Such program was initially implemented by means of
Regulation No. 27/2004 of
subsequently
substituted by the Program of Rationalization of Gas Exports and Use of Transportation
Capacity (the ‘‘Program’’) approved by Resolution No. 659/2004 of the Secretariat of
Energy. Additionally, Resolution No. 752/2005 of the Secretariat of Energy provided that
industrial users and thermal generators (which according to this resolution will have to
request volumes of gas directly from the producers) could also acquire the natural gas
from the cutbacks on natural gas exports through the Permanent Additional Injections
mechanism created by this Resolution. By means of the Program and/or the Permanent
Additional Injection, the Argentine Government requires natural gas exporting producers
in order to satisfy natural gas
to deliver additional volumes to the domestic market

F-28

of

of

certain

consumers

(‘‘Additional

the Argentine market

demand
Injection
Requirements’’). Such additional volumes are not contractually committed by YPF, who is
thus forced to affect natural gas exports, which execution has been conditioned. The
mechanisms established by the Resolutions No. 659/2004 and 752/2005 have been adapted
by the Secretariat of Energy Resolution No. 599/2007, modifying the conditions for the
imposition of the requirements, depending on whether the producers have signed or not
the proposed agreement, ratiﬁed by such resolution, between the Secretariat of Energy and
the Producers. Also, through Resolution No. 1410/2010 of the National Gas Regulatory
Authority (‘‘ENARGAS’’) approved the ‘‘Procedimiento para Solicitudes, Conﬁrmaciones y
Control de Gas’’ which sets new rules
for natural gas dispatch applicable to all
participants in the natural gas industry, imposing new and more severe restrictions to the
producers’ availability of natural gas. Additionally, the Argentine Government, through
instructions made using different procedures, has ordered limitations over natural gas
exports (in conjunction with the Program and the Permanent Additional Injection, named
the ‘‘Restrictions’’).

As a result of the Restrictions, in several occasions since 2004, YPF has been forced to
suspend, either totally or partially, its natural gas deliveries to some of its export clients,
with whom YPF has undertaken ﬁrm commitments to deliver natural gas.

The Company has challenged the Program, the Permanent Additional Injection and the
Additional Injection Requirements as arbitrary and illegitimate, and has invoked vis-a` -vis
the relevant clients that such measures of the Argentine Government constitute a fortuitous
case or force majeure event (act of authority) that releases the Company from any liability
and/or penalty for the failure to deliver the contractual volumes. These clients have
rejected the force majeure argument invoked by the Company, and some of them, amongst
which are included Electroandina S.A. and Empresa Ele´ctrica del Norte Grande S.A.
(‘‘Edelnor’’), have demanded the payment of
indemniﬁcations and/or penalties for the
failure to comply with ﬁrm supply commitments, and/or reserved their rights to future
claims in such respect (the ‘‘Claims’’).

On November 5, 2010, YPF, Edelnor and Electroandina entered into a settlement
agreement by which YPF, without assuming events or rights, compensates them for an
amount signiﬁcantly lower than the amount originally claimed, and the parties agreed to
solve their disputes under the arbitration that was in process, establishing: i) to terminate
and resign to all actions, rights and claims related to the natural gas supply contract; and
ii) to modify the terms of the natural gas supply contract, turning it into an interruptible
commitment. On January 7, 2011, the Secretariat of Energy approved the said settlements.

Additionally, on June 25, 2008, AES Uruguaiana Emprendimientos S.A.
(‘‘AESU’’)
claimed damages in a total amount of US$ 28.1 million for natural gas ‘‘deliver or pay’’
penalties for cutbacks accumulated from September 16, 2007 through June 25, 2008, and
also claimed an additional amount of US$ 2.7 million for natural gas ‘‘deliver or pay’’
penalties for cutbacks accumulated from January 18, 2006 until December 1, 2006. YPF
has rejected both claims. On September 15, 2008, AESU notiﬁed YPF the interruption of
the fulﬁllment of its commitments alleging delay and breach of YPF obligations. The
Company has rejected this notiﬁcation. On December 4, 2008, YPF notiﬁed that having
ceased the force majeure conditions, pursuant to the contract in force, it would suspend its
delivery commitments, due to the repeated breaches of AESU obligations. AESU has
rejected this notiﬁcation. On December 30, 2008, AESU rejected YPF’s right to suspend its
natural gas deliveries and on March 20, 2009, notiﬁed YPF the termination of
the
contract. Subsequently, AESU initiated an arbitration process in which it claims, among
other matters that the Company considers inappropriate, the payment of the ‘‘deliver or
pay’’ penalties mentioned above. YPF has also started an arbitration process against
AESU claiming, among other matters, the declaration that the termination of the contract
by AESU was unilateral and illegal under its responsibility. Both arbitral complaints had
been answered by the parties by requesting their rejection.

F-29

there are

certain claims

Furthermore,
in relation with payments of natural gas
transportation contracts associated with exports of such hydrocarbon. Consequently, one of
(‘‘TGN’’), commenced mediation
the parties, Transportadora de Gas del Norte S.A.
proceedings in order to determine the merits of such claims. The mediation proceedings did
not result in an agreement and YPF was notiﬁed of the lawsuit ﬁled against it, in which
TGN is claiming the fulﬁllment of contractual obligations and the payment of unpaid
invoices, according to their arguments, while reserving the right to claim for damages. YPF
has answered the mentioned claims, rejecting them based in the legal
impossibility for
TGN to render the transportation service and in the termination of the transportation
contract determined by YPF and notiﬁed with a complaint with ENARGAS. Additionally,
the plaintiff notiﬁed YPF that it was terminating the contract invoking YPF’s fault, basing
its decision on the alleged lack of payment of transportation fees, reserving the right to
claim for damages. In YPF’s Management opinion, the claims received up to date will not
have a material adverse effect on future results of operations.

Regarding this issue, on April 8, 2009, YPF had ﬁled a complaint against TGN with
ENARGAS, seeking the termination of the natural gas transportation contract with TGN
in connection with the natural gas export contract entered with AESU and other parties.
The termination of the contract with that company is based on: (a) the impossibility for
YPF to receive the service and for TGN to render the transportation service, due to (i) the
termination of the natural gas contract with Sulgas/AESU and (ii) the legal impossibility of
assigning the transportation contract to other shippers because of the regulations in effect,
(b) the legal
impossibility for TGN to render the transportation service on a ﬁrm basis
because of certain changes in law in effect since 2004, and (c) the Teorı´a de la Imprevisio´ n
available under Argentine law, when extraordinary events render a party’s obligations
excessively burdensome.

In addition, there are other claims in connection with the natural gas market in which
YPF is party, which are not individually signiﬁcant.

As of December 31, 2010, the Company has accrued costs for penalties associated with the
failure to deliver the contractual volumes of natural gas in the export and domestic
markets which are probable and can be reasonably estimated.

–

La Plata and Quilmes environmental claims:

La Plata: In relation with the operation of the reﬁnery that the Company has in La Plata,
there are certain claims for compensation of individual damages purportedly caused by the
operation of the La Plata reﬁnery and the environmental remediation of the channels
adjacent to the mentioned reﬁnery. During 2006, the Company submitted a presentation
before the Environmental Secretariat of the Province of Buenos Aires which put forward
for consideration the performance of a study for the characterization of environmental
associated risks. As previously mentioned, YPF has the right of indemnity for events and
claims prior to January 1, 1991, according to Law No. 24,145 and Decree No. 546/1993.
Besides, there are certain claims that could result in the requirement to make additional
investments connected with the operations of La Plata reﬁnery.

On January 25, 2011, YPF entered into an agreement with the environmental agency of
the Government of the Province of Buenos Aires (Organismo Provincial para el Desarrollo
Sostenible (‘‘OPDS’’)), within the scope of the Remediation, Liability and Environmental
Risk Control Program, created by Resolution 88/10 of
to the
the parties agreed to jointly perform an eight-year work program in the
agreement,
channels adjacent to the La Plata reﬁnery, including characterization and risk assessment
studies of
in the case that a required
remediation action is identiﬁed as a result of the risk assessment studies, the different
alternatives and available techniques will be considered, as well as the steps needed for the
implementation. Dating studies will also be performed pursuant to the agreement, in order
to determine responsibilities of the Argentine Government in accordance with its obligation
to hold YPF harmless in accordance with the article 9 of the Privatization Law N8 24,145.

the sediments. The agreement provides that,

the OPDS. Pursuant

F-30

YPF has accrued the estimated cost of the characterization and risk assessment studies
mentioned above. The cost of the remediation actions,
is recorded in those
if required,
situations where the loss is probable and can be reasonably estimated.

Quilmes: Citizens which allege to be residents of Quilmes, Province of Buenos Aires, have
ﬁled a lawsuit in which they have requested remediation of environmental damages and
also the payment of 47 plus interests as a compensation for supposedly personal damages.
leak in the poliduct running from La Plata to
They base their claim mainly on a fuel
Dock Sud, currently operated by YPF, which occurred in 1988 as a result of an illicit
detected at that time, being at that moment YPF a state-owned company. Fuel would have
emerged and became perceptible on November 2002, which resulted in remediation works
that are being performed by the Company in the affected area, supervised by the
environmental authority of
the Province of Buenos Aires. YPF has also notiﬁed the
Argentine Government that it will receive a citation, due to its obligation to indemnify the
Company against any liability according to Law No. 24,145, prior to requesting its citation
before the Court upon YPF’s response to the complaint. The Argentine Government has
denied any responsibility to indemnify YPF for this matter, and the Company has sued the
Argentine Government to obtain a declaration of invalidity of such decision. The award is
still pending. On November 25, 2009, the proceedings were transferred to the Federal
Court on Civil and Commercial Matters No. 3, Secretariat No. 6 in Buenos Aires City and
on March 4, 2010, YPF answered the complaint. In addition, other 34 judicial claims
related to similar matters have been brought against YPF amounting to approximately 17.
Additionally, the Company is aware of the existence of other out of court claims which are
based on similar allegations.

–

Environmental contingencies and other claims of YPF Holdings
subsidiary of YPF.

Inc.- a wholly owned

Laws and regulations relating to health and environmental quality in the United States of
America affect nearly all the operations of YPF Holdings Inc. These laws and regulations
set various standards regulating certain aspects of health and environmental quality,
provide for penalties and other liabilities for the violation of such standards and establish
in certain circumstances remedial obligations.

its policies and procedures in the area of pollution
YPF Holdings Inc. believes that
control, product safety and occupational health are adequate to prevent unreasonable risk
of environmental and other damage, and of resulting ﬁnancial liability, in connection with
its business. Some risk of environmental and other damage is, however,
in
particular operations of YPF Holdings Inc. and, as discussed below, Maxus Energy
Corporation (‘‘Maxus’’) and Tierra Solutions Inc.
(‘‘Tierra’’), both controlled by YPF
Holdings Inc., could have certain potential liabilities associated with operations of Maxus’
former chemical subsidiary.

inherent

YPF Holdings Inc. cannot predict what environmental
legislation or regulations will be
enacted in the future or how existing or future laws or regulations will be administered or
enforced. Compliance with more stringent
law regulations, as well as more vigorous
enforcement policies of
the regulatory agencies, could in the future require material
expenditures by YPF Holdings Inc. for the installation and operation of systems and
equipment
for remedial measures, possible dredging requirements, among other things.
Also, certain laws allow for recovery of natural resource damages from responsible parties
and ordering the implementation of interim remedies to abate an imminent and substantial
endangerment to the environment. Potential expenditures for any such actions cannot be
reasonably estimated.

In the following discussion, references to YPF Holdings Inc. include, as appropriate and
solely for the purpose of this information, references to Maxus and Tierra.

In connection with the sale of Maxus’ former chemical subsidiary, Diamond Shamrock
Chemicals Company (‘‘Chemicals’’) to Occidental Petroleum Corporation (‘‘Occidental’’) in
1986, Maxus agreed to indemnify Chemicals and Occidental from and against certain

F-31

liabilities relating to the business or activities of Chemicals prior to the selling date,
September 4, 1986 (the ‘‘selling date’’),
liabilities relating to
chemical plants and waste disposal sites used by Chemicals prior to the selling date.

including environmental

As of December 31, 2010, accruals for the environmental contingencies and other claims
totaled approximately 586. YPF Holdings Inc.’s Management believes it has adequately
accrued for all environmental contingencies, which are probable and can be reasonably
including new information or new
estimated; however,
requirements of governmental entities, could result in changes, including additions, to such
accruals in the future. The most signiﬁcant contingencies are described in the following
paragraphs:

in circumstances,

changes

Newark, New Jersey. A consent decree, previously agreed upon by the U.S. Environmental
Protection Agency (‘‘EPA’’), the New Jersey Department of Environmental Protection and
Energy (‘‘DEP’’) and Occidental, as successor to Chemicals, was entered in 1990 by the
United States District Court of New Jersey and requires implementation of a remedial
action plan at Chemical’s former Newark, New Jersey agricultural chemicals plant. The
interim remedy has been completed and paid for by Tierra. This project is in the operation
and maintenance phase. YPF Holdings Inc. has accrued approximately 58 as of December
31, 2010, in connection with such activities.

including the Passaic River adjacent

Passaic River, New Jersey. Studies have indicated that sediments of
the Newark Bay
watershed,
to the former Newark plant, are
contaminated with hazardous chemicals from many sources. These studies suggest that
older and more contaminated sediments located adjacent to the former Newark plant
generally are buried under more recent sediments deposits. Maxus, forced to act on behalf
of Occidental, negotiated an agreement with the EPA under which Tierra has conducted
further testing and studies near the plant site. While some work remains in a pending
state, these studies were substantially completed in 2005.

In addition:
–

YPF Holdings Inc. has been conducting similar studies under their own auspices for
several years.

–

–

–

The EPA and other agencies are addressing the lower Passaic River in a joint federal,
state,
local and private sector cooperative effort designated as the Lower Passaic
River Restoration Project (‘‘PRRP’’). Tierra, along with other entities, participated in
an initial remedial investigation and feasibility study (‘‘RIFS’’) in connection with the
PRRP. The parties are discussing the possibility of further work with the EPA. The
entities have agreed the allocations of costs associated with the RIFS, based on a
number of considerations.

In 2003, the DEP issued Directive No. 1 to Occidental and Maxus and certain of
their respective related entities as well as other third parties. Directive No. 1 seeks to
address natural resource damages allegedly resulting from almost 200 years of historic
industrial and commercial development along a portion of the Passaic River and a
part of its watershed. Directive No. 1 asserts that the named entities are jointly and
severally liable for the alleged natural resource damages without regard to fault. The
DEP has asserted jurisdiction in this matter even though all or part of the lower
Passaic River is subject to the PRRP. Directive No. 1 calls for the following actions:
interim compensatory restoration, injury identiﬁcation, injury quantiﬁcation and value
determination. Maxus and Tierra responded to Directive No. 1 setting forth good
faith defenses. Settlement discussions between the DEP and the named entities have
been hold, however, no agreement has been reached or is assured.

In 2004, the EPA and Occidental entered into an administrative order on consent
to which Tierra (on behalf of Occidental) has agreed to
(the ‘‘AOC’’) pursuant
conduct testing and studies to characterize contaminated sediment and biota in the
Newark bay. The initial ﬁeld work on this study, which includes testing in the
Newark Bay, has been substantially completed. Discussions with the EPA regarding

F-32

–

additional work that might be required are underway. EPA has notiﬁed other
companies in relation to the contamination of the Newark Bay. Tierra proposed that,
for phase III of the Newark Bay RIFS, the cost sharing be on a per capita basis. As
of the date of issuance of these ﬁnancial statements, the parties are considering the
proposal. However, YPF Holdings
information to determine
lacks
additional costs, if any, it might have with respect to this matter once the ﬁnal scope
of the phase III is approved, as well as the proposed distribution mentioned above.
Additionally, Tierra, acting on behalf of Occidental, is performing a separated RIFS
to characterize sediment contamination and evaluate remediation,
in
certain portions of the Hackensack River, the Arthur Kill River and the Kill van
Kull River.

if necessary,

sufﬁcient

In December 2005, the DEP issued a directive to Tierra, Maxus and Occidental
directing said parties to pay the State of New Jersey’s cost of developing a Source
Control Dredge Plan focused on allegedly dioxin-contaminated sediment in the lower
six-mile portion of the Passaic River. The development of this plan is estimated by
the DEP to cost approximately US$ 2 million. This directive was issued even though
this portion of the lower Passaic River is a subject of the PRRP. The DEP has
advised the recipients that (a) it is engaged in discussions with the EPA regarding the
subject matter of the directive, and (b) they are not required to respond to the
directive until otherwise notiﬁed. Additionally, in December 2005, the DEP sued YPF
Holdings Inc., Tierra, Maxus and other several companies, besides to Occidental,
alleging a contamination supposedly related to dioxin, DDT and other ‘‘hazardous
substances’’ discharged from Chemicals’ former Newark plant and the contamination
of the lower portion of the Passaic River, Newark Bay, other nearby waterways and
surrounding areas. The DEP seeks remediation of natural resources damaged and
punitive damages and other matters. The defendants have made responsive pleadings
to dismiss by Occidental Chemical
and ﬁlings. The Court denied motions
Corporation, Tierra and Maxus. The DEP ﬁled its Second Amended Complaint in
April 2008. YPF ﬁled a motion to dismiss for lack of personal
jurisdiction. The
motion mentioned previously was denied in September, 2008, and the denial was
conﬁrmed by the Court of Appeal. Notwithstanding, the Court denied to plaintiffs’
to ﬁle third-party
motion to bar
complaints. Third-party
and
governmental entities (including certain municipalities) which could have responsibility
in connection with the claim were ﬁled in February, 2009. DEP ﬁled its Third
Amended Complaint in August 2010, adding Maxus International Energy Company
and YPF International S.A. as additional named defendants. In September 2010,
Governmental entities of
third-party
defendants ﬁled their dismissal motions and Maxus and Tierra ﬁled their responses.
Resolution on these motions is still pending. DEP has not placed dollar amounts on
all its claims, but it has (a) contended that a US$ 50 million cap on damages under
one of the New Jersey statutes should not be applicable, (b) alleged that it has
incurred approximately US$ 118 million in past ‘‘cleanup and removal costs,’’ and is
seeking an additional award between US$ 10 and US$ 20 million to fund a study to
assess natural resource damages and, (c) notiﬁed Maxus and Tierra’s legal defense
team that DEP is preparing ﬁnancial models of costs and of other economic impacts.
In October, 2010, a number of public third-party defendants ﬁled a motion to sever
and stay, which would allow the DEP to proceed against the direct defendants.
However, the judge has ruled against this motion. Third-party defendants have also
brought motions to dismiss, which have been rejected in January 2011. Some of the
mentioned third-parties appealed the decision, and during March and April hearings
will be conducted to solve these appeals. The next step in the case will be the
preparation of a Trial Plan, which will set a schedule to follow, since the production
of evidence until the trial. As of the date of issuance of these ﬁnancial statements, it
take place.
is not possible

third party practice and allowed defendants
against

the State of New Jersey and a number of

to determine when the ﬁrst of

approximately

trials will

companies

claims

300

the

F-33

–

–

–

Simultaneously, a mediator prepared a work plan for an alternative dispute resolution
process to be presented to the parties during the ﬁrst quarter of 2011, but this
process failed when the parties could not reach a consensus.

In June 2007, EPA released a draft Focused Feasibility Study (the ‘‘FFS’’) that
outlines several alternatives for remedial action in the lower eight miles of the Passaic
River. These alternatives range from no action, which would result in comparatively
little cost, to extensive dredging and capping, which according to the draft FFS, EPA
estimated could cost from US$ 0.9 billion to US$ 2.3 billion and are all described by
EPA as involving proven technologies that could be carried out in the near term,
without extensive research. Tierra, in conjunction with the other parties of the PRRP
group, submitted comments on the legal and technical defects of the draft FFS to
EPA, as did other interested parties. In light of these comments, EPA decided to
initiate his review and informed that a revised remedy proposal will be forthcoming
in September 2011. Tierra will respond to any further EPA proposal as may be
appropriate at that time.

In August 2007, the National Oceanic Atmospheric Administration (‘‘NOAA’’) sent a
letter to the parties of the PRRP group, including Tierra and Occidental, requesting
that the group enters into an agreement to conduct a cooperative assessment of
natural resources damages in the Passaic River and Newark Bay. The PRRP group
has declined to do so at this time, citing concerns with matters such as the FFS
being revised by EPA as described above. In January 2008, the NOAA sent a letter
to YPF, YPF Holdings Inc., CLH Holdings Inc. and other entities, designating them
as potentially responsible parties (‘‘PRP’’). Such letters have been responded, rejecting
the designation as PRP. In November 2008, Tierra and Occidental entered into an
agreement with the NOAA to fund a portion of the costs it has incurred and to
conduct certain assessment activities during 2009. Approximately 20 other PRRP
members have also entered into similar agreements. In November 2009, Tierra
declined to extend this agreement for one additional year, citing concerns arising
from the Passaic River litigation.

In June 2008, the EPA, Occidental, and Tierra entered into an AOC, pursuant to
which Tierra (on behalf of Occidental) will undertake a removal action of sediment
from the Passaic River in the vicinity of the former Diamond Alkali facility. This
action will result in the removal of approximately 200,000 cubic yards of sediment,
which will be carried out in two different phases. The ﬁrst phase, which is scheduled
to begin in 2011, encompasses the removal of 40,000 cubic yards of sediments and is
expected to be completed at the beginning of 2012. The second phase involves the
removal of approximately 160,000 cubic yards of sediment. This second phase will
start after according with EPA certain development’s aspects related to it. Pursuant
to the AOC, the EPA has required the constitution of a trust fund of US$ 80 million
for the performance of the removal work. YPF Holdings Inc. originally accrued US$
80 million with respect to this matter. As of December 31, 2010, US$ 22 million has
been funded (thereby reducing the accrual in a similar amount). An additional US$
10 million must be contributed every six months, until the completion of the US$ 80
million. Notwithstanding, during 2010, letters of credit to provide ﬁnancial assurance
have been issued, in order to avoid the restriction of additional funds pursuant to the
AOC. During the removal action, contaminants not produced by the former
Diamond Alkali plant, such as PCBs and mercury, will necessarily be removed along
with dioxin. Although having recognized the estimated costs related to all works
mentioned above, YPF Holdings Inc. and its subsidiaries may seek cost recovery
from the parties responsible for such contamination, provided contaminants’ origins
were not from the Diamond Alkali plant. However, as of December 31, 2010, it is
not possible to make any predictions regarding the likelihood of success or the funds
potentially recoverable in a cost-recovery action.

F-34

As of December 31, 2010, there are approximately 282 accrued, comprising the estimated
costs for studies, the YPF Holdings Inc.’s best estimate of the cash ﬂows it could incur in
connection with remediation activities considering the studies performed by Tierra, and the
estimated costs related to the agreement, as well as certain other matters related to Passaic
River and the Newark Bay. However,
including interim
remedial measures, may be ordered. In addition, the development of new information on
remedial actions differing from the
the imposition of natural
scenarios that YPF Holdings Inc. has evaluated could result in additional costs to the
amount currently accrued.

it is possible that other works,

resource damages, or

Hudson County, New Jersey. Until 1972, Chemicals operated a chromite ore processing
plant at Kearny, New Jersey (‘‘Kearny Plant’’). According to the DEP, wastes from these
ore processing operations were used as ﬁll material at a number of sites in and near
Hudson County. The DEP and Occidental, as
signed an
administrative consent order with the DEP in 1990 for investigation and remediation work
at certain chromite ore residue sites in Kearny and Secaucus, New Jersey.

to Chemicals,

successor

Tierra, on behalf of Occidental, is presently performing the work and funding Occidental’s
share of the cost of investigation and remediation of these sites. In addition, ﬁnancial
assurance has been provided in the amount of US$ 20 million for performance of the
remedial
work. The ultimate cost of
investigation reports to the DEP in 2001, and the DEP continues to review the report.

remediation is uncertain. Tierra submitted its

Additionally, in May 2005, the DEP took two actions in connection with the chrome sites
in Hudson and Essex Counties. First, the DEP issued a directive to Maxus, Occidental and
two other chromium manufacturers directing them to arrange for the cleanup of chromite
ore residue at three sites in New Jersey City and the conduct of a study by paying the
DEP a total of US$ 20 million. While YPF Holdings Inc. believes that Maxus is
improperly named and there is little or no evidence that Chemicals’ chromite ore residue
was sent to any of these sites, the DEP claims these companies are jointly and severally
liable without regard to fault. Second, the State of New Jersey ﬁled a lawsuit against
Occidental and two other entities seeking, among other things, cleanup of various sites
where chromite ore residue is allegedly located, recovery of past costs incurred by the state
at such sites (including in excess of US$ 2 million allegedly spent for investigations and
studies) and, with respect to certain costs at 18 sites, treble damages. The DEP claims that
the defendants are jointly and severally liable, without regard to fault, for much of the
damages alleged. In February 2008, the parties reached an agreement for which Tierra will
pay US$ 5 million and will perform remediation works in three sites, with a total cost of
approximately US$ 2 million.

In November 2005, several environmental groups sent a notice of intent to sue the owners
of the properties adjacent to the former Kearny Plant (the ‘‘Adjacent Property’’), including
among others Tierra, under the Resource Conservation and Recovery Act. The stated
purpose of the lawsuit,
if ﬁled, would be to require the noticed parties to carry out
measures to abate alleged endangerments to health and the environment emanating from
the Adjacent Property. The parties have entered into an agreement that addresses the
concerns of the environmental groups, and these groups have agreed, at least for now, not
to ﬁle suit.

Pursuant to a request of the DEP, in the second half of 2006, Tierra and other parties
tested the sediments in a portion of the Hackensack River near the former Kearny Plant.
Tierra has submitted work plans for additional sampling requested by the DEP and is
presently awaiting DEP comments.

In March 2008, the DEP approved an interim response action work plan for work to be
the Kearny Plant by Tierra and the Adjacent Property by Tierra in
performed at
conjunction with other parties. This Adjacent Property was listed by EPA on the National
Priority List in 2007. In July 2010, EPA notiﬁed Tierra, along with three other parties,
which are considered potentially responsible for this adjacent property and requested to

F-35

conduct a RIFS for the site. The parties have responded and are awaiting discussion with
the EPA as to the scope of activities. At this time, it is unknown if work beyond what was
agreed to with the DEP will be required.

As of December 31, 2010, there are approximately 96 accrued in connection with the
foregoing chrome-related matters. The study of
the levels of chromium has not been
ﬁnalized, and the DEP is still reviewing the proposed actions. The cost of addressing these
chrome-related matters could increase depending upon the ﬁnal soil actions, the DEP’s
response to Tierra’s reports and other developments.

Painesville, Ohio. In connection with the operation until 1976 of one chromite ore
processing plant (‘‘Chrome Plant’’), from Chemicals, the Ohio Environmental Protection
Agency (‘‘OEPA’’) ordered to conduct a RIFS at the former Painesville’s Plant area.
Tierra has agreed to participate in the RIFS as required by the OEPA. Tierra submitted
the remedial investigation report to the OEPA, which report was ﬁnalized in 2003. Tierra
will submit required feasibility reports separately. In addition, the OEPA has approved
including the remediation of speciﬁc sites within the former Painesville
certain work,
Works area and work associated with the development plans discussed below (the
‘‘Remediation Work’’). The Remediation Work has begun. As
the OEPA approves
additional projects for the site of the former Painesville Works, additional amounts will
need to be accrued.

Over ten years ago, the former Painesville Works site was proposed for listing on the
national Priority List under the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended (‘‘CERCLA’’); however, the EPA has stated that
the site will not be listed so long as it is satisfactorily addressed pursuant to the Director’s
Order and OEPA’s programs. As of the date of issuance of these ﬁnancial statements, the
site has not been listed. YPF Holdings Inc. has accrued a total of 59 as of December 31,
2010 for its estimated share of the cost to perform the RIFS, the remediation work and
other operation and maintenance activities at this site. The scope and nature of any further
investigation or remediation that may be required cannot be determined at this time;
however, as the RIFS progresses, YPF Holdings Inc. will continuously assess the condition
of the Painesville’s plants works site and make any required changes, including additions,
to its accrual as may be necessary.

Third Party Sites. Pursuant to settlement agreements with the Port of Houston Authority
and other parties, Tierra and Maxus are participating (on behalf of Chemicals) in the
remediation of property required Chemicals’ former Greens Bayou facility where DDT and
the parties have reached an
certain other chemicals were manufactured. Additionally,
agreement with the Federal and State Natural Resources Trustees concerning natural
resources damages, which could require future additional contributions. As of December
31, 2010, YPF Holdings Inc. has accrued 17 for its estimated share of future remediation
activities associated with the Greens Bayou facility. Although the primary work was
completed in 2009, some follow-up activities and operation and maintenance remain
pending.

In June 2005, the EPA designated Maxus as a PRP at the Milwaukee Solvay Coke & Gas
site in Milwaukee, Wisconsin. The basis for this designation is Maxus alleged status as the
successor to Pickands Mather & Co. and Milwaukee Solvay Coke Co., companies that the
EPA has asserted are former owners or operators of such site. Preliminary works in
connection with the RIFS of
this site commenced in the second half of 2006. YPF
Holdings Inc. has accrued 6 as of December 31, 2010 for its estimated share of the costs
of the RIFS. YPF Holdings Inc. lacks sufﬁcient information to determine additional costs,
if any; it might have in respect of this site.

Maxus has agreed to defend Occidental, as successor to Chemicals,
in respect of the
Malone Services Company Superfund site in Galveston County, Texas. This site is a
former waste disposal site where Chemicals is alleged to have sent waste products prior to
September 1986. It is subject of enforcement activities by the EPA. Although Occidental is
one of many PRPs that have been identiﬁed and have agreed to an AOC, Tierra (which is

F-36

handling this matter on behalf of Maxus) presently believes the degree of Occidental’s
alleged involvement as successor to Chemicals is relatively small. Chemicals has also been
designated as a PRP with respect to a number of third party sites where hazardous
substances from Chemicals’ plant operations allegedly were disposed or have come to be
located. At several of these, Chemicals has no known relationship. Although PRPs are
typically jointly and severally liable for the cost of investigations, cleanups and other
response costs, each has the right of contribution from other PRPs and, as a practical
matter, cost sharing by PRPs is usually effected by agreement among them. As of
December 31, 2010, YPF Holdings Inc. has accrued approximately 2 in connection with its
estimated share of costs related to certain sites and the ultimate cost of other sites cannot
be estimated at the present time.

Black Lung Beneﬁts Act Liabilities. The Black Lung Beneﬁts Act provides monetary and
medical beneﬁts to miners disabled with a lung disease, and also provides beneﬁts to the
dependents of deceased miners if black lung disease caused or contributed to the miner’s
death. As a result of the operations of its coal-mining subsidiaries, YPF Holdings Inc. is
required to provide insurance of this beneﬁt to former employees and their dependents. As
of December 31, 2010, YPF Holdings Inc. has accrued 12 in connection with its estimate
of these obligations.

Legal Proceedings. In 2001, the Texas State Controller assessed Maxus approximately US$
1 million in Texas state sales taxes for the period of September 1, 1995 through December
31, 1998, plus penalty and interest. In August 2004, the administrative law judge issued a
decision afﬁrming approximately US$ 1 million of such assessment, plus penalty and
interest. YPF Holdings Inc. believes the decision is erroneous, but has paid the revised tax
assessment, penalty and interest (a total of approximately US$ 2 million) under protest.
Maxus ﬁled a suit in Texas state court in December 2004 challenging the administrative
decision. The matter will be reviewed by a trial de novo in the court action.

In 2002, Occidental sued Maxus and Tierra in state court in Dallas, Texas seeking a
declaration that Maxus and Tierra have the obligation under the agreement pursuant to
which Maxus sold Chemicals to Occidental to defend and indemnify Occidental from and
against certain historical obligations of Chemicals, notwithstanding the fact
that said
agreement contains a twelve-year cut-off for defense and indemnity obligations with respect
to most litigation. Tierra was dismissed as a party, and the matter was tried in May 2006.
The trial court decided that the twelve-year cut-off period did not apply and entered
judgment against Maxus. This decision was afﬁrmed by the Court of Appeals in February
2008. Maxus has petitioned the Supreme Court of Texas for review. This lawsuit was
denied. This decision will require Maxus to accept responsibility of various matters which
it has refused indemniﬁcation since 1998 which could result in the incurrence of costs in
addition to YPF Holdings
this matter. Maxus has paid
approximately US$ 17 million to Occidental, and remains in discussions with Occidental
regarding additional costs for US$ 0.2 million. Most of the claims that had been rejected
by Maxus based on the twelve-year cut-off period, were related to ‘‘Agent Orange’’. All
pending Agent Orange litigation was dismissed in December 2009, and although it is
possible that further claims may be ﬁled by unknown parties in the future, no further
signiﬁcant liability is anticipated. Additionally, the remaining claims received and refused
consist primarily of claims of potential personal
injury from exposure to vinyl chloride
monomer (‘‘VCM’’), and other chemicals, although they are not expected to result in
signiﬁcant liability. However, the declaratory judgement includes liability for claims arising
in the future, if any, related to this matters, which are currently unknown as of the date of
issuance of
in
additional liabilities for Maxus. As of December 31, 2010 YPF Holdings Inc. has accrued
approximately 1 in respect to these matters.

these ﬁnancial statements, and if such claims arise,

Inc.’s current accruals

they could result

for

In March 2005, Maxus agreed to defend Occidental, as successor to Chemicals, in respect
of an action seeking the contribution of costs incurred in connection with the remediation
of the Turtle Bayou waste disposal site in Liberty County, Texas. The plaintiffs alleged

F-37

that certain wastes attributable to Chemicals found their way to the Turtle Bayou site.
Trial for this matter was bifurcated, and in the liability phase Occidental and other parties
liable for waste products disposed of at this site.
were found severally, and not jointly,
Trial in the allocation phase of this matter was completed in the second quarter of 2007.
The court decision was appealed by Maxus. In June 2010, the Court of Appeals ruled that
the District Court had committed errors in the admission of certain documents, and
remanded the case to the District Court for further proceedings. A new ruling was issued
in January 2011, requiring Maxus to pay, on behalf of Occidental, 15.86% of the costs
incurred by one of the plaintiffs. Maxus is currently evaluating whether or not to appeal
this decision. As of December 31, 2010, YPF Holdings Inc. has accrued 15 in respect of
this matter.

including its subsidiaries,

YPF Holdings Inc.,
is a party to various other lawsuits and
environmental situations, the outcomes of which are not expected to have a material
adverse effect on YPF’s ﬁnancial condition or its future results of operations. YPF
Holdings Inc. accrues legal contingences and environmental situations that are probable
and can be reasonably estimated.

–

Tax claims:

The Company has received several claims from the Administracio´ n Federal de Ingresos
Pu´ blicos (‘‘AFIP’’) and from provincial and municipal ﬁscal authorities, which are not
individually signiﬁcant, and which have been accrued based on the best
information
available as of the date of the issuance of these ﬁnancial statements.

Additionally, YPF’s Management,
following contingencies and claims, individually signiﬁcant, have possible outcome:

in consultation with its external counsels, believes that the

–

–

in the

requested that

Asociacio´n Superﬁciarios de la Patagonia (‘‘ASSUPA’’): In August 2003, ASSUPA sued 18
companies operating exploitation concessions and exploration permits in the Neuque´n
Basin, YPF being one of them, claiming the remediation of the general environmental
damage purportedly caused in the execution of such activities, and subsidiary constitution
of an environmental restoration fund and the implementation of measures to prevent
environmental damages
the Argentine
future. The plaintiff
Government, the Federal Environmental Council (‘‘Consejo Federal de Medio Ambiente’’),
the provinces of Buenos Aires, La Pampa, Neuque´n, Rı´o Negro and Mendoza and the
Ombudsman of the Nation be summoned. It requested, as a preliminary injunction, that
the defendants refrain from carrying out activities affecting the environment. Both the
Ombudsman’s summon as well as the requested preliminary injunction were rejected by the
CSJN. YPF has answered the demand requesting its rejection, opposing failure of the
plaintiff and requiring the summon of the Argentine Government, due to its obligation to
indemnify YPF for events and claims previous to January 1, 1991, according to Law No.
24,145 and Decree No. 546/1993. The CSJN gave the plaintiffs a term to correct the
defects of the complaint. On August 26, 2008, the CSJN decided that such defects had
already been corrected and on February 23, 2009, ordered that certain provinces, the
Argentine Government and the Federal Environmental Council be summoned. Therefore,
pending issues were deferred until all third parties impleaded appear before the court. As
of the date of issuance of these ﬁnancial statements, the provinces of Rı´o Negro, Buenos
Aires, Neuque´n, Mendoza, and the Argentine government have made their presentations,
which are not available to the Company yet. The provinces of Neuque´n and La Pampa
have claimed lack of jurisdiction, which has been answered by the plaintiff, and the claim
is pending resolution.

Dock Sud environmental claims: A group of neighbors of Dock Sud, Province of Buenos
Aires, have sued 44 companies, among which YPF is included, the Argentine Government,
the Province of Buenos Aires, the City of Buenos Aires and 14 municipalities, before the
CSJN, seeking the remediation and the indemniﬁcation of the environmental collective
damage produced in the basin of the Matanza and Riachuelo rivers. Additionally, another
group of neighbors of the Dock Sud area, have ﬁled two other environmental lawsuits, one
of them desisted in relation to YPF, claiming several companies located in that area,

F-38

among which YPF is included, the Province of Buenos Aires and several municipalities, for
the remediation and the indemniﬁcation of the environmental collective damage of the
Dock Sud area and for the individual damage they claim to have suffered. At the moment,
it is not possible to reasonably estimate the outcome of
if
applicable, the corresponding legal fees and expenses that might result. YPF has the right
of indemnity by the Argentine Government for events and claims previous to January 1,
1991, according to Law No. 24,145 and Decree No. 546/1993.

these claims, as long as,

By means of sentence dated July 8, 2008, the CSJN:

the program of environmental remediation of

(i) Determined that the Basin Authority (Law No. 26,168) should be in charge of the
execution of
the basin, being the
Argentine Government, the Province of Buenos Aires and the City of Buenos Aires
responsible of its development; delegated in the Federal Court of First Instance of
Quilmes the knowledge of all the matters concerning the execution of the remediation
and reparation; declared that all
the
remediation plan will accumulate and will proceed before this court and established
that
the
this process produces that other collective actions that have for object
environmental remediation of the basin be dismissed (‘‘littispendentia’’);

the litigations related to the execution of

(ii) Decided that

the proceedings related to the determination of

the responsibilities
derived from past behaviors for the reparation of the environmental damage will
continue before the CSJN.

–

Other environmental claims in La Plata: On June 6, 2007, YPF was served with a new
complaint in which 9 residents of the vicinity of La Plata reﬁnery requested: i) the cease of
contamination and other harms they claim are attributable to the reﬁnery; and ii) the
clean-up of the adjacent channels, Rı´o Santiago and Rı´o de la Plata (soil, water and
acquiferous, including those of the reﬁnery) or, if clean-up is impossible,
indemniﬁcation
for environmental and personal damages. The plaintiff has quantiﬁed damages in 52 or an
amount to be determined from evidence produced during the proceeding. YPF believes that
most damages that are alleged by the plaintiff, might be attributable to events that
occurred prior to YPF’s privatization and would, therefore, be covered to that extent by
the indemnity granted by the Argentine Government in accordance with the Privatization
Law of YPF.

the Argentine Government

The Court has accepted the summon of
in this matter.
Notwithstanding the foresaid, the possibility of YPF being asked to afford these liabilities
is not discarded, in which case the Argentine Government must be asked to reimburse the
remediation expenses for liabilities existing prior to January 1, 1991. In addition, the claim
partially overlaps with the request made by a group of neighbors of La Plata Reﬁnery on
June 29, 1999, described in the ﬁrst paragraph of ‘‘La Plata and Quilmes environmental
claims’’. Accordingly, YPF considers that the cases should be partially consolidated to the
information and
extent
documents in order to answer the claim are being collected, and for the time being, it is
not possible to reasonably estimate the outcome, as long as,
if applicable, estimate the
corresponding legal fees and expenses that might result. The contamination that may exist
could derive from countless sources, including from disposal of waste over many years by
other industrial facilities and ships.

the claims overlap. Regarding claims not consolidated,

that

Additionally, YPF is aware of an action that has not been served yet,
in which the
plaintiff requests the clean-up of the channel adjacent to the La Plata reﬁnery, the Rı´o
Santiago, and other sectors near the coast line, and, if such remediation is not possible, an
indemniﬁcation of 500 or an amount to be determined from the evidence produced in
discovery. The claim partially overlaps with the requests made by a group of neighbors of
La Plata reﬁnery on June 29, 1999, described in the ﬁrst paragraph of ‘‘La Plata and
Quilmes environmental claims’’, and with the complaint served on June 6, 2007, mentioned
in the previous paragraph. Accordingly, YPF considers
served in this
proceeding or any other proceeding related to the same subject matters, the cases should
to claims not
be consolidated to the extent

the claims overlap. With respect

that

that

is

it

if

F-39

consolidated, for the time being,
it is not possible to reasonably estimate the monetary
outcome, as long as, if applicable, estimate the corresponding legal fees and expenses that
if
might result. Additionally, YPF believes that most damages alleged by the plaintiff,
proved, might be attributable to events that occurred prior to YPF’s privatization and
would therefore be the responsibility of the Argentine Government in accordance with the
Privatization Law concerning YPF.

In addition to the information mentioned above, YPF has entered into an agreement with
the OPDS in connection with the claims of the channels adjacent to the La Plata reﬁnery,
which is described in ‘‘La Plata and Quilmes environmental claims’’.

–

Hydrocarbon’s concessions – Provincial claims: YPF has been notiﬁed of the Resolution
No. 433/2008 issued by the Direction of Hydrocarbons, Ministry of Production of the
Province of Rı´o Negro, concerning compliance with certain obligations assumed as
production concessionaire of the areas Barranca de los Loros, Bajo del Piche, El Medanito
and Los Caldenes, all of them located in the Province of Rı´o Negro. The resolution
provides that YPF, among others, has not complied with certain obligations as production
concessionaire and claims for damages to the environment.

Considering the previous paragraph and the dispositions of the Law No. 17,319 (Law of
Hydrocarbons), YPF was requested to submit its discharge at risk of termination of the
the mentioned Law grants the concessionaire and/or
mentioned concessions. However,
licensee the right, prior to termination of the concession, to cure a contractual breach
within a certain period of time after receiving notice thereof. In this order, on May 29,
2008, YPF ﬁled a request for nulliﬁcation of the Resolution No. 433/2008, since this
resolution fail to grant YPF the mentioned right. Additionally, on June 13, 2008, YPF
submitted a response, denying the mentioned charges and, on November 12, 2008, the
the evidence production period. On
Ministry of Production ordered the initiation of
November 28, 2008, YPF requested the production of
certain evidence and the
appointment of a technical expert. As of the issuance date of these ﬁnancial statements,
YPF has argued certain aspects related with the production of evidence. On May 12, 2009,
the Company was notiﬁed of
the issuance of Resolution No. 31/09, ordering a time
extension in the evidence production period. On December 1, 2009, YPF ﬁled with the
requested documentary evidence and stated that certain aspects related to the evidence
production period are still pending. On September 16, 2010, YPF submitted a presentation
and requested the termination of this claim based on: (a) the amounts invested in the four
areas between 2007 and 2010 and (b) the actions taken as regards the environmental
matters.

–

Claims related to the gas market and others:

In addition to the information described under the title ‘‘Natural gas market’’ in this note,
and in relation to the existence of clients with whom YPF has commitments to deliver
natural gas which, as a result of the Restrictions, the Company has been forced to suspend
totally or partially the corresponding deliveries, invoking the existence of force majeure or
fortuitous event, and which, according to the estimation of the Management, constitute in
some cases contingencies with possible outcome, the Company is also involved in the
following litigations related to the natural gas market:

–

Arbitration process initiated by Transportadora de Gas del Mercosur S.A. (‘‘TGM’’):
YPF was notiﬁed of an arbitration process brought by TGM against YPF before the
International Chamber of Commerce (‘‘ICC’’), claiming unpaid and outstanding
invoices in an approximate amount of US$ 10 million plus interest until the date of
payment, in connection with the payments of the invoices established in the natural
gas transportation contract entered into in September 1998 between YPF and TGM,
associated with the natural gas export contract entered into by YPF and AESU
previously mentioned. On April 8, 2009, YPF requested the rejection of this claim
and counterclaimed asking for the termination of
the natural gas transportation
contract, based on the termination promoted by AESU and Companhı´a de Ga´ s do
the natural gas export contract.
(‘‘Sulga´ s’’) of
Estado do Rı´o Grande do Sul

F-40

–

Additionally, YPF registered a request for arbitration at the ICC against TGM,
amongst others. TGM answered the arbitral complaint by requesting the rejection of
all YPF claims and ﬁled a counterclaim against YPF asking the arbitral tribunal: i)
that YPF indemniﬁes TGM for all of the present and future damages derived from
the termination of the natural gas transportation contract and the agreement entered
into between the parties on October 2, 1998, by which YPF had agreed to pay TGM
non-capitalizable irrevocable contributions as a compensation for the extension of the
natural gas pipeline Proyecto Uruguayana; and ii) that AESU/Sulga´ s be severally
obliged to indemnify TGM for all the damages caused to TGM derived from the
termination of the natural gas supply contract, in case AESU or Sulgas are declared
responsible for that termination. Additionally, on July 10, 2009, TGM increased the
amounts of its claim to US$ 17 million and claimed an additional amount of US$
366 million as lost proﬁt, a claim for which YPF believes it would not be responsible.
YPF rejected TGM’s arguments. The Arbitration Tribunal has been constituted and
the parties agreed on the Terms of Reference in coordination with the Arbitration
Tribunal. On June 10, 2010, YPF submitted its arguments on procedural grounds
before the Arbitration Tribunal and requested the Arbitration Tribunal to determine
that it was not competent to hear the claim. In case such motion is rejected, YPF
has requested the Arbitration Tribunal to suspend this arbitration until the ongoing
arbitration with TGM, among others, is solved. On the same date, TGM submitted a
similar
the Arbitration
Tribunal’s decision to sustain the Company’s motion,
therefore suspending the
proceeding until the arbitration brought by YPF is solved.

request. On February 14, 2011, YPF was notiﬁed of

the unsuccessful attempts

National Antitrust Protection Board: On November 17, 2003, Antitrust Board
requested explanations, within the framework of an ofﬁcial investigation pursuant to
Art. 29 of the Antitrust Law, from a group of almost thirty natural gas production
companies, YPF among them, with respect to the following items: (i) the inclusion of
clauses purportedly restraining trade in natural gas purchase/sale contracts; and (ii)
observations on gas imports from Bolivia,
in particular (a) old expired contract
signed by YPF, when it was state-owned, and YPFB (the Bolivian state-owned oil
company), under which YPF allegedly sold Bolivian gas in Argentina at prices below
the purchase price; and (b)
in 2001 by Duke and
Distribuidora de Gas del Centro to import gas into Argentina from Bolivia. On
January 12, 2004, YPF submitted explanations in accordance with Art. 29 of the
Antitrust Law, contending that no antitrust violations had been committed and that
there had been no price discrimination between natural gas sales in the Argentine
market and the export market. On January 20, 2006, YPF received a notiﬁcation of
resolution dated December 2, 2005, whereby the Antitrust Board (i) rejected the ‘‘non
bis in idem’’ petition ﬁled by YPF, on the grounds that ENARGAS was not
empowered to resolve the issue when ENARGAS Resolution No. 1,289 was enacted;
and (ii) ordered that the opening of the proceedings be undertaken pursuant to the
provisions of Section 30 of the Antitrust Law. On January 15, 2007, the Antitrust
Board charged YPF and eight other producers with violations of the Antitrust Law.
YPF has contested the complaint on the basis that no violation of the law took place
and that the charges are barred by the applicable statute of limitations, and has
presented evidence in support of its position. On June 22, 2007, YPF presented to the
Antitrust Board, without acknowledging any conduct in violation of the Antitrust
Law, a commitment consistent with Art. 36 of the Antitrust Law, requiring to the
Antitrust Board to approve the commitment, to suspend the investigation and to ﬁle
the proceedings. On December 14, 2007, the Antitrust Board decided to transfer the
motion to the Court of Appeals as a consequence of the appeal presented by YPF
against the rejection of the application of the statute of limitations.

F-41

–

–

In addition, YPF is subject to other claims before the Antitrust Board which are
related to alleged price discrimination in sale of
fuels. Upon the opinion of
Management and its legal advisors, such claims have been considered as possible
contingencies.

Users and Consumers’ Association claim: The ‘‘Users and Consumers Association’’
(Unio´ n de Usuarios y Consumidores) claimed originally against Repsol YPF (then
extending its claim to YPF) the reimbursement of the overprice allegedly charged to
bottled LPG consumers between 1993 and 2001. The claim is for an unspeciﬁed sum,
amounting to 91 in the period 1993 to 1997 (this sum, brought up-to-date would be
approximately 321), together with an undetermined amount for the period 1997 to
2001. The Company claimed the application of the statute of limitations (as well as
other defenses) since, at the date of the extension of the claim, the two-year limit had
already elapsed. Notwithstanding, on August 6, 2009, the evidence production period
commenced and the evidence is now being produced.

Compan˜ı´a Mega claim: Compan˜ ı´a Mega has claimed YPF for cutbacks in natural gas
supply pursuant to their respective sales contract. YPF afﬁrmed that the deliveries of
natural gas to Mega were affected by the interference of the Argentine Government.
Besides, YPF would not have any responsibility based on the event of force majeure.
Despite the fact that the Company has material arguments of defense, taking into
account
they have been considered as possible
contingencies.

the characteristics of

the claims,

–

Other claims. YPF has been subject to claims related to the lack of payment to employees
who, according to the interpretation made by the plaintiffs, were entitled to wages for not
being able to beneﬁt from their time to rest while on duty. The labor authority has issued
an arbitral award imposing on the Company the payment of the hours during which the
employees were on duty as actually worked time. YPF has submitted a motion to declare
the decision null, which has been rejected. Due to the foregoing, YPF has ﬁled a lawsuit
requesting the judge declared the administrative decision void as well as a preliminary
injunction. As the said lawsuit was rejected, the Company has appealed that decision. On
the court admitted the preliminary injunction and suspended the
March 30, 2011,
administrative proceedings. The amount of
the claim is to be determined during the
proceedings.

Additionally, the Company has received other labor, civil and commercial claims and several
claims from the AFIP and from provincial and municipal ﬁscal authorities, not individually
signiﬁcant, which have not been accrued since Management, based on the evidence available as
of
these ﬁnancial statements, has considered them to be possible
contingencies.

the date of

issuance of

Additional information
–

Liqueﬁed petroleum gas market: On March 22, 1999, YPF was notiﬁed of Resolution No.
189/1999 from the former Secretariat of Industry, Commerce and Mining of Argentina,
which imposed a ﬁne on the Company of 109 based on the interpretation that YPF had
purportedly abused of its dominant position in the bulk liqueﬁed petroleum gas (‘‘LPG’’)
market due to the existence of different prices between the exports of LPG and the sales
to the domestic market from 1993 through 1997. In July 2002, the Argentine Supreme
Court conﬁrmed the ﬁne and YPF carried out the claimed payment.

Additionally, Resolution No. 189/1999 provided the beginning of an investigation in order
to prove whether the penalized behavior continued from October 1997 to March 1999. On
the National Antitrust Protection Board (the ‘‘Antitrust Board’’)
December 19, 2003,
imputed the behavior of abuse of dominant position during the previously mentioned
period to the Company. On January 20, 2004, the Company answered the notiﬁcation: (i)
opposing the preliminary defense claiming the application of the statutes of limitation and

F-42

alleging the existence of defects in the imputation procedure (absence of majority in the
resolution that decided the imputation and pre-judgment by its signers); (ii) arguing the
absence of abuse of dominant position; and (iii) offering the corresponding evidence.

The request of invalidity by defects in the imputation procedure mentioned above was
rejected by the Antitrust Board. This resolution of the Antitrust Board was conﬁrmed by
the Economic Penal Appellate Court, and it was conﬁrmed, on September 27, 2005,
pursuant to the Argentine Supreme Court’s (‘‘CSJN’’) rejection of the complaint made by
YPF due to the extraordinary appeal denial.

latter mentioned rejected both appeals

Additionally, on August 31, 2004, YPF ﬁled an appeal with the Antitrust Board in relation
to the resolution that denied the claim of statutes of limitation. The Antitrust Board
conceded the appeal and remitted proceedings for its resolution by the Appeal Court.
However,
in March 2006, YPF was notiﬁed that the proceedings were opened for the
production of evidence. During August and September 2007, testimonial hearings were held
for YPF’s witnesses. On August 12, 2008, the Appeal Court in Criminal Economic Matters
rejected the statute of limitation argument opposed by YPF. Such decision was appealed
by the Company. Upon the conﬁrmation of the Antitrust Board’s decision given by the
Chamber B, YPF has appealed that judgment by cassation and extraordinary appeals,
because the Antitrust Board applied Law No. 22,262 and Chamber B applied Law No.
(cassation and extraordinary),
25,156. The
consequently YPF presented complaint appeals against the cassation appeal, denied on
December 18, 2008, and against the Extraordinary Appeal, denied on February 17, 2009.
Regarding the administrative proceedings before
evidence
production period has ended, and on November 25, 2009, YPF presented its closing
statement. On December 22, 2009, Chamber IV of the Court of Cassation rejected the
appeal against the rejection of YPF’s statute of limitations argument by Chamber B of the
National Court of Appeals in Criminal Economic Matters. The extraordinary appeal
presented against this decision was denied on July 14, 2010. Furthermore, on December 21,
2009, YPF ﬁled another claim concerning the statutes of limitations before the Antitrust
Board. The Antitrust Board rejected the presentation. YPF appealed such decision
requesting the intervention of Chamber B of the National Court of Appeals in Criminal
Economic Matters, and presented its arguments on October 7, 2010. On December 22,
2010, YPF was notiﬁed that Chamber B had ruled in its favor, by revoking CNDC’s
decision and ordering the termination of the proceedings. As of the issuance date of these
ﬁnancial statements the judgment is ﬁnal.

the Antitrust Board,

the

b)

Environmental liabilities:
YPF is subject to various provincial and national laws and regulations relating to the protection
of the environment. These laws and regulations may, among other things, impose liability on
resulting from
the cost of pollution clean-up and environmental damages
companies
operations. Management believes that the Company’s operations are in substantial compliance
with Argentine laws and regulations currently in force relating to the protection of
the
environment, as such laws have historically been interpreted and enforced.

for

the Company is periodically conducting new studies

to increase its knowledge
However,
concerning the environmental situation in certain geographic areas where the Company operates
in order to establish their status, causes and necessary remediation and, based on the aging of
the environmental
in
accordance with the contingencies assumed by the Argentine Government for liabilities existing
prior to December 31, 1990. Until these studies are completed and evaluated, the Company
cannot estimate what additional costs, if any, will be required. However, it is possible that other
works, including provisional remedial measures, may be required.

issue, to analyze the possible responsibility of Argentine Government,

In addition to the hydrocarbon wells abandonment legal obligations for 5,471 as of December
31, 2010, the Company has accrued 507 corresponding to environmental remediation, which
evaluations and/or remediation works are probable and can also be reasonably estimated, based
on the Company’s existing remediation program. Legislative changes, on individual costs and/or

F-43

technologies may cause a re-evaluation of the estimates. The Company cannot predict what
environmental
legislation or regulation will be enacted in the future or how future laws or
regulations will be administered. In the long-term, this potential changes and ongoing studies
could materially affect future results of operations.

c)

Contractual commitments and regulatory requirements:
–

Contractual commitments: The Company has signed contracts by means of which it has
committed to buy certain products and services, and to sell natural gas, liqueﬁed petroleum
gas and other products. Some of the mentioned contracts include penalty clauses that
stipulate compensations for a breach of the obligation to receive, deliver or transport the
product object of the contract.

In particular, the Company has renegotiated certain natural gas export contracts, and has
agreed certain limited compensations
in case of any delivery interruption and/or
suspension, for any reason, except for physical force majeure event. The estimated losses
if any, considering the compensations mentioned above, are
for contracts in progress,
charged to the income of the year in which are identiﬁed.

–

residential and small

Natural gas regulatory requirements: In addition to the regulations that affect the natural
gas market mentioned in ‘‘Natural gas market’’ (Note 10.a), on June 14, 2007, Resolution
No. 599/2007 of the Secretariat of Energy was published in the Ofﬁcial Gazette (the
‘‘Resolution’’). This Resolution approved an agreement with natural gas producers
regarding the natural gas supply to the domestic market during the period 2007 through
this Agreement 2007-2011 is to
2011 (the ‘‘Agreement 2007-2011’’). The purpose of
guarantee the normal supply of the natural gas domestic market during the period 2007
through 2011, considering the domestic market demand registered during 2006 plus the
growth of
‘‘Priority
Demand’’). According to the Resolution, the producers that have signed the Agreement
2007-2011 commit to supply a part of the Priority Demand according to certain percentage
determined for each producer based upon its share of production for the 36 months period
prior to April 2004. In case of shortage to supply Priority Demand, natural gas exports of
producers that did not sign the Agreement 2007-2011 will be the ﬁrst to be called upon in
order to satisfy such mentioned shortage. The Agreement 2007-2011 also establishes terms
of effectiveness and pricing provisions for the Priority Demand consumption. Considering
that the Resolution anticipates the continuity of the regulatory mechanisms that affect the
exports, YPF has appealed the Resolution and has expressly stated that the execution of
the Agreement 2007-2011 does not mean any recognition by YPF of the validity of that
Resolution. On June 22, 2007, the National Direction of Hydrocarbons notiﬁed that the
Agreement 2007-2011 reached the sufﬁcient level of subscription.

consumption (the

commercial

customer’s

Additionally, on October 4, 2010, the Ofﬁcial Gazette published ENARGAS Resolution
the ‘‘Procedimiento para Solicitudes, Conﬁrmaciones y
No. 1410/2010 that approves
Control de Gas’’ which sets new rules
for natural gas dispatch applicable to all
participants in the natural gas industry, imposing new and more severe restrictions to the
producers’ availability of natural gas, as follows. By virtue of these procedures, distributors
remain able to request all the natural gas necessary to cover the Priority Demand even in
the case of natural gas volumes that exceed those that the Secretariat of Energy would
have allocated by virtue of the Agreement ratiﬁed by the Resolution No. 599/07. Producers
are obligated to conﬁrm all the natural gas requested by distributors to supply the Priority
Demand. The producers’ shares in such volumes follow the allocation criterion established
by the Agreement 2007-2011. It is not possible to predict the estimated demand of the
Argentine market that must be satisﬁed by the producers, whether or not the producer
signed the Agreement 2007-2011. Once the Priority Demand has been supplied,
the
volumes requested by the rest of the segments must be conﬁrmed, leaving the exports last
in order of priority. In case the programming do not yield sustainable results, with respect
to the objective of maintaining the equilibrium and preserving the operation of
the
transportation and distribution systems, the necessary reprogramming and redirections will

F-44

–

–

take place. In case the producer’s conﬁrmations are of a lower volume than requested, the
transporters will be in charge of making conﬁrmations adequate by redirecting natural gas
until the volume required by distributors according to Priority Demand is completed. This
greater volume will have to be withdrawn from the conﬁrmations made by that producer
to other clients. If the producer would not have conﬁrmed natural gas to other clients
from the same basin, the lacking volume will be requested to the rest of the natural gas
producers. Therefore, this procedure imposes a supply obligation that is jointly liable for
all producers in case any producer supplies natural gas in a deﬁcient way.

that wishes to export diesel or crude oil

the Secretariat of Energy added other petroleum products

Liquid hydrocarbons regulatory requirements: Resolution No. 1,679/04 of the Secretariat of
Energy reinstalled the registry of diesel and crude oil export
transactions created by
Executive Decree No. 645/02, and mandated that producers, sellers, reﬁning companies and
any other market agent
to register such
transaction and to demonstrate that domestic demand has been satisﬁed and that they
have offered the product to be exported to the domestic market. In addition, Resolution
to the
No. 1,338/06 of
registration regime created by Executive Decree No. 645/02, including gasoline, fuel oil and
its derivatives, diesel, aviation fuel, asphalts, certain petrochemicals, certain lubricants, coke
and petrochemical derivatives. Resolution No. 715/07 of
the Secretariat of Energy
empowered the National Reﬁning and Marketing Director to determine the amounts of
diesel to be imported by each company,
in speciﬁc periods of the year, to compensate
exports of products included under the regime of Resolution No. 1,679/04; the fulﬁllment
of this obligation to import diesel
is necessary to obtain authorization to export the
products included under Decree No. 645/02. In addition, certain regulations establish that
exports are subordinated to the supply of the domestic market. In this way, Resolution
No. 25/06 of the Secretariat of Domestic Commerce, issued within the framework of Law
No. 20,680,
imposes on each Argentine reﬁning company the obligation to supply all
reasonable diesel fuel demand, by supplying certain minimum volumes (which at least
should be volumes supplied the year before plus the positive correlation between diesel
demand
reference). The mentioned
commercialization should be done without altering or affecting the normal operation of the
diesel market.

from the month

accumulated

and GDP

Additionally, Rule 168/04 requires companies intending to export LPG to ﬁrst obtain an
authorization from the Secretariat of Energy, by demonstrating that local demand was
satisﬁed or that an offer to sell LPG to local demand has been made and rejected.

In January 2008, the Secretariat of Domestic Commerce issued Resolution No.14/2008,
whereby the reﬁning companies were instructed to optimize their production in order to
obtain maximum volumes according to their capacity.

Other regulatory requirements: In connection with certain natural gas export contracts from
the Noroeste basin in Argentina, YPF presented to the Secretariat of Energy the
accreditation of the existence of natural gas reserves of that basin in adherence to export
permits. In case the Secretariat of Energy considers that the natural gas reserves are
insufﬁcient, it could resolve the expiration or partial or total suspension of one or several
export permits. The Secretariat of Energy limited preventively the exportable volumes of
natural gas in a 20% by Note No. 1,009/2006. All of this is connected with the export
authorization given by Resolution No. 167/1997 of the Secretariat of Energy (80% of the
maximum exportable quantities still remain).

During 2005, the Secretariat of Energy by means of Resolution No. 785/2005 modiﬁed by
Resolution No. 266/2008 of
the Ministry of Federal Planning, Public Investment and
Services, created the National Program of Hydrocarbons and its derivatives Warehousing
Aerial Tank Loss Control, measure aimed at reducing and correcting environmental
pollution caused by hydrocarbons and its derivatives warehousing-aerial
tanks. The
Company has begun to develop and implement a technical and environmental audit plan
as required by the resolution.

F-45

–

Agreements of extension of concessions: On December 28, 2000, through Decree No. 1,252/
2000, the Argentine Federal Executive Branch (the ‘‘Federal Executive’’) extended for an
additional term of 10 years and until November 2027 the concession for the exploitation of
Loma La Lata - Sierra Barrosa area granted to YPF. The extension was granted under the
terms and conditions of
the Extension Agreement executed between the Argentine
Government,
the Province of Neuque´n and YPF on December 5, 2000. Under this
agreement, YPF paid US$ 300 million to the Argentine Government for the extension of
the concession mentioned above, which were recorded in ‘‘Fixed Assets’’ on the balance
sheet and committed, among other things,
to deﬁne a disbursement and investment
program of US$ 8,000 million in the Province of Neuque´n from 2000 to 2017 and to pay
to the Province of Neuque´n 5% of the net cash ﬂows arising out of the concession during
each year of
the extension term. The previously mentioned commitments have been
affected by the changes in economic rules established by Public Emergency and Exchange
System Reform Law No. 25,561.

these concessions

to extend for ten additional years the term of

Additionally, in 2008 and 2009, the Company entered into a series of agreements with the
the production
Province of Neuque´n,
concessions on several areas located in that province, which, as result of
the above
mentioned agreement, will expire between 2026 and 2027. As a condition for the extension
the Company undertook the following commitments upon the
of
execution of the agreements: i) to make to the Province total initial payments of US$ 204
million; ii) to pay in cash to the Province an ‘‘Extraordinary Production Royalty’’ of 3%
of
the parties agreed to make
adjustments of up to an additional 3% in the event of an extraordinary income according
to the mechanisms and reference values established in each signed agreement; iii) to carry
out exploration activities in the remaining exploration areas and make certain investments
and expenditures in the production concessions that are the purpose of the agreements in a
total amount of US$ 3,512 million until the expiring date of the concessions; and iv) to
make Corporate Social Responsibility contributions to the Province of Neuque´n in a total
amount of US$ 23 million.

the production of

In addition,

the areas

involved.

d) Operating leases:

As of December 31, 2010, the main lease contracts correspond to the rental of oil and gas
production and drilling equipment, ships, natural gas compression equipment and real estate for
service stations. Charges recognized under these contracts for the year ended December 31, 2010,
amounted to 1,210 and has been recognized in ‘‘Rental of real estate and equipment’’ and
‘‘Operation services and other service contracts’’.

As of December 31, 2010, estimated future payments related to these contracts are as follows:

Within
1 year

From 1 to
2 years

From 2 to
3 years

From 3 to
4 years

From 4 to
5 years

More than
5 years

Estimated future payments ......

958

641

302

140

66

93

F-46

11. RESTRICTIONS ON UNAPPROPRIATED RETAINED EARNINGS
In accordance with the provisions of Law No. 19,550, 5% of net income for each ﬁscal year has to
the Company’s capital
be appropriated to the legal reserve until such reserve reaches 20% of
(subscribed capital plus adjustment to contributions). The legal reserve is fully integrated amounting
2,243.

in excess of accumulated
Under Law No. 25,063, dividends distributed, either in cash or in kind,
taxable income as of the end of the year immediately preceding the dividend payment or distribution
date, shall be subject to a 35% income tax withholding as a sole and ﬁnal payment, except for those
distributed to shareholders resident in countries beneﬁted from treaties for the avoidance of double
taxation, which will be subject to a minor tax rate.

12. SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN ACCOUNTING PRINCIPLES

FOLLOWED BY THE COMPANY AND UNITED STATES GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES

The consolidated ﬁnancial statements have been prepared in accordance with Argentine GAAP, which
differs in certain respects from generally accepted accounting principles in the United States of
America (‘‘U.S. GAAP’’).

The differences between Argentine GAAP and U.S. GAAP are reﬂected in the amounts provided in
Notes 13 and 14 and principally relate to the items discussed in the following paragraphs:

Functional and reporting currency

a.
Under Argentine GAAP, ﬁnancial statements are presented in constant Argentine pesos (‘‘reporting
currency’’), as mentioned in Note 1.a. Foreign currency transactions are recorded in Argentine pesos
by applying to the foreign currency amount the exchange rate between the reporting and the foreign
currency at the date of the transaction. Exchange rate differences arising on monetary items in
foreign currency are recognized in the income statement of each year.

Under U.S. GAAP, a deﬁnition of the functional currency is required, which may differ from the
reporting currency. Management has determined for YPF and certain of its subsidiaries and investees
the U.S. dollar as its functional currency in accordance with the Accounting Standard Codiﬁcation
‘‘Foreign Currency translation’’ (‘‘ASC No. 830’’). Therefore, the Company has
(‘‘ASC’’) No. 830,
remeasured into U.S. dollars its ﬁnancial statements and the ﬁnancial statements of the mentioned
subsidiaries and investees as of December 31, 2010, 2009 and 2008, prepared in accordance with
Argentine GAAP by applying the procedures speciﬁed in ASC No. 830. The objective of
the
remeasurement process is to produce the same results that would have been reported if the accounting
records had been kept in the functional currency. Accordingly, monetary assets and liabilities are
remeasured at the balance sheet date (current) exchange rate. Amounts carried at prices in past
transactions are remeasured at the exchange rates in effect when the transactions occurred. Revenues
and expenses are remeasured on a monthly basis at the average rates of exchange in effect during the
period, except for consumption of nonmonetary assets, which are remeasured at the rates of exchange
in effect when the respective assets were acquired. Translation gains and losses on monetary assets
and liabilities arising from the remeasurement are included in the determination of net income (loss)
in the period such gains and losses arise. For certain YPF’s subsidiaries and investees, Management
has determined the Argentine peso as its functional currency. Translation adjustments resulting from
the process of translating the ﬁnancial statements of the mentioned subsidiaries and investees into
U.S. dollars are not included in determining net income and are reported in other comprehensive
income (‘‘OCI’’) as a component of shareholders’ equity.

The amounts obtained from the process referred to above are translated into Argentine pesos
following the provisions of ASC No. 830. Assets and liabilities were translated at the current selling
exchange rate of Argentine pesos 3.98, 3.80 and 3.45 to US$ 1, as of December 31, 2010, 2009 and
2008, respectively. Revenues, expenses, gains and losses reported in the income statement are
translated at the exchange rate existing at the time of each transaction or,
if appropriate, at the
weighted average of
the exchange rates during the period. Translation effects of exchange rate
changes are included in OCI as a component of shareholders’ equity.

F-47

Proportional consolidation

b.
As discussed in Note 1, YPF has proportionally consolidated, net of intercompany transactions,
assets, liabilities, revenues, income, costs and expenses of investees and joint ventures in which joint
control
is held. Under U.S. GAAP these investees and joint ventures not engaged in oil and gas
activities, are accounted for by the equity method. The mentioned proportional consolidation
generated under Argentine GAAP an increase of 966, 965 and 804 in total assets and total liabilities
as of December 31, 2010, 2009 and 2008, respectively, and an increase of 1,684, 1,433 and 1,770 in
net sales and 609, 551, and 681 in operating income for the years ended December 31, 2010, 2009
and 2008, respectively.

Valuation of inventories

c.
As described in Note 2.b, the Company values its inventories of reﬁned products for sale, products in
process of reﬁning and separation, crude oil and natural gas at replacement cost provided that does
not exceed net realizable value. Under U.S. GAAP, these inventories should be valued at the lower of
cost or market, which is deﬁned as replacement cost, provided that it does not exceed net realizable
value or is not less than net realizable value reduced by a normal proﬁt margin. As the turnover ratio
there have been no signiﬁcant differences between inventories valued at
of
replacement cost and at historical cost using ﬁrst
(‘‘FIFO’’) method for the years
presented.

inventories is high,

in ﬁrst out

Impairment of long-lived assets

d.
Under Argentine GAAP,
long-lived assets are grouped
with other assets at business segment level (see Note 8). With respect to long-lived assets that are
held as pending for sale or disposal, the Company’s policy is to record these assets at amounts that
did not exceed net realizable value.

in order to perform the recoverability test,

Under U.S. GAAP, considering the characteristic of the Argentinean market, which are also affected
by certain regulatory provisions, oil properties are grouped into a unique cash generating unit and
gas properties are grouped by basin, considering logistics restrictions. Other long-lived assets are
aggregated, so that the discrete cash ﬂows produced by each group of assets may be separately
analyzed. Each group of assets is tested following the guidelines of ASC No. 360, ‘‘Accounting for
the Impairment of Long-Lived Assets’’, by comparing the net book value of such group of assets
with the expected undiscounted cash ﬂow. If the book value exceeds the expected undiscounted cash
ﬂow, then the impairment losses are measured as the amount by which the carrying amount of the
assets exceeds the fair value of the assets. When market values are not available, the Company
estimates them using the expected future cash ﬂows discounted at a rate commensurate with the risks
associated with the recovery of the assets.

There were no impairment charges under U.S. GAAP for the years ended December 31, 2010 and
impairment charges under U.S. GAAP amounted to 124 for the year ended
2009. Additional
December 31, 2008, and were included as operating income from continuing operations. The
impairment recorded in year ended December 31, 2008, was mainly the result of a decrease in oil and
gas reserves affecting certain long-lived assets of the YPF’s Exploration and Production Business
Segment.

The adjusted basis of ﬁxed assets book values after impairment charges results in lower depreciation
under U.S. GAAP of 181, 173 and 119 for the years ended December 31, 2010, 2009 and 2008,
respectively.

Pension Plans

e.
As displayed in Note 2.e, YPF Holdings Inc. has non-contributory deﬁned-beneﬁt pension plans and
postretirement and postemployment beneﬁts (‘‘pension plans’’).

Under Argentine GAAP, the Company fully recognized the underfunded status of pension plans as a
liability. The actuarial
losses were charged to the ‘‘Other (expense) income, net’’ account of the
statement of income.

F-48

Under U.S. GAAP the Company adopted SFAS No. 158 ‘‘Employers’ Accounting for Deﬁned Beneﬁt
Pension and Other Postretirement Plans-an amendment of FASB Statements No. 87, 88, 106, and 132
(R)’’ codiﬁed into ASC No. 320. Under provisions of ASC No. 320 the Company fully recognized
the underfunded status of deﬁned-beneﬁt pension and postretirement plans as a liability in the
ﬁnancial statements reducing the Company’s shareholders’ equity through Accumulated OCI account.
Unrecognized actuarial
income during the
expected average remaining service period of the employees participating in the plans and the life
expectancy of retired employees.

losses and gains are recognized in the statement of

Accounting for asset retirement obligations

f.
‘‘Accounting for Asset Retirement Obligations’’ (‘‘ASC No. 410’’), addresses ﬁnancial
ASC No. 410,
accounting and reporting for obligations associated with the retirement of tangible long-lived assets
and the associated asset retirement cost. The standard applies to legal obligations associated with the
retirement of long-lived assets that result from the acquisition, construction, development and normal
use of the asset. ASC No. 410 requires that the fair value of a liability for an asset retirement
obligation be recognized in the period in which it is incurred, if a reasonable estimate of fair value
can be made. The asset retirement obligations liability is built up in cash ﬂow layers, with each layer
being discounted using the discount rate as of the date that the layer was created. Measurement of
the entire obligation using current discount rates is not permitted. Each cash ﬂow layer is added to
the carrying amount of the associated asset. This additional carrying amount is then depreciated over
the life of the asset. The liability is increased due to the passage of time based on the time value of
money (‘‘accretion expense’’) until the obligation is settled. The activity with respect to retirement
obligations under US GAAP is detailed in Note 14.c.

Argentine GAAP is similar to ASC No. 410, except for a change in the discount rate which is treated
as a change in estimates, so the entire liability must be recalculated using the current discount rate,
being the change added or reduced from the related asset.

Consolidation of variable interest entities – Interpretation of ARB No. 51

g.
Under Argentine GAAP consolidation is based on having the votes necessary to control corporate
decisions (Note 1). Under US GAAP, ASC 810 ‘‘Consolidation’’, as amended by ASU 2009-17,
adopted a qualitative approach towards consolidation, which requires a reporting enterprise to have
some economic exposure to a variable interest entity (‘‘VIE’’) along with the power to direct the
activities that most signiﬁcantly impact the economic performance of the VIE in order to consolidate
such VIE.

Until May, 2008, YPF had operations with one VIE which had been created in order to structure
YPF’s future deliveries of oil (‘‘FOS transaction’’).

YPF entered into a forward oil sale agreement that called for the future delivery of oil for the life of
the contract. YPF was paid in advance for the future delivery of oil. The price of the oil to be
delivered was calculated using various factors, including the expected future price and quality of the
crude oil being delivered. The counterparty or assignee to the oil supply agreement was a VIE
incorporated in the Cayman Islands, which ﬁnanced itself through the issuance of notes. The oil to be
delivered under the supply agreement was subsequently sold in the open market.

YPF was exposed to any change in the price of the crude oil it will deliver in the future under the
outstanding FOS transaction. YPF’s exposure derived from crude oil swap agreement under which
YPF paid a ﬁxed price with respect to the nominal amount of the crude oil sold, and received the
variable market price of such crude oil.

In May 2008, YPF delivered the last barrels committed under the FOS transaction; consequently the
transaction and the swap agreement expired. As of December 31, 2010, 2009 and 2008, no
shareholder’s equity reconciliation adjustment is required.

The adoption of ASU 2009-17 as of December 31, 2010, did not have any impact in the Company’s
ﬁnancial statements as of such date.

F-49

Capitalization of ﬁnancial expenses

h.
Under Argentine GAAP, for those assets that necessarily take a substantial period of time to get
ready for its intended use, borrowing costs (including interest and exchange differences) should be
capitalized. Accordingly, borrowing costs for those assets whose construction period exceeds one year
have been capitalized, provided that such capitalization does not exceed the amount of ﬁnancial
expense recorded in that year.

Under US GAAP, interest expense on qualifying assets must be capitalized, regardless of the asset’s
construction period.

The effect on net income and shareholders’ equity as of December 31, 2010, 2009 and 2008 is
included in ‘‘Capitalization of ﬁnancial expenses’’ in the reconciliation in Note 13.

The adjusted basis of ﬁxed assets results in higher depreciation under U.S. GAAP of 80, 57 and 47
for the years ended December 31, 2010, 2009 and 2008, respectively.

Receivables (ASC 310)

i.
In July 2010, the FASB issued ASU 2010-20 ‘‘Disclosures about the Credit Quality of Financing
Receivables and the Allowance for Credit Losses’’, which became effective with the Company‘s
reporting at December 31, 2010. This standard amends and expands disclosure requirements about the
credit quality of ﬁnancing receivables and the related allowance for credit losses. As a result of these
amendments, companies are required to disaggregate, by portfolio segment or class of ﬁnancing
receivables, certain existing disclosures and provide certain new disclosures about ﬁnancing receivables
and related allowance for credit losses. Adoption of the standard did not have an impact on the
Company’s existing disclosures.

F-50

13. RECONCILIATION OF NET INCOME AND SHAREHOLDERS’ EQUITY TO UNITED

STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES

The following is a summary of the signiﬁcant adjustments to net income for each of the years ended
December 31, 2010, 2009 and 2008, and to shareholders’ equity as of December 31, 2010, 2009 and
2008, which would have been required if U.S. GAAP had been applied instead of Argentine GAAP
in the consolidated ﬁnancial statements. Amounts are expressed in millions of Argentine pesos.

Net income according to Argentine GAAP ................................
Increase (decrease) due to:
Elimination of the inﬂation adjustment into Argentine constant
pesos (Note 1.a and 12.a)........................................................
Remeasurement into functional currency (Note 12.a) ................
Impairment of long-lived assets (Note 12.d) ...............................
Pension Plans (Note 12.e)............................................................
Asset Retirement Obligations (Note 12.f) ...................................
Consolidation of VIEs (Note 12.g) .............................................
Capitalization of ﬁnancial expenses (Note 12.h) .........................
Deferred income tax(1) .................................................................

2010

2009

2008

5,790

3,689

3,901

450
(1,570)
181
27
41
—
(66)
(167)

537
(1,478)
173
(40)
(114)
—
(17)
(145)

725
(1,230)
(5)
(79)
(55)
35
(41)
(237)

Net income in accordance with U.S. GAAP ..........................

4,686

2,605

3,014

Shareholders’ equity according to Argentine GAAP ..................
Increase (decrease) due to:
Elimination of the inﬂation adjustment into Argentine constant
pesos (Note 1.a and 12.a)........................................................

Remeasurement into functional currency and translation into

reporting currency (Note 12.a)................................................
Impairment of long-lived assets (Note 12.d) ...............................
Pension plans (Note 12.e)............................................................
Asset Retirement Obligations (Note 12.f) ...................................
Capitalization of ﬁnancial expenses (Note 12.h) .........................
Deferred income tax(1) .................................................................

19,040

17,701

18,973

(2,491)

(2,941)

(3,478)

9,875
(337)
—
(170)
141
1,034

10,265
(498)
—
(203)
199
1,194

9,150
(613)
(1)
(79)
197
1,343

Shareholders’ equity in accordance with U.S. GAAP ............

27,092

25,717

25,492

(1) Corresponds to the effect of Deferred Income Tax, if applicable, to U.S. GAAP adjustments.

F-51

The summarized consolidated balance sheets as of December 31, 2010, 2009 and 2008, and
consolidated statements of income and cash ﬂows for the years then ended, remeasured into U.S.
dollar and translated into Argentine pesos under U.S. GAAP, after giving effect to the adjustments
detailed above and the elimination of the proportional consolidation performed under Argentine
GAAP, are presented only for the convenience of the readers and would be as follows:

Summarized consolidated balance sheets

2010

2009

2008

Current assets ..............................................................................
Fixed assets..................................................................................
Other noncurrent assets...............................................................

Total assets..............................................................................

Current liabilities .........................................................................
Noncurrent liabilities ...................................................................
Shareholders’ equity ....................................................................

Total liabilities and shareholders’ equity ................................

14,391
35,189
4,173

53,753

16,996
9,665
27,092

53,753

11,129
32,781
2,634

46,544

11,870
8,957
25,717

46,544

9,653
31,954
2,644

44,251

10,900
7,859
25,492

44,251

Summarized consolidated statements of income

2010

2009

2008

Net sales(1) ...................................................................................
Operating income (Note 14.a) .....................................................
Net income ..................................................................................
Earnings per share, basic and diluted .........................................

42,459
7,690
4,686
11.91

32,931
4,385
2,605
6.62

33,103
5,230
3,014
7.66

(1) Sales are disclosed net of fuel transfer tax, turnover tax and hydrocarbon export withholdings.

Summarized consolidated statements of cash ﬂows

2010

2009

2008

Net cash ﬂow provided by operating activities ...........................
Net cash ﬂow used in investing activities ....................................
Net cash ﬂow used in ﬁnancing activities....................................

Increase in cash and equivalents .............................................

Cash and equivalents at the beginning of years ..........................
Exchange differences from cash and equivalents ........................

Cash and equivalents at the end of years ...............................

12,776
(8,520)
(3,790)

466

1,808
52

2,326

9,303
(5,566)
(2,960)

777

977
54

1,808

13,497
(6,958)
(6,215)

324

610
43

977

Cash and equivalents at the end of years are comprised as follows:

Cash(2)..........................................................................................
Cash equivalents(1)(2)....................................................................

Cash and equivalents at the end of years(2) ............................

2010

2009

2008

518
1,808

2,326

563
1,245

1,808

384
593

977

(1) Included in short-term investments in the consolidated balance sheets.

(2) Cash and equivalents from jointly controlled companies which are proportionally consolidated for Argentine GAAP purposes are

not included.

F-52

The principal ﬁnancing and investing transactions not affecting cash and equivalents consisted in
increases in assets related to revisions in hydrocarbon well abandonment costs for the years ended
December 31, 2010, 2009 and 2008 and the acquisitions during the years ended December 31, 2009
and 2008, of mineral property in connection with the extension of certain production concessions in
the Province of Neuque´n (Note 10.c), which was payable in installments through 2009 and 2010.

14. ADDITIONAL U.S. GAAP DISCLOSURES

Consolidated operating income

a)
Under U.S. GAAP, costs charged to income for YPF Holdings environmental remediation, holding
long-lived assets, operating income from jointly controlled
gains on inventories,
companies proportionally consolidated, pending lawsuits and other claims costs and other items which
are not individually signiﬁcant, would have been deducted from or added to operating income.

impairment of

Comprehensive income

b)
Net income under U.S. GAAP as determined in Note 13 is approximately the same as comprehensive
income as deﬁned by ASC No. 220, ‘‘Reporting Comprehensive Income’’ (‘‘ASC 220’’) for all periods
presented, except for the effect in the years 2010, 2009 and 2008 of the variations of the following
items. The items included in Accumulated other comprehensive income as of December 31, 2010, 2009
and 2008, are as follows:

Effect arising from the translation into reporting currency(1).....
Pension plans(2)............................................................................

21,699
(74)

20,532
(41)

18,046
(72)

Comprehensive income at the end of years ............................

21,625

20,491

17,974

2010

2009

2008

(1) Has no tax effect.

(2) Valuation allowance has been recorded to offset the recognized income tax effect.

Assets retirement obligation

c)
Under Argentine regulations,
related to the
abandonment of hydrocarbon wells. The Company does not have assets legally restricted for purposes
of settling the obligation.

the obligation to incur costs

the Company has

The reconciliation of
the beginning and ending aggregate carrying amount of assets retirement
obligation, translated into Argentine pesos at the outstanding selling exchange rate at the end of each
year and under US GAAP, is as follows:

Aggregate assets retirement obligation, beginning of year..........
Translation effect.........................................................................
Revision in estimated cash ﬂows .................................................
Obligations incurred ....................................................................
Accretion expense ........................................................................
Obligations settled .......................................................................

Aggregate assets retirement obligation, end of year ...................

2010

2009

2008

4,282
111
307
139
380
(145)

5,074

4,382
213
(667)(1)
156
397
(199)

4,282

3,036
381
652
138
264
(89)

4,382

(1) The effect is mainly attributable to the new timing estimation for the Company’s wells abandonment obligations taking into

consideration the extension of concessions.

F-53

Fair Value Measurements

d)
SFAS No. 157, Fair Value Measurements codiﬁed into ASC No. 820, deﬁnes fair value, establishes a
fair value
framework for measuring fair value and expands disclosure
measurements. ASC No. 820 does not mandate any new fair-value measurements and is applicable to
assets and liabilities
fair value under other accounting
pronouncements.

that are required to be recorded at

requirements about

ASC No. 820 establishes three levels of the fair-value hierarchy based on the sources of the inputs
used in the measurement of the fair value, which are described below:

Level 1: Quoted prices (unadjusted) in active markets for identical assets and liabilities.

Level 2: Inputs other than Level 1 that are observable, either directly or indirectly.

Level 3: Unobservable inputs.

The initial application of SFAS No. 157 on January 1, 2008, had no effect on the Company’s existing
fair-value measurement practices and is limited to the Company’s investments in mutual funds. The
fair value measurements for these assets are based on observable market inputs (Level 1) consisting in
quotations provided by the mutual funds’ bank sponsor. The fair value of these assets was 1,457, 653
and 187 as of December 31, 2010, 2009 and 2008, respectively and the related gains or losses from
periodic measurement at fair value is immaterial to the Company’s ﬁnancial statements.

As of December 31, 2010, 2009 and 2008, there were not non-ﬁnancial assets or liabilities measured
at fair value.

SFAS Interpretation No. 48, ‘‘Accounting for uncertainty in income taxes – an interpretation of FASB

e)
Statement No. 109’’ (‘‘FIN 48’’), codiﬁed into ASC No. 740
FIN 48 deﬁnes the criteria an individual tax position must meet for any part of the beneﬁt of such
position to be recognized in the ﬁnancial statements. FIN 48 establishes ‘‘a more-likely-than-not’’
recognition threshold that must be met before a tax beneﬁt can be recognized in the ﬁnancial
statements. FIN 48 also provides guidance, among other things, on the measurement of the income
tax beneﬁt associated with uncertain tax positions, de-recognition, classiﬁcation, interest and penalties
and ﬁnancial statement disclosures.

There were no unrecognized tax beneﬁts as of December 31, 2010, 2009 and 2008.

Under Argentine tax regime, as of December 31, 2010, ﬁscal years 2003 through 2009 remain to
examination by the Federal Administration of Public Revenues (‘‘AFIP’’).

15. OTHER CONSOLIDATED FINANCIAL STATEMENT INFORMATION
The following tables present additional consolidated ﬁnancial statement disclosures required under
Argentine GAAP. Certain information disclosed in these tables is not required as part of the basic
ﬁnancial statements under U.S. GAAP.

a)

b)

c)

d)

e)

f)

Fixed assets evolution.

Investments
companies.

in shares and holdings

in companies under

signiﬁcant

inﬂuence and other

Allowances and accruals for contingencies.

Cost of sales.

Foreign currency assets and liabilities.

Expenses incurred.

F-54

a)

Fixed assets evolution

2010

Cost

Main account

Amounts at
beginning of
year

Net
translation
effect(5)

Net decreases,
reclassiﬁcations
and transfers

Amounts at
the end of
year

Increases

Land and buildings ...........................
Mineral property, wells and related

3,206

equipment.....................................

61,501

Reﬁnery equipment and

petrochemical plants ....................
Transportation equipment ................
Materials and equipment in

warehouse.....................................
Drilling and work in progress...........
Exploratory drilling in progress........
Furniture, ﬁxtures and installations..
Selling equipment..............................
Other property ..................................

10,847
1,973

814
3,640
119
884
1,485
652

Total 2010 ....................................

85,121

Total 2009 ....................................

80,364

Total 2008 ....................................

73,060

—

14

—
—

—
—
—
—
—
—

14

54

56

17

936

7
9

1,572
6,553
266
9
—
108

162

3,385

4,079

66,530

588
15

(1,069)
(4,619)
(137)
48
47
262

11,442
1,997

1,317
5,574
248
941
1,532
1,022

9,477(2)

(624)(1)

93,988

5,389(2)(6)

(686)(1)

85,121

7,962(2)(6)

(714)(1)

80,364

2009

2008

2010

Depreciation

Main account

Accumulated
at beginning
of year

Net decreases,
reclassiﬁcations
and transfers

Depreciation
rate

Increases

Accumulated
at the end of
year

Net book
value

Net book
value

Net book
value

Land and buildings ...........................
Mineral property, wells and related

1,219

equipment ......................................

45,162

Reﬁnery equipment and

petrochemical plants ......................
Transportation equipment.................
Materials and equipment in

warehouse ......................................
Drilling and work in progress ...........
Exploratory drilling in progress ........
Furniture, ﬁxtures and installations ..
Selling equipment ..............................
Other property...................................

7,102
1,433

—
—
—
674
1,176
322

Total 2010......................................

57,088

Total 2009......................................

52,291

Total 2008......................................

47,579

2%

(4)

4 - 10%
4 - 5%

—
—
—
10%
10%
10%

(16)

(5)

(1)
(10)

—
—
—
—
(2)
(8)

(42)(1)

(35)(1)

(63)(1)

79

1,282

2,103

1,987

1,345

4,442

49,599

16,931(3)

16,339(3)

16,442(3)

513
65

—
—
—
87
62
25

7,614
1,488

—
—
—
761
1,236
339

3,828
509

1,317
5,574
248
180
296
683

5,273

62,319

31,669

3,745
540

814
3,640
119
210
309
330

3,651
573

827
4,339
116
161
341
278

4,832

57,088

28,033

4,775

52,291

28,073

(1) Includes 10, 6 and 4 of net book value charged to ﬁxed assets allowances for years ended December 31, 2010, 2009 and 2008,

respectively.

(2) Includes 894, 176 and 444 corresponding to hydrocarbon wells abandonment costs for the years ended December 31, 2010, 2009

and 2008, respectively.

(3) Includes 1,072, 1,196 and 1,260 of mineral property as of December 31, 2010, 2009 and 2008, respectively.

(4) Depreciation has been calculated according to the unit of production method.

F-55

(5) Includes the net effect of the exchange differences arising from the translation of foreign companies’ ﬁxed assets net book values at

beginning of the year.

(6) Includes 106 and 594 for the extension of certain exploitation concessions in the Province of Neuque´n for the years ended

December 31, 2009 and 2008, respectively (Note 10.c.).

b)

Investments in shares and holdings in companies under signiﬁcant inﬂuence and other companies

2010

2009

2008

Information of the Issuer

Description of the Securities

Last Financial Statements Available

Name and Issuer

Class

Face
Value

Amount

Book
Value

Cost(5)

Main Business

Registered Address

Date

Capital
Stock

Income
(Loss)

Equity

Holding in
Capital
Stock

Book
Value

Book
Value

Companies under signiﬁcant inﬂuence:
Common
Oleoductos del Valle

S.A..............................

$ 10

4,072,749

83(1)(2)

Terminales Marı´timas

Common

$ 10

476,034

47(2)

Patago´ nicas S.A..........

— Oil transportation
by pipeline
— Oil storage and
shipment

Oiltanking Ebytem S.A. . Common

$ 10

351,167

32

4 Hydrocarbon

transportation and
storage

Gasoducto del Pacı´ﬁco

Preferred

$ 1

15,579,578

4(2)

— Gas transportation

(Argentina) S.A. .........

Central Dock Sud S.A. .. Common

$ 0.01 2,827,694,307

—(7)

46

Gas Argentino S.A.(6) .... Common

$ 1

126,808,862

66

338

Inversora Dock Sud S.A. Common

$ 1

103,501,823

89(2)

193

by pipeline

Electric power
generation and
bulk marketing
Investment in
Metrogas S.A.

Investment and
ﬁnance

Pluspetrol Energy S.A.... Common

$ 1

30,006,540

281(2)

— Exploration and

exploitation of
hydrocarbons and
electric power
generation,
production and
marketing

Florida 1, P. 108, Buenos
Aires, Argentina
Av. Leandro N. Alem
1180, P.118, Buenos
Aires, Argentina
Terminal Marı´tima
Puerto Rosales –
Provincia de Buenos
Aires, Argentina
Av. Leandro N. Alem
928, P. 78, Buenos Aires,
Argentina
Reconquista 360, P. 68,
Buenos Aires, Argentina

Gregorio Araoz de
Lamadrid 1360, Buenos
Aires, Argentina
Reconquista 360, P. 68,
Buenos Aires, Argentina
Lima 339, Buenos Aires,
Argentina

09/30/10

110

09/30/10

09/30/10

14

12

06/30/10

156

09/30/10

356

(10)

21

287

146

37.00%

84(1)(2)

82(1)(2)

33.15%

45(2)

43(2)

8

2

9

105

30.00%

34

30

94

10.00%

8(2)

21(2)

142

9.98%(4) —(7)

4(2)

09/30/10

280

(48)

144

45.33%

100

196

09/30/10

09/30/10

241

67

21

83

187

725

42.86%

82(2)

104(2)

45.00%

240(2)

258(2)

Oleoducto Trasandino

Preferred

$ 1

27,018,720

14(2)

— Oil transportation
by pipeline

Macacha Gu¨ emes 515, P.
38, Buenos Aires,
Argentina

09/30/10

76

(4)

39

36.00%

16(2)

14(2)

(Argentina) S.A. .........

Other companies:
Others(3)..........................

—

—

—

12

29 —

—

—

—

—

—

—

27

31

628

610

636

783

(1) Holding in shareholder’s equity, net of intercompany proﬁts.
(2) Holding in shareholder’s equity plus adjustments to conform to YPF accounting methods.
(3) Includes Gasoducto del Pacı´ﬁco (Cayman) Ltd. A&C Pipeline Holding Company. Poliga´ s Luja´ n S.A.C.I., Oleoducto

Transandino (Chile) S.A., Gasoducto Oriental S.A., Bizoy S.A., Civeny S.A. and Bioceres S.A.

(4) Additionally, the Company has a 29.93% indirect holding in capital stock through Inversora Dock Sud S.A.
(5) Cost net of cash dividends and stock redemption from long-term investments restated in accordance with Note 1.a.
(6) On May 19, 2009, Gas Argentino S.A. (‘‘GASA’’) ﬁled a voluntary reorganization petition (‘‘concurso preventivo’’), which was

opened on June 8, 2009. The book value as of December 31, 2010, 2009 and 2008, is fully reserved.

(7) As of December 31, 2010 and 2009, holding in negative sharehholders’ equity was disclosed in ‘‘Accounts payable’’ after

adjustments in shareholders’ equity to comform to YPF accounting methods.

F-56

c)

Allowances and accruals for contingencies

2010

2009

2008

Amount at
Beginning of
Year

Increases

Decreases

Transfers

Amount at
End of Year

Amount at
End of Year

Amount at
End of Year

467
93

560

16

79

3

99

197

757

295

295

413
94

507

17

125

3

37

182

689

341

341

2,527

2,527

2,822

1,959

1,959

2,300

—
—

—

—

—

—

—

—

—

—

—

(3)

(3)

3

3

—

—

—

417
134

551

48

221

3

42

314

865

588

588

1,857

1,857

2,445

Account

Deducted from current assets:
For doubtful trade receivables ......
For other doubtful accounts .........

Deducted from noncurrent assets:
For valuation of other receivables
to their estimated realizable
value...........................................
For reduction in value of holdings
in long-term investments............

For unproductive exploratory

drilling........................................
For obsolescence of materials and
equipment ..................................

Total deducted from assets, 2010

Total deducted from assets, 2009

Total deducted from assets, 2008

Accruals for losses – current:
For various speciﬁc contingencies .

Accruals for losses – noncurrent:
For pending lawsuits,

environmental contingencies
and various speciﬁc
contingencies ..............................

Total included in liabilities, 2010

413
94

507

17

125

3

37

182

689

865

865

341

341

144
1

145

—

—

—

72

72

217

162

142

33

33

1,959

1,959

2,300

1,277

1,277

1,310

90
2

92

1

46

—

10

57

149

338

142

76

76

712

712

788

Total included in liabilities, 2009

2,445

1,067

1,212

Total included in liabilities, 2008

2,319

870

744

F-57

d)

Cost of sales

2010

2009

2008

Inventories at beginning of year..................................................
Purchases for the year .................................................................
Production costs (Note 15.f)........................................................
Holding gains (losses) on inventories ..........................................
Inventories at end of year............................................................

3,066
9,631
20,391
676
(3,865)

3,449
5,873
16,932
(11)
(3,066)

2,573
8,547
15,866
476
(3,449)

Cost of sales ............................................................................

29,899

23,177

24,013

e)

Foreign currency assets and liabilities

Account

Foreign currency and amount

Exchange
rate in
pesos as of
12-31-10

Book value
as of
12-31-10

2008

2009

2010

US$ 44
US$ 165
US$ 556
A 1
US$ 264
A 5

US$ 102
US$ 163
US$ 508
A 1
US$ 488
A 3

US$ 84
US$ 439
US$ 592
A 1
US$ 427
A 2

US$ 52
US$ 38

US$ 35
US$ 27

US$ 9
US$ 291

Current Assets
Cash.................................................
Investments......................................
Trade receivables .............................

Other receivables .............................

Total current assets .....................

Noncurrent Assets
Investments......................................
Other receivables .............................

Total noncurrent assets...............

Total assets..................................

Current Liabilities
Accounts payable ............................ US$ 1,314
A 24
US$ 693
US$ 13
US$ —
US$ 108

Loans ...............................................
Salaries and social security..............
Taxes payable ..................................
Accruals for losses...........................

A 27

US$ 767 US$ 1,019
A 49
US$ 910 US$ 1,254
US$ 4
US$ 2
US$ 53

US$ 5
US$ —
US$ 64

Total current liabilities................

Noncurrent Liabilities
Accounts payable ............................
Loans ...............................................
Salaries and social security..............
Accruals for losses...........................

Total noncurrent liabilities..........

Total liabilities ............................

(1) Buying exchange rate.

(2) Selling exchange rate.

US$ 919
US$ 365
US$ 34
US$ 331

US$ 563
US$ 510
US$ 26
US$ 342

US$ 715
US$ 386
US$ 35
US$ 411

F-58

3.94(1)
3.94(1)
3.94(1)
5.22(1)
3.94(1)
5.22(1)

3.94(1)
3.94(1)

3.98(2)
5.27(2)
3.98(2)
3.98(2)
3.98(2)
3.98(2)

3.98(2)
3.98(2)
3.98(2)
3.98(2)

332
1,728
2,332
5
1,681
10

6,088

35
1,145

1,180

7,268

4,056
258
4,991
16
8
212

9,541

2,846
1,535
139
1,634

6,154

15,695

f)

Expenses incurred

2010

2009

2008

Production
costs

Administrative
expenses

Selling
expenses

Exploration
expenses

Total

Total

Total

Salaries and social security

taxes....................................

1,710

Fees and compensation for

services................................
Other personnel expenses ........
Taxes, charges and

contributions ......................
Royalties and easements .........
Insurance .................................
Rental of real estate and

equipment...........................
Survey expenses.......................
Depreciation of ﬁxed assets ....
Industrial inputs, consumable
materials and supplies ........

Operation services and other

222
488

351
2,970
150

487
—
5,036

825

service contracts .................

2,228

Preservation, repair and

maintenance........................
Contractual commitments .......
Unproductive exploratory

drillings...............................
Transportation, products and
charges................................

Allowance (recovery) for

doubtful trade receivables ..

Publicity and advertising

expenses ..............................

Fuel, gas, energy and

2,955
411

—

1,037

—

—

miscellaneous......................

1,521

442

431
97

46
—
7

4
—
108

8

70

38
—

—

4

—

98

76

293

57
26

555
8
20

80
—
129

59

172

78
—

—

1,346

24

94

74

Total 2010 ..........................

20,391

1,429

3,015

Total 2009 ..........................

16,932

1,102

2,490

Total 2008 ..........................

15,866

1,053

2,460

67

8
12

—
11
—

—
98
—

3

—

13
—

2,512

1,827

1,592

718
623

952
2,989
177

571
98
5,273

587
494

755
2,545
200

531
54
4,832

638
520

712
2,418
159

466
186
4,775

895

696

676

2,470

1,981

1,244

3,084
411

2,315
139

2,471
61

112

112

356

351

—

—

—

20

344

552

684

2,387

2,045

2,144

24

192

(11)

165

(12)

179

1,691

1,565

1,483

25,179

21,076

20,063

16. RECENT EVENTS
On March 2, 2011, the Board of Director’s meeting, among other issues, proposed to the shareholders
the creation of a statutory reserve for future dividends in the amount of 6,622 million, which will be
subject to their consideration in the shareholder’s meeting to be held on April 26, 2011.

In April 2011, YPF entered into a Memorandum of Agreement to extend the term of the exploitation
concessions identiﬁed below, which will become effective upon its approval, through the issuance of
the corresponding executive decree, by the province of Mendoza. The Memorandum of Agreement
between YPF and the province of Mendoza provides, inter alia, the following:

*

Concessions involved: el Porto´ n, Barrancas, Cerro Fortunoso, el Manzano, La Brea,
Llancanelo, Llancanelo R, Puntilla de Huinca´ n, Rı´o Tunuyan, Valle del Rı´o Grande,
Vizcacheras, Can˜ ado´ n Amarillo, Altiplanicie del Payu´ n, Chihuido de la Sierra Negra,
Puesto Herna´ ndez and La Ventana.

F-59

*

*

Exploitation concession terms, which were originally set to expire in 2017, are extended for
a 10-year term; and

(ii)

YPF has undertaken: (i) to make initial payments to the province of Mendoza in an
aggregate amount of approximately of US$ 135 million, on the date speciﬁed in the
Memorandum of Agreement;
to pay the province of Mendoza an ‘‘Extraordinary
Production Royalty’’ of 3% of the production of the areas affected by the Memorandum
of Agreement; (iii) to carry out exploration activities in the remaining exploration areas
and make certain investments and expenditures in a total amount of US$ 4,113 million
until the expiration of the extended term, as stipulated in the Memorandum of Agreement,
on the exploitation concessions affected by the Memorandum of Agreement;
to
contribute with US$ 16.2 million to a ‘‘Social Infrastructure Investment Fund’’ to satisfy
community needs in the province of Mendoza, and; (v) to make payments equal to 0.3%
of the annual amount paid as ‘‘Extraordinary Production Royalty’’ in order to fund the
purchase of equipment and ﬁnance training activities in certain government agencies of the
province of Mendoza.

(iv)

As of the date of the issuance of these ﬁnancial statements, there are no other signiﬁcant subsequent
events that require adjustments or disclosure, if applicable, which were not already considered in this
note or elsewhere in the ﬁnancial statements.

SUPPLEMENTAL INFORMATION ON OIL AND GAS PRODUCING ACTIVITIES (UNAUDITED)
The following information is presented in accordance with ASC No. 932 ‘‘Extractive Activities – Oil
and Gas’’, as amended by ASU 2010 – 03 ‘‘Oil and Gas Reserves. Estimation and Disclosures’’,
issued by FASB in January 2010 in order to align the current estimation and disclosure requirements
with the requirements set in the SEC ﬁnal rules and interpretations, published on December 31, 2008,
according to oil and gas reporting requirements were updated (‘‘SEC Final Rule’’). Many of the
revisions are updates to deﬁnitions in the existing oil and gas rules to make them consistent with the
petroleum resource management system, which is a widely accepted standard for the management of
petroleum resources that was developed by several
industry organizations. Key revisions include
changes to the pricing used to estimate reserves, the ability to include non-traditional resources in
reserves, the use of new technology for determining reserves, and permitting disclosure of probable
to comply with the amended disclosure
and possible reserves. The SEC required companies
requirements for registration statements ﬁled after January 1, 2010, and for annual reports for ﬁscal
years ending on or after December 31, 2010. Early adoption was not permitted. The Company
adopted the new requirements effective December 31, 2009. This adoption did not have a material
impact on the Company’s reported reserves evaluation, results of operations, ﬁnancial position or
cash ﬂows (amounts expressed in millions of Argentine Pesos, except where otherwise indicated and
prepared under Argentine GAAP).

Oil and gas reserves
Proved oil and gas reserves are those quantities of oil and gas, which, by analysis of geoscience and
engineering data, can be estimated with reasonable certainty to be economically producible (from a
given date forward,
from known reservoirs, and under existing economic conditions, operating
methods and government regulations) prior to the time at which contracts providing the right to
is reasonably certain, regardless of whether
operate expire, unless evidence indicates that renewal
the
deterministic or probabilistic methods are used for the estimation. The project
hydrocarbons must have commenced or
it will
commence the project within reasonable time. In some cases, substantial investments in new wells and
related facilities may be required to recover proved reserves.

the operator must be reasonably certain that

to extract

Information on net proved reserves as of December 31, 2010 and 2009 was calculated in accordance
with the SEC rules and FASB’s ASC 932 as amended. Accordingly, crude oil prices used to
determine reserves were calculated at the beginning of each month, for crude oils of different quality
produced by the Company, considering the realized prices for crude oils of such quality in the
domestic market until 2011 (taking into account the effects of export taxes according to Law No.
26,217 which are enforceable until such year) and, for the following years, the Company considered

F-60

the underweighted average price of the ﬁrst-day-of-the-month price for each month within the twelve-
month period ended December 31, 2010 and 2009, respectively, which refers to the WTI prices
adjusted by each different quality produced by the Company. Additionally, since there are no
benchmark market natural gas prices available in Argentina, the Company used average realized gas
prices during the year to determine its gas reserves. Information on net proved reserves as of
December 31, 2008 was calculated using year-end prices and costs, respectively.

Net reserves are deﬁned as that portion of the gross reserves attributable to the interest of YPF after
deducting interests owned by third parties. In determining net reserves, the Company excludes from
its reported reserves royalties due to others, whether payable in cash or in kind, where the royalty
owner has a direct interest
in the underlying production and is able to make lifting and sales
arrangements independently. By contrast, to the extent that royalty payments required to be made to
a third party, whether payable in cash or in kind, are a ﬁnancial obligation, or are substantially
equivalent to a production or severance tax, the related reserves are not excluded from the reported
reserves despite the fact that such payments are referred to as ‘‘royalties’’ under local rules. The same
methodology is followed in reporting our production amounts.

Gas reserves exclude the gaseous equivalent of liquids expected to be removed from the gas on
concessions and leases, at ﬁeld facilities and at gas processing plants. These liquids are included in net
proved reserves of crude oil and natural gas liquids.

Technology used in establishing proved reserves additions in 2010
YPF’s estimated proved reserves as of December 31, 2010, are based on estimates generated through
the integration of available and appropriate data, utilizing well-established technologies that have been
demonstrated in the ﬁeld to yield repeatable and consistent results. Data used in these integrated
assessments include information obtained directly from the subsurface via wellbore, such as well logs,
reservoir core samples, ﬂuid samples, static and dynamic pressure information, production test data,
and surveillance and performance information. The data utilized also include subsurface information
obtained through indirect measurements, including high quality 2-D and 3-D-seismic data, calibrated
with available well control. Where applicable, surface geological
information was also utilized. The
tools used to interpret and integrate all these data included both proprietary and commercial software
for reservoir modeling, simulation and data analysis. In some circumstances, where appropriate analog
reservoir models are available, reservoir parameters from these analog models were used to increase
the reliability of our reserves estimates.

F-61

Changes in YPF’s Estimated Net Proved Reserves
The table below sets forth information regarding changes in YPF’s net proved reserves during 2010,
2009 and 2008, by hydrocarbon product.

2010

2009

2008

Crude oil, condensate and natural
gas liquids

Worldwide Argentina

Other
foreign Worldwide Argentina

Other
foreign Worldwide Argentina

Other
foreign

Consolidated entities
At January 1,..........................
Developed ...........................
Undeveloped .......................

Revisions of previous

estimates(1).......................
Extensions and discoveries..
Improved recovery ..............
Purchase of minerals in

place ................................
Sale of minerals in place.....
Production for the year(2) ...

At December 31(3), .................

Developed ...........................
Undeveloped .......................

Equity –accounted entities
At January 1,..........................
Developed ...........................
Undeveloped .......................

Revisions of previous

estimates(1).......................
Extensions and discoveries..
Improved recovery ..............
Purchase of minerals in

place ................................
Sale of minerals in place.....
Production for the year(2) ...

At December 31(3), .................

Developed ...........................
Undeveloped .......................

537
429
108

46
23
32

—
—
(107)

531

404
127

2
2
—

—
—
—

—
—
(1)

1

1
—

536
428
108

45
23
32

—
—
(106)

530

403
127

2
2
—

—
—
—

—
—
(1)

1

1
—

(Millions of barrels)

1
1
—

1
—
—

—
—
(1)

1

1
—

—
—
—

—
—
—

—
—
—

—

—
—

580
451
129

39
14
15

—
—
(111)

537

429
108

1
1
—

2
—
—

—
—
(1)

2

2
—

579
450
129

38
14
15

—
—
(110)

536

428
108

1
1
—

2
—
—

—
—
(1)

2

2
—

1
1
—

1
—
—

—
—
(1)

1

1
—

—
—
—

—
—
—

—
—
—

—

—
—

623
460
163

31
20
21

—
—
(115)

580

451
129

2
2
—

—
—
—

—
—
(1)

1

1
—

617
460
157

35
20
21

—
—
(114)

579

450
129

2
2
—

—
—
—

—
—
(1)

1

1
—

6
—
6

(4)
—
—

—
—
(1)

1

1
—

—
—
—

—
—
—

—
—
—

—

—
—

2010

2009

2008

Crude oil, condensate and natural
gas liquids

Worldwide Argentina

Other
foreign Worldwide Argentina

Other
foreign Worldwide Argentina

Other
foreign

Consolidated and
Equity –accounted entities

At January 1,

Developed ...........................
Undeveloped .......................

Total....................................

At December 31,

Developed ...........................
Undeveloped .......................

Total....................................

431
108

539

405
127

532

430
108

538

404
127

531

1
—

1

1
—

1

(Millions of barrels)

452
129

581

431
108

539

451
129

580

430
108

538

1
—

1

1
—

1

462
163

625

452
129

581

462
157

619

451
129

580

—
6

6

1
—

1

(1) Revisions in estimates of reserves are performed at least once a year. Revision of oil and gas reserves is considered prospectively in

the calculation of depreciation.

(2) Oil production of consolidated entities for the years 2010, 2009 and 2008 includes an estimated approximately 13, 14 and 14,
respectively, of crude oil, condensate and natural gas liquids in respect of royalty payments which, as described above, are a
ﬁnancial obligation, or are substantitally equivalent to a production or similar tax. Oil production of equity-accounted entities in
respect of royalty payments which are a ﬁnancial obligation, or are substantially equivalent to a production or similar tax, is not
material.

F-62

(3) Proved oil reserves of consolidated entities as of December 31, 2010, 2009 and 2008 include an estimated approximately 66, 67 and
70, respectively, of crude oil, condensate and natural gas liquids in respect of royalty payments which, as described above, are a
ﬁnancial obligation, or are substantially equivalent to a production or similar tax. Oil reserves of equity-accounted entities in
respect of royalty payments which are a ﬁnancial obligation, or are substantially equivalent to a production or similar tax, is not
material.

F-63

Natural gas

Worldwide Argentina

Other
foreign Worldwide Argentina

Other
foreign Worldwide Argentina

Other
foreign

2010

2009

2008

Consolidated entities
At January 1,..........................
Developed ...........................
Undeveloped .......................

Revisions of previous

estimates(1).......................
Extensions and discoveries..
Improved recovery ..............
Purchase of minerals in

place ................................
Sale of minerals in place.....
Production for the year(2) ...

2,672
2,102
570

2,670
2,100
570

301
50
1

—
—
(491)

300
50
1

—
—
(490)

At December 31(3), .................

2,533

2,531

Developed ...........................
Undeveloped .......................

1,948
585

1,946
585

Equity –accounted entities
At January 1,..........................
Developed ...........................
Undeveloped .......................

Revisions of previous

estimates(1).......................
Extensions and discoveries..
Improved recovery ..............
Purchase of minerals in

place ................................
Sale of minerals in place.....
Production for the year(2) ...

At December 31(3), .................

Developed ...........................
Undeveloped .......................

49
49
—

14
—
—

—
—
(15)

48

48
—

49
49
—

14
—
—

—
—
(15)

48

48
—

2
2
—

1
—
—

—
—
(1)

2

2
—

—
—
—

—
—
—

—
—
—

—

—
—

(Billion of standard cubic feet)

3,099
2,219
880

3,096
2,216
880

36
69
1

—
—
(533)

36
69
1

—
—
(532)

2,672

2,670

2,102
570

2,100
570

49
49
—

17
—
—

—
—
(17)

49

49
—

49
49
—

17
—
—

—
—
(17)

49

49
—

3
3
—

—
—
—

—
—
(1)

2

2
—

—
—
—

—
—
—

—
—
—

—

—
—

3,708
2,441
1,267

3,702
2,438
1,264

(134)
129
3

—
—
(607)

(132)
129
3

—
—
(606)

3,099

3,096

2,219
880

2,216
880

51
31
20

16
—
—

—
—
(18)

49

49
—

51
31
20

16
—
—

—
—
(18)

49

49
—

6
3
3

(2)
—
—

—
—
(1)

3

3
—

—
—
—

—
—
—

—
—
—

—

—
—

Natural gas

Worldwide Argentina

Other
foreign Worldwide Argentina

Other
foreign Worldwide Argentina

Other
foreign

2010

2009

2008

Consolidated and
Equity –accounted entities

At January 1,

(Billions of standard cubic feet)

Developed ...........................
Undeveloped .......................

2,151
570

2,149
570

Total....................................

2,721

2,719

At December 31,

Developed ...........................
Undeveloped .......................

1,996
585

1,994
585

Total....................................

2,581

2,579

2
—

2

2
—

2

2,268
880

2,265
880

3,148

3,145

2,151
570

2,149
570

2,721

2,719

3
—

3

2
—

2

2,472
1,287

2,469
1,284

3,759

3,753

2,268
880

2,265
880

3,148

3,145

3
3

6

3
—

3

(1) Revisions in estimates of reserves are performed at least once a year. Revision of natural gas reserves is considered prospectively in

the calculation of depreciation.

(2) Natural gas production of consolidated entities for the years 2010, 2009 and 2008 includes an estimated approximately 50, 56 and
69, respectively, of natural gas in respect of royalty payments which, as described above, are a ﬁnancial obligation, or are
substantially equivalent to a production or similar tax. Natural gas production of equity-accounted entities in respect of royalty
payments which are a ﬁnancial obligation, or are substantially equivalent to a production or similar tax, is not material.

(3) Proved natural gas reserves of consolidated entities as of December 31, 2010, 2009 and 2008 include an estimated approximately
257, 280 and 377, respectively, of natural gas in respect of royalty payments which, as described above, are a ﬁnancial obligation,
or are substantially equivalent to a production or similar tax. Natural gas reserves of equity-accounted entities in respect of royalty
payments which are a ﬁnancial obligation, or are substantially equivalent to a production or similar tax, is not material.

F-64

2010

2009

2008

Oil equivalent(1)

Worldwide Argentina

Other
foreign Worldwide Argentina

Other
foreign Worldwide Argentina

Other
foreign

Consolidated entities

(Millions of barrels of oil-equivalent)

At January 1,..........................
Developed ...........................
Undeveloped .......................

1,014
803
211

1,012
801
211

Revisions of previous

estimates(2).......................
Extensions and discoveries..
Improved recovery ..............
Purchase of minerals in

place ................................
Sale of minerals in place.....
Production for the year(3) ...

At December 31(4), .................

Developed ...........................
Undeveloped .......................

Equity –accounted entities
At January 1,..........................
Developed ...........................
Undeveloped .......................

Revisions of previous

estimates(2).......................
Extensions and discoveries..
Improved recovery ..............
Purchase of minerals in

place ................................
Sale of minerals in place.....
Production for the year(3) ...

At December 31(4), .................

Developed ...........................
Undeveloped .......................

100
32
32

—
—
(195)

982

751
231

10
10
—

3
—
—

—
—
(3)

10

10
—

99
32
32

—
—
(194)

981

750
231

10
10
—

3
—
—

—
—
(3)

10

10
—

2
2
—

1
—
—

—
—
(1)

1

1
—

—
—
—

—
—
—

—
—
—

—

—
—

1,133
847
286

1,131
845
286

44
27
15

—
—
(205)

43
27
15

—
—
(204)

1,014

1,012

803
211

801
211

10
10
—

3
—
—

—
—
(3)

10

10
—

10
10
—

3
—
—

—
—
(3)

10

10
—

2
2
—

1
—
—

—
—
(1)

2

2
—

—
—
—

—
—
—

—
—
—

—

—
—

1,282
894
388

1,275
894
381

8
44
22

—
—
(223)

12
44
22

—
—
(222)

1,133

1,131

847
286

845
286

11
7
4

3
—
—

—
—
(4)

10

10
—

11
7
4

3
—
—

—
—
(4)

10

10
—

7
—
7

(4)
—
—

—
—
(1)

2

2
—

—
—
—

—
—
—

—
—
—

—

—
—

Oil equivalent(1)

Worldwide Argentina

Other
foreign Worldwide Argentina

Other
foreign Worldwide Argentina

Other
foreign

2010

2009

2008

Consolidated and
Equity –accounted entities

At January 1,

(Millions of barrels of oil-equivalent)

Developed ...........................
Undeveloped .......................

813
211

811
211

Total....................................

1,024

1,022

At December 31,

Developed ...........................
Undeveloped .......................

Total....................................

761
231

992

760
231

991

2
—

2

1
—

1

857
286

855
286

1,143

1,141

813
211

811
211

1,024

1,022

2
—

2

2
—

2

901
392

901
386

1,293

1,287

857
286

855
286

1,143

1,141

—
6

6

2
—

2

(1) Volumes of natural gas have been converted to barrels of oil-equivalent at 5,615 cubic feet per barrel.

(2) Revisions in estimates of reserves are performed at least once a year. Revision of oil and natural gas reserves are considered

prospectively in the calculation of depreciation.

(3) Barrel of oil-equivalent production of consolidated entities for the years 2010 , 2009 and 2008 includes an estimated approximately
22, 22 and 26, respectively, of oil and natural gas in respect of royalty payments which, as described above, are a ﬁnancial
obligation, or are substantially equivalent to a production or similar tax. Oil and natural gas production of equity-accounted
entities in respect of royalty payments which are a ﬁnancial obligation, or are substantially equivalent to a production or similar
tax, is not material.

F-65

(4) Proved oil-equivalent reserves of consolidated entities as of December 31, 2010, 2009 and 2008 include an estimated approximately
110, 116 and 137, respectively, of oil and natural gas in respect of royalty payments which, as described above, are a ﬁnancial
obligation, or are substantially equivalent to a production or similar tax. Oil and natural gas reserves of equity-accounted entities
in respect of royalty payments which are a ﬁnancial obligation, or are substantially equivalent to a production or similar tax, are
not material.

The paragraphs below explain in further detail the most signiﬁcant changes in our reserves during
2010.

Changes in our estimated proved reserves during 2010

a)

Revisions of previous estimates:
During 2010,
(‘‘mmbbl’’) of crude oil and 315 billion cubic feet (‘‘bcf’’) of natural gas.

the Company’s proved reserves were revised upwards by 46 million barrels

The main revisions to proved reserves have been due to the following:

–

–

–

–

–

–

Liquids production (mainly oil and natural gas liquids) performed better than expected
during 2010. As a result, approximately 45 mmbbl were added as proved developed
reserves. The main additions to liquid reserves were from the: Los Perales, Loma La Lata,
Chihuido de la Sierra Negra, Seco-Leo´ n, El Tre´bol and CNQ 7A ﬁelds. In Acambuco,
Desﬁladero Bayo and Escalante areas a total of approximately 5 million barrels of oil
equivalent (‘‘mmboe’’) where discounted from developed reserves due to poor production
results.

A total of approximately 254 bcf were added as proved developed natural gas reserves as a
result of better than expected production performance and revised forecast following new
studies. This increase was mainly based on additions from the Aguada Pichana, San
Roque, Loma La Lata, Magallanes, Ramos, Aguada Toledo – Sierra Barrosa and Paso
Bardas Norte ﬁelds.

Due to the revision of development projects studies, approximately 25 mmboe of proved
undeveloped reserves were added, mainly in the Piedras Negras – Sen˜ al Lomita, El
Medanito, Octo´ gono, Puesto Hernandez, Aguarague and Barranca Baya ﬁelds.

An addition of approximately 5 mmboe of proved reserves were achiveved as a result of
successful workover activities performed in some areas, mainly in the Loma La Lata, Bajo
del Piche and Aguarague ﬁelds.

The results of some of our development wells were below expectations in certain areas,
resulting in a downward revision of approximately 9 mmboe of proved reserves, mainly in
the Aguada Pichana, Loma La Lata, Manantiales Behr, Loma de La Mina and San Roque
Fields.

Primarily as a consequence of the revision of development plans, there was a downward
revision of approximately 10 mmboe of proved reserves which affected mainly in Los
Perales, Loma La Lata, Loma de La Mina, San Roque and Manantiales Behr ﬁelds.

b)

Improved recovery
In the Golfo San Jorge basin approximately 14 mmbbl of proved oil reserves were added on
account of the completion of technical/economic feasibility studies for new projects and the
extension of current improved recovery projects. These additions were mainly obtained from the
following areas and projects: Los Perales (Los Perales Central BIII, La Itala BI, El Huetel BIV),
Manantiales Behr (Grmbeek II), Barranca Baya (CG Sur, CG Centro), Seco Leo´ n (C. Leo´ n O)
and Lomas del Cuy (AP Sur).

In CNQ 7A (Jaguel Casa de Piedra, El Corcobo Norte, Puesto Pinto and Cerro Huanul Sur) ,
Desﬁladero Bayo (Zona Norte Integral) and Sen˜ al Picada (Zona Norte II and Zona Este) ﬁelds
and projects
increased by
located in Neuquina and Mendoza basins, proved reserves
approximately 11 mmbbl on account of completion of
feasibility studies for waterﬂooding
projects.

F-66

A total of approximately 6 mmbbl of proved oil reserves have been added due to positive
production response, new production and injection wells, and from workovers, performed as
part of the improved recovery projects.

c)

Extensions and discoveries
Wells drilled in unproved reserve areas added approximately 32 mmbbl of proved reserves (50
bcf of natural gas and 23 mmbbl of oil).

In the Loma La Lata ﬁeld the drilling of 9 new wells in an unproved reserves area, and side-
track work on an existing well contributed approximately 18 bcf proved natural gas reserves. In
the Aguada Pichana ﬁeld similar activity carried out with the drilling of 21 new wells in an
the total proved reserves
unproved reserves area accounted for approximately 16 bcf of
additions related to extensions and discoveries.

As a result of the drilling activity at approximately 280 wells in unproved reserve areas, 16
mmbbl of proved oil reserves were added in the Manantiales Behr (approximately 5 mmbbl), El
Medanito (approximately 2 mmbbl), Barranca Baya (approximately 2 mmbbl), Can˜ ado´ n Yatel
(approximately 2 mmbbl), CNQ7A, Escalante, Sen˜ al Picada and Seco Leo´ n areas.

F-67

Capitalized costs
The following tables set forth capitalized costs, along with the related accumulated depreciation and
allowances as of December 31, 2010, 2009 and 2008:

2010

2009

2008

Consolidated capitalized costs

Argentina

Other
foreign Worldwide Argentina

Other
foreign Worldwide Argentina

Other
foreign Worldwide

Proved oil and gas properties
Mineral property, wells and
related equipment............

Support equipment and

65,236

943

66,179

60,304

844

61,148

56,452

716

57,168

facilities ...........................

2,160

Drilling and work in

progress ...........................

2,268

Unproved oil and gas

properties ............................

559

—

—

73

2,160

1,492

2,268

1,744

632

400

—

—

79

1,492

1,505

1,744

2,341

479

384

—

—

53

1,505

2,341

437

Total capitalized costs ........
Accumulated depreciation and
valuation allowances...........

70,223

1,016

71,239

63,940

923

64,863

60,682

769

61,451

(49,581)

(716)

(50,297)

(45,291)

(465)

(45,756)

(41,620)

(115)

(41,735)

Net capitalized costs ...........

20,642

300

20,942

18,649

458

19,107

19,062

654

19,716

Company’s share in equity method
investees’ capitalized costs

Argentina

Other
foreign Worldwide Argentina

Other
foreign Worldwide Argentina

Other
foreign Worldwide

2010

2009

2008

Proved oil and gas properties
Mineral property, wells and
related equipment............

Support equipment and

facilities ...........................

Drilling and work in

progress ...........................

Unproved oil and gas

properties ............................

Total capitalized costs ........
Accumulated depreciation and
valuation allowances...........

253

—

—

—

253

(188)

Net capitalized costs ...........

65

—

—

—

—

—

—

—

253

213

—

—

—

—

—

72

253

285

(188)

(181)

65

104

—

—

—

—

—

—

—

213

212

—

—

72

—

—

34

285

246

(181)

(169)

104

77

—

—

—

—

—

—

—

212

—

—

34

246

(169)

77

F-68

Costs incurred
The following tables set forth the costs incurred for oil and gas producing activities during the years
ended December 31, 2010, 2009 and 2008:

2010

2009

2008

Consolidated costs incurred

Argentina

Other
foreign Worldwide Argentina

Other
foreign Worldwide Argentina

Other
foreign Worldwide

Acquisition of unproved

properties ............................
Exploration costs....................
Development costs..................

—
481
6,207

—
80
34

—
561
6,241

—
567
3,668

23
19
77

23
586
3,745

—
631
5,848

Total costs incurred ........

6,688

114

6,802

4,235

119

4,354

6,479

—
71
111

182

—
702
5,959

6,661

2010

2009

2008

Company’s share in equity method
investees’ costs incurred

Argentina

Other
foreign Worldwide Argentina

Other
foreign Worldwide Argentina

Other
foreign Worldwide

Exploration costs....................
Development costs..................

Total costs incurred ........

9
4

13

—
—

—

9
4

13

36
3

39

—
—

—

36
3

39

34
2

36

—
—

—

34
2

36

Results of operations from oil and gas producing activities
The following tables include only the revenues and expenses directly associated with oil and gas
producing activities. It does not include any allocation of the interest costs or corporate overhead
and, therefore,
is not necessarily indicative of the contribution to net earnings of the oil and gas
operations.

Differences between these tables and the amounts shown in Note 8, ‘‘Consolidated Business Segment
Information’’, for the exploration and production business unit, relate to additional operations that
do not arise from those properties held by the Company.

2010

2009

2008

Consolidated results of operations

Argentina

Other
foreign Worldwide Argentina

Other
foreign Worldwide Argentina

Other
foreign Worldwide

Net sales to unafﬁliated

parties .................................
Net intersegment sales ............

Total net revenues...............
Production costs .....................
Exploration expenses ..............
Depreciation and expense for
valuation allowances...........
Other.......................................

Pre-tax income (loss) from

producing activities .........
Income tax expense ................

Results of oil and gas

3,862
17,853

21,715
(11,112)
(282)

(4,241)
(360)

189
—

189
(57)
(62)

4,051
17,853

3,236
14,823

21,904
(11,169)
(344)

18,059
(8,801)
(514)

173
—

173
(55)
(38)

3,409
14,823

3,363
12,576

18,232
(8,856)
(552)

15,939
(8,373)
(614)

(226)
—

(4,467)
(360)

(3,708)
(422)

(334)
—

(4,042)
(422)

(3,985)
(275)

190
—

190
(21)
(70)

(95)
—

3,553
12,576

16,129
(8,394)
(684)

(4,080)
(275)

5,720
(2,008)

(156)
—

5,564
(2,008)

4,614
(1,730)

(254)
—

4,360
(1,730)

2,692
(1,030)

4
—

2,696
(1,030)

producing activities .........

3,712

(156)

3,556

2,884

(254)

2,630

1,662

4

1,666

F-69

Company’s share in equity method
investee’s results of operations

Argentina

Other
foreign Worldwide Argentina

Other
foreign Worldwide Argentina

Other
foreign Worldwide

2010

2009

2008

Net sales to unafﬁliated

parties .................................
Net intersegment sales ............

Total net revenues...............
Production costs .....................
Depreciation and expense for
valuation allowances...........

Pre-tax income from

producing activities .........
Income tax expense ................

Results of oil and gas

producing activities .........

135
16

151
(92)

(54)

5
(2)

3

—
—

—
—

—

—
—

—

135
16

151
(92)

(54)

5
(2)

3

108
20

128
(99)

(11)

18
(7)

11

—
—

—
—

—

—
—

—

108
20

128
(99)

(11)

18
(7)

11

110
11

121
(40)

(31)

50
(18)

32

—
—

—
—

—

—
—

—

110
11

121
(40)

(31)

50
(18)

32

Standardized measure of discounted future net cash ﬂows
The standardized measure is calculated as the excess of future cash inﬂows from proved reserves less
future costs of producing and developing the reserves, future income taxes and a discount factor. For
the years ended December 31, 2010 and 2009 future cash inﬂows represent the revenues that would be
received from production of year-end proved reserve quantities assuming the future production would
be sold at the prices used for reserves estimates as of December 31, 2010 and 2009, respectively (the
‘‘average price’’). Accordingly, for the years ended December 31, 2010 and 2009, crude oil prices used
to determine reserves were calculated at the beginning of each month, for crude oils of different
quality produced by the Company, considering the realized prices for crude oils of such quality in the
domestic market until 2011 (taking into account the effects of export taxes according to Law No.
26,217 which are enforceable until such year) and for the following years, were considered the
unweighted average prices of the ﬁrst-day-of-the-month price for each month within the twelve-month
periods ended December 31, 2010 and 2009, respectively, which refers to the WTI prices adjusted by
each different quality produced by the Company, for the following years. Additionally, since there are
no benchmark market natural gas prices available in Argentina, the Company used average realized
gas prices during the years ended December 31, 2010 and 2009 to determine its gas reserves. For the
year ended December 31, 2008,
future cash ﬂows were calculated using year-end selling prices,
adjusted in those instances where future sales were covered by contracts at speciﬁed prices.

Future production costs include the estimated expenditures related to production of
the proved
reserves plus any production taxes without consideration of future inﬂation. Future development costs
include the estimated costs of drilling development wells and installation of production facilities, plus
the net costs associated with dismantling and abandonment of wells, assuming yearend costs continue
without consideration of future inﬂation. Future income taxes were determined by applying statutory
rates to future cash inﬂows less future production costs and less tax depreciation of the properties
involved. The present value was determined by applying a discount rate of 10% per year to the
annual future net cash ﬂows.

The future cash inﬂows and outﬂows in foreign currency have been remeasured at
the selling
exchange rate of Argentine pesos 3.98, 3.80 and 3.45 to US$ 1, as of December 31, 2010, 2009 and
2008, respectively.

The standardized measure does not purport to be an estimate of the fair market value of the
Company’s proved reserves. An estimate of fair value would also take into account, among other
things, the expected recovery of reserves in excess of proved reserves, anticipated changes in future
prices and costs and a discount factor representative of the time value of money and the risks
inherent in producing oil and gas.

F-70

Consolidated standardized measure
of discounted future net cash ﬂows

Argentina

Other
foreign Worldwide Argentina

Other
foreign Worldwide Argentina

Other
foreign Worldwide

2010

2009

2008

Future cash inﬂows(1) .............
Future production costs .........
Future development costs.......
Future income tax expenses ...
10% annual discount for

estimated timing of cash
ﬂows ....................................

Standardized measure of

discounted future net cash
ﬂows ....................................

Company’s share in equity method
investee’s standardized measure of
discounted future net cash ﬂows

Future cash inﬂows(1) .............
Future production costs .........
Future income tax expenses ...
10% annual discount for

estimated timing of cash
ﬂows ....................................

Standardized measure of

discounted future net cash
ﬂows ....................................

154,882
(54,026)
(16,999)
(23,365)

303
(172)

155,185
(54,198)
— (16,999)
(23,375)
(10)

111,797
(41,430)
(13,793)
(13,889)

265
(139)

112,062
(41,569)
— (13,793)
(13,933)
(44)

88,852
(39,449)
(11,753)
(7,759)

289
(144)
(4)
(49)

89,141
(39,593)
(11,757)
(7,808)

(16,568)

(16)

(16,584)

(11,917)

(8)

(11,925)

(7,899)

(25)

(7,924)

43,924

105

44,029

30,768

74

30,842

21,992

67

22,059

2010

2009

2008

Argentina

Other
foreign Worldwide Argentina

Other
foreign Worldwide Argentina

Other
foreign Worldwide

531
(144)
(131)

(62)

—
—
—

—

531
(144)
(131)

537
(145)
(130)

(62)

(68)

—
—
—

—

537
(145)
(130)

627
(121)
(178)

(68)

(62)

—
—
—

—

627
(121)
(178)

(62)

194

—

194

194

—

194

266

—

266

(1) Future cash inﬂows are stated net of the impact of withholdings on exports until 2011, according to the provisions of Law No.

26,217.

Changes in the standardized measure of discounted future net cash ﬂows
The following table reﬂects the changes in standardized measure of discounted future net cash ﬂows
for the years ended December 31, 2010, 2009 and 2008:

2010

2009

2008

Company’s
share in equity
method
investees

Consolidated

Company’s
share in equity
method
investees

Consolidated

Beginning of year ...........................................
Sales and transfers, net of production costs ..
Net change in sales and transfer prices, net of
future production costs ..............................

Changes in reserves and production rates

(timing) .......................................................

Net changes for extensions, discoveries and

improved recovery ......................................
Changes in estimated future development and
abandonment costs.....................................
Development costs incurred during the year
that reduced future development costs.......
Accretion of discount.....................................
Net change in income taxes ...........................
Others.............................................................

30,842
(10,703)

14,275

5,864

7,373

(4,018)

2,058
2,611
(5,696)
1,423

194
(106)

1

60

—

5

8
14
10
8

22,059
(9,600)

11,534

3,464

2,745

(2,416)

2,108
1,896
(3,159)
2,211

End of year ....................................................

44,029

194

30,842

266
(169)

(83)

87

—

(22)

1
18
69
27

194

36,627
(11,353)

(25,502)

1,282

2,250

(2,495)

2,554
3,428
11,732
3,536

22,059

F-71

Exhibit 12.1

I, Sebastián Eskenazi, certify that: 

1.      I have reviewed this annual report on Form 20-F of YPF Sociedad Anónima (the “Company”); 

CERTIFICATION 

2.      Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the 

circumstances under which such statements were made, not misleading with respect to the period covered by this report; 

3.      Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of 

operations and cash flows of the Company as of, and for, the periods presented in this report; 

4.      The company’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 

15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Company and have: 

(a)      Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information 

relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; 

(b)      Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance 

regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; 

(c)      Evaluated the effectiveness of the Company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and 

procedures, as of the end of the period covered by this report based on such evaluation; and 

(d)      Disclosed in this report any change in the Company’s internal control over financial reporting that occurred during the period covered by the annual report that has materially 

affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting; and 

5.      The company’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Company’s auditors and the audit 

committee of the Company’s board of directors (or persons performing the equivalent functions): 

(a)      All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the 

Company’s ability to record, process, summarize and report financial information; and 

(b)      Any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal control over financial reporting. 

Date: April 12, 2011 

By: /s/ Sebastián Eskenazi 

Name: Sebastián Eskenazi 
Title: Chief Executive Officer

 
 
 
 
 
 
Exhibit 12.2

We, Guillermo Reda and Ángel Ramos Sánchez, certify that: 

1.      We have reviewed this annual report on Form 20-F of YPF Sociedad Anónima (the “Company”); 

CERTIFICATION 

2.      Based on our knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the 

circumstances under which such statements were made, not misleading with respect to the period covered by this report; 

3.      Based on our knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of 

operations and cash flows of the Company as of, and for, the periods presented in this report; 

4.      We and the Company’s other certifying officer are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 

15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Company and have: 

(a)      Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information 

relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; 

(b)      Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance 

regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; 

(c)      Evaluated the effectiveness of the Company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and 

procedures, as of the end of the period covered by this report based on such evaluation; and 

(d)      Disclosed in this report any change in the Company’s internal control over financial reporting that occurred during the period covered by the annual report that has materially 

affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting; and 

5.      We and the Company’s other certifying officer have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Company’s auditors and the 

audit committee of the Company’s board of directors (or persons performing the equivalent functions): 

(a)      All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the 

Company’s ability to record, process, summarize and report financial information; and 

(b)      Any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal control over financial reporting. 

Date: April 12, 2011 

By: /s/ Guillermo Reda 

Name: Guillermo Reda 
Title: Chief Financial Officer

By: /s/ Ángel Ramos Sánchez

 Name: Ángel Ramos Sánchez
 Title: Director of Administration and Tax

 
 
 
 
 
 
 
 
 
 
 
CERTIFICATION PURSUANT TO 

18 U.S.C. SECTION 1350, 

AS ADOPTED PURSUANT TO 

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 

Exhibit 13.1

The certification set forth below is being submitted in connection with the Annual Report on Form 20-F for the year ended December 31, 2010 (the “Annual Report”) for the purposes of 

complying with Rule 13a-14(b) or Rule 15d-14(b) of the Securities Exchange Act of 1934 (the “Exchange Act”) and Section 1350 of Chapter 63 of Title 18 of the United States Code. 

Sebastián Eskenazi, the Chief Executive Officer, Guillermo Reda, the Chief Financial Officer and Ángel Ramos Sánchez, the Director of Administration and Tax of YPF Sociedad 

Anónima, each certifies that, to the best of his knowledge: 

1.

2.

the Annual Report fully complies with the requirements of Section 13(a) or 15(d) of the Exchange Act; and

the information contained in the Annual Report fairly presents, in all material respects, the financial condition and results of operations of YPF Sociedad Anónima.

Date: April 12, 2011 

By: /s/ Sebastián Eskenazi

Name: Sebastián Eskenazi 
Title: Chief Executive Officer 

By: /s/ Guillermo Reda 

Name: Guillermo Reda 
Title: Chief Financial Officer 

By: /s/ Ángel Ramos Sánchez 

Name: Ángel Ramos Sánchez 
Title: Director of Administration and Tax

  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM 

We consent to the incorporation by reference in the Registration Statements on Form F-3 (File Nos. 333-149313, 333-170848 and 333-172317) of our report dated April 12, 2011, relating to the 
consolidated financial statements of YPF Sociedad Anónima (“YPF”) (which report expresses an unqualified opinion and includes an explanatory paragraph stating that the accounting principles 
generally accepted in Argentina vary in certain significant respects from accounting principles generally accepted in the United States of America and that the information relating to the nature 
and effect of such differences is presented in Notes 12, 13, and 14 to the consolidated financial statements), and of our report dated April 12, 2011, relating to the effectiveness of YPF’s internal 
control over financial reporting, appearing in the Annual Report on Form 20-F of YPF for the year ended December 31, 2010. 

Exhibit 23.1

Buenos Aires, Argentina 
April 12, 2011 

Deloitte & Co. S.R.L. 

/s/ Diego O. De Vivo

Diego O. De Vivo 
Partner

  
 
 
 
Exhibit 23.2

Four Oaks Place
1300 Post Oak Boulevard, Suite 1000 
Houston, Texas 77056

(713) 850-9955
(713) 850-9966
gcah@gaffney-cline.com

April 8, 2011

Telephone: 
Facsimile: 
Email: 

Technical and Management Advisers to the Petroleum Industry Internationally Since 1962

Gaffney, Cline & Associates Inc. 

DKM/bgh/C1900.00/gcah.159.11

YPF S.A. 
Macacha Guemes 515  
C1106BKK Buenos Aires  
Argentina  

Gentlemen:  

Consent of Independent Petroleum Engineers  

     We hereby consent to the references to Gaffney, Cline & Associates Inc. and the inclusion of our third party report dated February 22, 2011 and the information included 
therein in sections “Information on the Company—Exploration and Production” and “Exhibits” in YPF S.A.’s report on Form 20-F for the year ended December 31, 2010 to be 
filed with the United States Securities and Exchange Commission, and the incorporation by reference of the same information in Form F-3 documents that have been filed with 
the Securities and Exchange Commission by YPF S.A.  

     Gaffney, Cline & Associates Inc. audited certain areas in the Gulf of Mexico and Oklahoma basins in the United States in which YPF has interests. These external audits 
were performed with an as of date of September 30, 2010.  

Very truly yours,  

GAFFNEY, CLINE & ASSOCIATES, INC.  

/s/ David K. Morgan  

     David K. Morgan  
Senior Technical Manager  

UNITED KINGDOM      UNITED STATES      SINGAPORE    AUSTRALIA      ARGENTINA      BRAZIL      KAZAKHSTAN      RUSSIA      UAE  

  
 
 
DEGOLYER AND MACNAUGHTON 

5001 SPRING VALLEY ROAD 
SUITE 800 EAST 
DALLAS, TEXAS 75244 

April 12, 2011 

Exhibit 23.3

YPF S.A. 
Macacha Guemes 515 
C1106BKK Buenos Aires 
Argentina 

Ladies and Gentlemen: 

     We hereby consent to the references to DeGolyer and MacNaughton and to the inclusion of our two third-party letter reports dated January 25, 2011, as set forth under the sections 
“Information on the Company—Exploration and Production” and “Exhibits” in YPF SA.’s report on Form 20-F for the year ended December 31, 2010 to be filed with the United States 
Securities and Exchange Commission, and the incorporation by reference of the same information in Form F-3 documents that have been filed with the Securities and Exchange Commission by 
YPF S A. 

     Our third party letter reports contain our independent estimates of the proved oil, natural gas liquids, marketable gas, and oil equivalent reserves as of September 30, 2010, of certain selected 
properties in the Neuquina and San Jorge basins in Argentina in which YPF S.A. holds interests. 

Very truly yours,

/s/ DeGOLYER and MacNAUGHTON 

DeGOLYER and MacNAUGHTON
Texas Registered Engineering Firm F-716

 
 
 
 
 
 
 
 
Exhibit 99.1

Four Oaks Place
1300 Post Oak Boulevard, Suite 1000 
Houston, Texas 77056

Telephone: 
Facsimile: 
Email: 

(713) 850-9955
(713) 850-9966
gcah@gaffney-cline.com

February 22, 2011

Technical and Management Advisers to the Petroleum Industry Internationally Since 1962

Gaffney, Cline & Associates Inc. 

CMH/bgh/C1900.00/gcah.36.11

Mr. Aquiles Rattia 
Director de Reservas, YPF S.A. 
Macacha Güemes 515  
C1106BKK Buenos Aires  
Argentina 

Dear Mr. Rattia: 

Reference No.: 26146 

Proved Reserve Statements 
for Neptune Field and Eugene Island 148 
Gulf of Mexico, United States 
and 
Texas and Oklahoma Properties  
as of September 30, 2010 

These Proved reserve statements have been prepared by Gaffney, Cline & Associates (GCA) and issued on February 22, 2011 at the request of YPF S.A. (YPF). YPF’s 100% owned 
subsidiary, Maxus (US) Exploration Company (Maxus) is a non-operator of and 15% interest participant in the Neptune Field and a 2.66667% overridding royalty participant in the Eugene 
Island 148 Field in the Gulf of Mexico, USA. Additionally, this report covers various overridding royalty interests in Texas and Oklahoma properties. This report is intended for inclusion in 
YPF’s December 31, 2010 20-F filing with the United States Securities and Exchange Commission. 

GCA has conducted an independent audit examination as of September 30, 2010, of the Proved crude oil, hydrocarbon liquid, and natural gas reserves of the above described fields and 

properties. On the basis of technical and other information made available to us concerning these properties, we hereby provide the reserve statements given in the tables below. 

Statement of Remaining Proved Hydrocarbon Volumes 
for Neptune Field 
Gulf of Mexico, United States 
as of September 30, 2010 

Reserves
Proved
  Developed
  Undeveloped

Total Proved

Gross (100%) Field 
Volumes

Liquids 
(MMstb)

Gas  
(Bscf) 

Reserves 
Net to YPF’s Interest
Gas 
(Bscf)

Liquids 
(MMstb)

5.5
2.6

8.1

4.4
2.1

6.5

0.7
0.3

1.0

0.6
0.3

0.9

UNITED KINGDOM      UNITED STATES      SINGAPORE    AUSTRALIA      ARGENTINA      BRAZIL      KAZAKHSTAN      RUSSIA      UAE 

 
 
 
 
 
CMH/bgh/1900.00/gcah.36.11 
YPF S.A. 
February 22, 2011  
Page 2 

Reserves
Proved
  Developed
  Undeveloped

Total Proved

Reserves
  Proved
  Developed
Undeveloped

Total Proved

Gaffney, Cline & Associates

Statement of Remaining Proved Hydrocarbon Volumes  
for Eugene Island 148  
Gulf of Mexico, United States  
as of September 30, 2010 

Gross (100%) Field 
Volumes

Liquids
(MMstb)

Gas 
(Bscf) 

Reserves
Net to YPF’s Interest
Gas
(Bscf)

Liquids
(MMstb)

0.0
0.0

0.0

0.7
0.0

0.7

0.0
0.0

0.0

Statement of Remaining Proved Hydrocarbon Volumes  
for Texas and Oklahoma Properties  
as of September 30, 2010 

Gross (100%) Field 
Volumes

Liquids
(MMstb)

Gas 
(Bscf) 

Reserves
Net to YPF’s Interest
Gas
(Bscf)

Liquids
(MMstb)

1.9
0.0

1.9

340.6
0.0

340.6

0.01
0.00

0.01

0.02
0.00

0.02

1.8
0.0

1.8

Hydrocarbon liquid volumes represent crude oil and condensate estimated to be recovered during field separation and are reported in millions of stock tank barrels. Natural gas volumes 
represent expected gas sales, and are reported in billions (109) of cubic feet at standard conditions of 14.7 psia and 60 degrees Fahrenheit. The volumes have not been reduced for fuel usage in 
the field. A royalty of 12.5% payable to the State has been deducted from reported net interest volumes for Neptune only. 

Proved gas volumes are based on firm and existing gas contracts and on the reasonable expectation that such gas sales contracts will be renewed on similar terms in the future. 

It is our understanding that the proved reserves estimated in this report constitute approximately 0.1% percent of YPF’s Proved Reserves; it is also our understanding that the Proved 
Undeveloped Reserves estimated in this report constitute approximately 0.2% percent of all YPF’s Proved Undeveloped Reserves as of September 30, 2010. These proportions are on a barrel oil 
equivalent (BOE) basis. Our study was completed on December 20, 2010. GCA is not in a position to verify this statement gas assets. 

 
 
 
 
Gaffney, Cline & Associates

CMH/bgh/1900.00/gcah.36.11 
YPF S.A. 
February 22, 2011  
Page 3 

A description of the field(s), data available, assumptions made, work carried out and the general methodology and procedures applied can be found in the Technical Addendum attached 

hereto as Appendix I. 

     This audit examination was based on reserve estimates and other information provided by YPF to GCA through November 29, 2010, and included such tests, procedures and adjustments as 
were considered necessary under the circumstances to prepare the report. All questions that arose during the course of the audit process were resolved to our satisfaction. GCA believes that the 
assumptions, data, methods and procedures used in connection with the preparation of this report are appropriate for the purpose served by the report. 

The economic tests for the September 30, 2010 Proved reserve volumes were based on a prior twelve-month first-day-of-the-month average price for West Texas Intermediate (WTI) crude 
of US$77.84/Bbl and Henry Hub gas sales price of US$4.42/MMBtu. For Neptune the oil price was reduced by 5% (by contractual agreement) by US$2.25/Bbl for quality and US$1.25/Bbl for 
Shell transportation costs resulting in an average wellhead price of US$70.45/Bbl. The prior twelve-month first-day-of-the-month average gas sales price of US$4.42/MMBtu (equivalent to 
US$5.20/Mscf) was used based on Henry Hub reference price. No price escalation has been included. 

A realized equivalent gas price for Eugene Island 148 of US$4.40/Mscf was based on a quality reduction of US$0.02/MMBtu from the Henry Hub price of US$4.42/MMBtu mentioned 

above. The realized oil price was based on reducing the US$77.84/Bbl WTI average by US$1.87/Bbl for quality. Tariffs of US$0.076/Bbl and US$0.005/Mscf were handled as operating 
expenses. These prices and expenses are only used to determine remaining life of the field. Due to the nature of the Texas and Oklahoma properties traditional economic analysis was not 
conducted. Economic limits for these properties are discussed in the Technical Addendum. 

Future capital costs were derived from development plans prepared by YPF for the field. Recent historical operating expense data were utilized as the basis for operating cost projections. 

GCA has found that YPF has projected sufficient capital investments and operating expenses economically to produce the projected volumes. 

It is GCA’s opinion that the estimates of total remaining recoverable hydrocarbon liquid and gas volumes at September 30, 2010, are, in the aggregate, reasonable and the reserves 
categorization is appropriate and consistent with the definitions for reserves set out in Part 210 Rule 4-10(a) of Regulation S-X of the United States Securities and Exchange Commission (as set 
out in Appendix II). GCA concludes that the methodologies employed YPF in the derivation of the reserves estimates are appropriate and that the quality of the data relied upon, the depth and 
thoroughness of the reserves estimation process is adequate. 

GCA is not aware of any potential changes in regulations applicable to these fields that could affect the ability of YPF to produce the estimated reserves. 

This assessment has been conducted within YPF’s petroleum property rights as represented by YPF’s management. GCA is not in a 

 
Gaffney, Cline & Associates

CMH/bgh/1900.00/gcah.36.11 
YPF S.A. 
February 22, 2011  
Page 4 

position to attest to property title, financial interest relationships or encumbrances thereon for any part of the appraised properties or interests. 

There are numerous uncertainties inherent in estimating reserves and resources, and in projecting future production, development expenditures, operating expenses and cash flows. Oil and 

gas reserve engineering and resource assessment must be recognized as a subjective process of estimating subsurface accumulations of oil and gas that cannot be measured in an exact way. 
Estimates of oil and gas reserves or resources prepared by other parties may differ, perhaps materially, from those contained within this report. The accuracy of any Reserve or Resource estimate 
is a function of the quality of the available data and of engineering and geological interpretation. Results of drilling, testing and production that post-date the preparation of the estimates may 
justify revisions, some or all of which may be material. Accordingly, Reserve and Resource estimates are often different from the quantities of oil and gas that are ultimately recovered, and the 
timing and cost of those volumes that are recovered may vary from that assumed. 

For this assignment, GCA served as an independent reserve auditor. The firm’s officers and employees have no direct or indirect interest holdings in the property units evaluated. GCA’s 

remuneration was not in any way contingent on reported reserve estimates. The qualifications of the technical person primarily responsible for overseeing this audit are included in Appendix III. 

This report has been prepared at the request of YPF regarding assets held by YPF in the United States and is for inclusion in YPF’s filing with the U.S. Securities and Exchange 

Commission. 

     Very truly yours, 

GAFFNEY, CLINE & ASSOCIATES, INC. 

/s/ C. M. Holmgren  
C. M. Holmgren, PE 

Attachments  
Appendices 

Technical Addendum 
SEC Reserve Definitions

I:
II:
III: Technical Qualifications of Person Responsible for Audit

 
 
 
 
 
 
 
 
Gaffney, Cline & Associates

APPENDIX I: 

Technical Addendum 

  
  
  
  
  
 
  
  
  
  
  
 
Technical Addendum  
to  
Proved Reserve Statements for 
Neptune Field and Eugene Island 148 Gulf of Mexico, United States  
and  
Texas and Oklahoma Overridding Royalties  
as of September 30, 2010 

Gaffney, Cline & Associates

Neptune Field

Neptune Field is an oil and gas discovery located in blocks 573, 574, 575, 617, and 618 of the Green Canyon-Atwater Valley area of the Gulf of Mexico. The blocks were acquired in 1985 
by BP, Fina, Hess, Pennzoil, Conoco, and Sun then unitized in 1995 followed by the drilling of the Neptune 1 well. The second Neptune well was drilled in 1997. In early 2002 BP left the group 
and BHP took over as operator, followed by the drilling of Neptune 3. Late in 2002 and into early 2003, the fourth well was drilled. Maxus acquired its 15% interest from BHP in mid-year 2003 
and well five (5) was drilled. Finally, in 2004, Neptune 6 was drilled and a recommendation to develop the field was made. The field contains a number of unique reservoirs in the M9 and M10 
series. 

The original development plan called for seven (7) wells to be drilled in years 2007 through 2009 and a future well to be drilled (2014 or later). To date, there have been seven (7) wells 

drilled and put into production from the field. The current development plan only anticipates a recompletion in the SB02 well in 2011. 

YPF provided structure maps and isopach maps for the area for each reservoir via Pertel modeling. Petrophysical data and reservoir properties were further delivered as well as well data 

and production data in an OFM database. 

Performance forecasts for proved producing wells used historic decline trends extrapolated exponentially. GCA has reviewed these forecasts and finds them to be reasonable. GCA 
performed reserve estimations and economic limits testing using the economic program PHDWin and the performance forecasts described above. Resultant net gas volumes were reduced by 
20% for shrinkage. 

YPF estimated Proved Undeveloped reserves for the SB02 using in place hydrocarbon volumes as found by static modeling using the software Petrel and applying recovery factors for each 
reservoir which were estimated from current trends of existing production. GCA reviewed this work and found it to be reasonable. The performance profile for the recompletion was estimated by 
GCA for use in the economic limit testing. 

Eugene Island 148

Eugene Island 148 is a one well field located in shallow water of the Gulf of Mexico just south of Louisiana. The well was drilled and completed in mid-2002 in the TEX X reservoir at 
approximately 14,640 feet. YPF provided production history, operating expense information, quality discount and tariff information. The interest held in the property by YPF is an overriding 
royalty of 2.6667%. 

Projected future performance and economic limit testing was estimated using the historic production data which was then forecast using the economic program PHDWin. 

 
 
 
Gaffney, Cline & Associates

Texas and Oklahoma Overriding Royalties

As a result of a series of property sales and intercompany transactions that occurred in the late 1990s (e.g. after the purchase of Maxus by YPF in 1995), Maxus retained overriding royalty 

interests (ORRIs) in certain Mid-Continent Area oil and gas leaseholds located in Texas and Oklahoma (Crescendo). 

These ORRI’s currently exist on over Panhandle Area counties and ten adjacent counties in Oklahoma. The overwhelming majority of these properties are single gas well leases or drilling 

units. Less than 7% of the total property set is classified as oil leases by state regulatory authorities. 

Over the past three years, YPF has made a concerted effort to properly identify and manage these interests. This time-consuming process has required a significant amount of land, legal, 

and title work to accurately verify the interests, get all them in paying status, and recover any past revenues to which YPF was entitled. 

Reserve estimates for these oil and gas properties have been recently updated by YPF via traditional rate-time decline curve analysis using publicly available monthly production data and 
the OFM software package. GCA has reviewed the majority of the forecasts made by YPF and finds that they are acceptable. Only one small correction was required by GCA which was a result 
of a summation error for Roberts County Texas. 

In order to determine a reasonable set of gas rate cutoffs for the declines, a separate economic limit analysis was undertaken for a typical single gas well property for each state by YPF. 

The principal parameters incorporated in the economic limit analysis include: 

1.

2.

3.

4.

5.

6.

Overall Royalty Burden

Severance Tax Rates

Advalorem (Property) Tax Rates

Product Prices

Lease Operating Costs

Product Transportation Costs

The above analysis resulted in the following set of gas rate: 

Oklahoma properties:
Texas properties:

19 Mcfd. 
22 Mcfd.

Condensate reserves for the gas properties are based on historical yields. A separate Stb/MMcf yield was estimated for each state (4.0 Stb/MMcf for the Oklahoma gas properties and 2.0 

Stb/MMcf for the Texas gas properties). 

 
 
 
 
 
 
 
 
 
 
 
 
Gaffney, Cline & Associates

APPENDIX I TO ADDENDUM: 

TABLES 

  
  
  
  
  
 
  
  
  
  
  
 
STATEMENT OF REMAINING HYDROCARBON VOLUMES  
NEPTUNE FIELD AND EUGENE ISLAND 148, GULF OF MEXICO, USA 
AND 
TEXAS AND OKLAHOMA PROPERTIES 
AS OF SEPTEMBER 30, 2010 

Gaffney, Cline & Associates

Neptune
Crescendo
EI 148

Neptune
Crescendo
EI 148

Proved Developed

Oil
MBo

5,483.9
1,922.0
2.8

Gas
MMcf

4,387.1
340,653.0
753.1

Proved Developed

Oil
MBo

719.8
10.6
0.1

Gas
MMcf

575.8
1,795.0
20.1

Gross Field Volumes
Undeveloped

Total Proved

Oil
MBo

2,639.1
—
—

Oil
MBo

346.4
—
—

Gas 
MMcf 

Oil 
MBo 

2,111.3
—
—

8,123.0
1,922.0
2.8

Gas 
MMcf 

Oil 
MBo 

277.1
—
—

1,066.2
10.6
0.1

Net Reserves
Undeveloped

Total Proved

Gas
MMcf

6,498.4
340,653.0
753.1

Gas
MMcf

852.9
1,795.0
20.1

 
 
 
Gaffney, Cline & Associates

APPENDIX II TO ADDENDUM: 

MAPS 

  
  
  
  
  
 
  
  
  
  
  
 
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NEPTUNE 

  
  
  
  
  
   
   
   
   
   
 
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EUGENE ISLAND 148 

  
  
  
  
  
  
  
  
  
  
 
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TEXAS AND OKLAHOMA 
ORRI 

  
  
  
  
  
  
  
  
 
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DECLINES 

  
  
  
  
  
  
  
  
  
 
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NO CURVES ARE PRESENTED FOR THE OVER RIDDING  
ROYALTIES DUE TO THE NUMBER OF WELLS INVOLVED 

  
  
  
  
  
  
  
  
 
Gaffney, Cline & Associates

APPENDIX II TO LETTER: 

SEC Reserve Definitions 

  
  
  
  
  
 
  
  
  
  
  
 
U.S. SECURITIES AND EXCHANGE COMMISSION (SEC)  
MODERNIZATION OF OIL AND GAS REPORTING1 

Oil and Gas Reserves Definitions and Reporting

Gaffney, Cline & Associates

(a) Definitions

(1)     Acquisition of properties. Costs incurred to purchase, lease or otherwise acquire a property, including costs of lease bonuses and options to purchase or lease properties, the portion of costs 
applicable to minerals when land including mineral rights is purchased in fee, brokers’ fees, recording fees, legal costs, and other costs incurred in acquiring properties. 

(2)     Analogous reservoir. Analogous reservoirs, as used in resources assessments, have similar rock and fluid properties, reservoir conditions (depth, temperature, and pressure) and drive 
mechanisms, but are typically at a more advanced stage of development than the reservoir of interest and thus may provide concepts to assist in the interpretation of more limited data and 
estimation of recovery. When used to support proved reserves, an  “analogous reservoir” refers to a reservoir that shares the following characteristics with the reservoir of interest: 

(i)

Same geological formation (but not necessarily in pressure communication with the reservoir of interest); 

(ii) Same environment of deposition; 

(iii) Similar geological structure; and 

(iv) Same drive mechanism.

Instruction to paragraph (a)(2): Reservoir properties must, in the aggregate, be no more favorable in the analog than in the reservoir of interest.

(3)     Bitumen. Bitumen, sometimes referred to as natural bitumen, is petroleum in a solid or semi-solid state in natural deposits with a viscosity greater than 10,000 centipoise measured at 
original temperature in the deposit and atmospheric pressure, on a gas free basis. In its natural state it usually contains sulfur, metals, and other non-hydrocarbons. 

(4)     Condensate. Condensate is a mixture of hydrocarbons that exists in the gaseous phase at original reservoir temperature and pressure, but that, when produced, is in the liquid phase at 
surface pressure and temperature. 

(5)     Deterministic estimate. The method of estimating reserves or resources is called deterministic when a single value for each parameter (from the geoscience, engineering, or economic data) 
in the reserves calculation is used in the reserves estimation procedure. 

(6)     Developed oil and gas reserves. Developed oil and gas reserves are reserves of any category that can be expected to be recovered: 

(i)

Through existing wells with existing equipment and operating methods or in which the cost of the required equipment is relatively minor compared to the cost of a new well; and

(ii) Through installed extraction equipment and infrastructure operational at the time of the reserves estimate if the extraction is by means not involving a well.

(7)     Development costs. Costs incurred to obtain access to proved reserves and to provide facilities for extracting, treating, gathering and storing the oil and gas. More specifically, development 
costs, including depreciation and applicable operating costs of support equipment and facilities 

1

Extracted from 17 CFR Parts 210, 211, 229, and 249 [Release Nos. 33-8995; 34-59192; FR-78; File No. S7-15-08] RIN 3235-AK00].

 
 
 
 
 
 
 
Gaffney, Cline & Associates

and other costs of development activities, are costs incurred to: 

(i) Gain access to and prepare well locations for drilling, including surveying well locations for the purpose of determining specific development drilling sites, clearing ground, draining, 

road building, and relocating public roads, gas lines, and power lines, to the extent necessary in developing the proved reserves.

(ii) Drill and equip development wells, development-type stratigraphic test wells, and service wells, including the costs of platforms and of well equipment such as casing, tubing, 

pumping equipment, and the wellhead assembly.

(iii) Acquire, construct, and install production facilities such as lease flow lines, separators, treaters, heaters, manifolds, measuring devices, and production storage tanks, natural gas 

cycling and processing plants, and central utility and waste disposal systems.

(iv) Provide improved recovery systems.

(8)     Development project. A development project is the means by which petroleum resources are brought to the status of economically producible. As examples, the development of a single 
reservoir or field, an incremental development in a producing field, or the integrated development of a group of several fields and associated facilities with a common ownership may constitute a 
development project. 

(9)     Development well. A well drilled within the proved area of an oil or gas reservoir to the depth of a stratigraphic horizon known to be productive. 

(10)     Economically producible. The term economically producible, as it relates to a resource, means a resource which generates revenue that exceeds, or is reasonably expected to exceed, the 
costs of the operation. The value of the products that generate revenue shall be determined at the terminal point of oil and gas producing activities as defined in paragraph (a)(16) of this section. 

(11)     Estimated ultimate recovery (EUR). Estimated ultimate recovery is the sum of reserves remaining as of a given date and cumulative production as of that date. 

(12)     Exploration costs. Costs incurred in identifying areas that may warrant examination and in examining specific areas that are considered to have prospects of containing oil and gas 
reserves, including costs of drilling exploratory wells and exploratory-type stratigraphic test wells. Exploration costs may be incurred both before acquiring the related property (sometimes 
referred to in pail as prospecting costs) and after acquiring the property. Principal types of exploration costs, which include depreciation and applicable operating costs of support equipment and 
facilities and other costs of exploration activities, are: 

(i)

Costs of topographical, geographical and geophysical studies, rights of access to properties to conduct those studies, and salaries and other expenses of geologists, geophysical crews, 
and others conducting those studies. Collectively, these are sometimes referred to as geological and geophysical or “G&G” costs.

(ii) Costs of carrying and retaining undeveloped properties, such as delay rentals, ad valorem taxes on properties, legal costs for title defense, and the maintenance of land and lease 

records.

(iii) Dry hole contributions and bottom hole contributions.

(iv) Costs of drilling and equipping exploratory wells.

(v) Costs of drilling exploratory-type stratigraphic test wells.

(13)     Exploratory well. An exploratory well is a well drilled to find a new field or to find a new reservoir in a field previously found to be productive of oil or gas in another reservoir. 
Generally, an exploratory well is any well that is not a development well, an extension well, a service well, or a stratigraphic test well 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
as those items are defined in this section. 

(14)     Extension well. An extension well is a well drilled to extend the limits of a known reservoir. 

(15)     Field. An area consisting of a single reservoir or multiple reservoirs all grouped on or related to the same individual geological structural feature and/or stratigraphic condition. There may 
be two or more reservoirs in a field which are separated vertically by intervening impervious strata, or laterally by local geologic barriers, or by both. Reservoirs that are associated by being in 
overlapping or adjacent fields may be treated as a single or common operational field. The geological terms “structural feature” and “stratigraphic condition” are intended to identify localized 
geological features as opposed to the broader terms of basins, trends, provinces, plays, areas-of-interest, etc. 

Gaffney, Cline & Associates

(16)     Oil and gas producing activities. 

(i) Oil and gas producing activities include:

(A) The search for crude oil, including condensate and natural gas liquids, or natural gas (“oil and gas”) in their natural states and original locations;

(B) The acquisition of property rights or properties for the purpose of further exploration or for the purpose of removing the oil or gas from such properties;

(C) The construction, drilling, and production activities necessary to retrieve oil and gas from their natural reservoirs, including the acquisition, construction, installation, and 

maintenance of field gathering and storage systems, such as:

(1) Lifting the oil and gas to the surface; and

(2) Gathering, treating, and field processing (as in the case of processing gas to extract liquid hydrocarbons); and

(D) Extraction of saleable hydrocarbons, in the solid, liquid, or gaseous state, from oil sands, shale, coalbeds, or other nonrenewable natural resources which are intended to be 

upgraded into synthetic oil or gas, and activities undertaken with a view to such extraction.

Instruction 1 to paragraph (a)(16)(i): The oil and gas production function shall be regarded as ending at a  “terminal point”, which is the physical or operational circumstances exist, it may 
be appropriate to regard the terminal point for the production function as:

a.

b.

The first point at which oil, gas, or gas liquids, natural or synthetic, are delivered to a main pipeline, a common carrier, a refinery, or a marine terminal; and 

In the case of natural resources that are intended to be upgraded into synthetic oil or gas, if those natural resources are delivered to a purchaser prior to upgrading, the first point at 
which the natural resources are delivered to a main pipeline, a common carrier, a refinery, a marine terminal, or a facility which upgrades such natural resources into synthetic oil or 
gas.

Instruction 2 to paragraph (a)(16)(i): For purposes of this paragraph (a)(16), the term saleable hydrocarbons means hydrocarbons that are saleable in the state in which the hydrocarbons are 
delivered. 

(ii) Oil and gas producing activities do not include: 

(A) Transporting, refining, or marketing oil and gas;

(B) Processing of produced oil, gas or natural resources that can be upgraded into synthetic oil or gas by a registrant that does not have the legal right to produce or a revenue 

interest in such production;

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Gaffney, Cline & Associates

(C) Activities relating to the production of natural resources other than oil, gas, or natural resources from which synthetic oil and gas can be extracted; or

(D) Production of geothermal steam.

(17)     Possible reserves. Possible reserves are those additional reserves that are less certain to be recovered than probable reserves. 

(i) When deterministic methods are used, the total quantities ultimately recovered from a project have a low probability of exceeding proved plus probable plus possible reserves. When 
probabilistic methods are used, there should be at least a 10% probability that the total quantities ultimately recovered will equal or exceed the proved plus probable plus possible 
reserves estimates.

(ii) Possible reserves may be assigned to areas of a reservoir adjacent to probable reserves where data control and interpretations of available data are progressively less certain. 

Frequently, this will be in areas where geoscience and engineering data are unable to define clearly the area and vertical limits of commercial production from the reservoir by a 
defined project.

(iii) Possible reserves also include incremental quantities associated with a greater percentage recovery of the hydrocarbons in place than the recovery quantities assumed for probable 

reserves.

(iv) The proved plus probable and proved plus probable plus possible reserves estimates must be based on reasonable alternative technical and commercial interpretations within the 

reservoir or subject project that are clearly documented, including comparisons to results in successful similar projects.

(v)

Possible reserves may be assigned where geoscience and engineering data identify directly adjacent portions of a reservoir within the same accumulation that may be separated from 
proved areas by faults with displacement less than formation thickness or other geological discontinuities and that have not been penetrated by a wellbore, and the registrant believes 
that such adjacent portions are in communication with the known (proved) reservoir. Possible reserves may be assigned to areas that are structurally higher or lower than the proved 
area if these areas are in communication with the proved reservoir.

(vi) Pursuant to paragraph (a)(22)(iii) of this section, where direct observation has defined a highest known oil (HKO) elevation and the potential exists for an associated gas cap, proved 
oil reserves should be assigned in the structurally higher portions of the reservoir above the HKO only if the higher contact can be established with reasonable certainty through 
reliable technology. Portions of the reservoir that do not meet this reasonable certainty criterion may be assigned as probable and possible oil or gas based on reservoir fluid properties 
and pressure gradient interpretations.

(18)     Probable reserves. Probable reserves are those additional reserves that are less certain to be recovered than proved reserves but which, together with proved reserves, are as likely as not to 
be recovered. 

(i) When deterministic methods are used, it is as likely as not that actual remaining quantities recovered will exceed the sum of estimated proved plus probable reserves. When 

probabilistic methods are used, there should be at least a 50% probability that the actual quantities recovered will equal or exceed the proved plus probable reserves estimates. 

(ii) Probable reserves may be assigned to areas of a reservoir adjacent to proved reserves where data control or interpretations of available data are less certain, even if the interpreted 

reservoir continuity of structure or productivity does not meet the reasonable certainty criterion. Probable reserves may be assigned to areas that are structurally higher than the 
proved area if these areas are in communication with the proved reservoir.

 
 
 
 
 
 
 
 
 
 
 
 
 
 
(iii) Probable reserves estimates also include potential incremental quantities associated with a greater percentage recovery of the hydrocarbons in place than assumed for proved reserves.

(iv) See also guidelines in paragraphs (a)(17)(iv) and (a)(17)(vi) of this section.

(19)     Probabilistic estimate. The method of estimation of reserves or resources is called probabilistic when the full range of values that could reasonably occur for each unknown parameter 
(from the geoscience and engineering data) is used to generate a full range of possible outcomes and their associated probabilities of occurrence. 

(20)     Production costs. 

(i)

Costs incurred to operate and maintain wells and related equipment and facilities, including depreciation and applicable operating costs of support equipment and facilities and other 
costs of operating and maintaining those wells and related equipment and facilities, they become part of the cost of oil and gas produced. Examples of production costs (sometimes 
called lifting costs) are: 

Gaffney, Cline & Associates

(A) Costs of labor to operate the wells and related equipment and facilities.

(B) Repairs and maintenance.

(C) Materials, supplies, arid fuel consumed and supplies utilized in operating the wells and related equipment and facilities.

(D) Property taxes and insurance applicable to proved properties and wells and related equipment and facilities.

(E) Severance taxes.

(ii) Some support equipment or facilities may serve two or more oil and gas producing activities and may also serve transportation, refining, and marketing activities. To the extent that 

the support equipment and facilities are used in oil and gas producing activities, their depreciation and applicable operating costs become exploration, development or production 
costs, as appropriate. Depreciation, depletion, and amortization of capitalized acquisition, exploration, and development costs are not production costs but also become part of the cost 
of oil and gas produced along with production (lifting) costs identified above.

(21)     Proved area. The part of a property to which proved reserves have been specifically attributed. 

(22)     Proved oil and gas reserves. Proved oil and gas reserves are those quantities of oil and gas, which, by analysis of geoscience and engineering data, can be estimated with reasonable 
certainty to be economically producible—from a given date forward, from known reservoirs, and under existing economic conditions, operating methods, and government regulations—prior to 
the time at which contracts providing the right to operate expire, unless evidence indicates that renewal is reasonably certain, regardless of whether deterministic or probabilistic methods are used
for the estimation. The project to extract the hydrocarbons must have commenced or the operator must be reasonably certain that it will commence the project within a reasonable time. 

(i)

The area of the reservoir considered as proved includes:

(A) The area identified by drilling and limited by fluid contacts, if any, and

(B) Adjacent undrilled portions of the reservoir that can, with reasonable certainty, be judged to be continuous with it and to contain economically producible oil or gas on the basis 

of available geoscience and engineering data.

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Gaffney, Cline & Associates

(ii)

In the absence of data on fluid contacts, proved quantities in a reservoir are limited by the lowest known hydrocarbons (LKH) as seen in a well penetration unless geoscience, 
engineering, or performance data and reliable technology establishes a lower contact with reasonable certainty.

(iii) Where direct observation from well penetrations has defined a highest known oil (HKO) elevation and the potential exists for an associated gas cap, proved oil reserves may be 

assigned in the structurally higher portions of the reservoir only if geoscience, engineering, or performance data and reliable technology establish the higher contact with reasonable 
certainty.

(iv) Reserves which can be produced economically through application of improved recovery techniques (including, but not limited to, fluid injection) are included in the proved 

classification when:

(A) Successful testing by a pilot project in an area of the reservoir with properties no more favorable than in the reservoir as a whole, the operation of an installed program in the 

reservoir or an analogous reservoir, or other evidence using reliable technology establishes the reasonable certainty of the engineering analysis on which the project or program 
was based; and 

(B) The project has been approved for development by all necessary parties and entities, including governmental entities.

(v) Existing economic conditions include prices and costs at which economic producibility from a reservoir is to be determined. The price shall be the average price during the 12-month 

period prior to the ending date of the period covered by the report, determined as an unweighted arithmetic average of the first-day-of-the-month price for each month within such 
period, unless prices are defined by contractual arrangements, excluding escalations based upon future conditions.

(23)     Proved properties. Properties with proved reserves. 

(24)     Reasonable certainty. If deterministic methods are used, reasonable certainty means a high degree of confidence that the quantities will be recovered. If probabilistic methods are used, 
there should be at least a 90% probability that the quantities actually recovered will equal or exceed the estimate. A high degree of confidence exists if the quantity is much more likely to be 
achieved than not, and, as changes due to increased availability of geoscience (geological, geophysical, and geochemical), engineering, and economic data are made to estimated ultimate 
recovery (EUR) with time, reasonably certain EUR is much more likely to increase or remain constant than to decrease. 

(25)     Reliable technology. Reliable technology is a grouping of one or more technologies (including computational methods) that has been field tested and has been demonstrated to provide 
reasonably certain results with consistency and repeatability in the formation being evaluated or in an analogous formation. 

(26)     Reserves. Reserves are estimated remaining quantities of oil and gas and related substances anticipated to be economically producible, as of a given date, by application of development 
projects to known accumulations. In addition, there must exist, or there must be a reasonable expectation that there will exist, the legal right to produce or a revenue interest in the production, 
installed means of delivering oil and gas or related substances to market, and all permits and financing required to implement the project. 

Note to paragraph (a)(26): Reserves should not be assigned to adjacent reservoirs isolated by major, potentially sealing, faults until those reservoirs are penetrated and evaluated as 
economically producible. Reserves should not be assigned to areas that are clearly separated from a known accumulation by a non-productive reservoir (i.e., absence of reservoir, 
structurally low reservoir, or negative test results). Such areas may contain prospective resources (i.e.,

 
 
 
 
 
 
 
 
 
Gaffney, Cline & Associates

potentially recoverable resources from undiscovered accumulations).

(27)     Reservoir. A porous and permeable underground formation containing a natural accumulation of producible oil and/or gas that is confined by impermeable rock or water barriers and is 
individual and separate from other reservoirs. 

(28)     Resources. Resources are quantities of oil and gas estimated to exist in naturally occurring accumulations. A portion of the resources may be estimated to be recoverable, and another 
portion may be considered to be unrecoverable. Resources include both discovered and undiscovered accumulations. 

(29)     Service well. A well drilled or completed for the purpose of supporting production in an existing field. Specific purposes of service wells include gas injection, water injection, steam 
injection, air injection, salt-water disposal, water supply for injection, observation, or injection for in-situ combustion. 

(30)     Stratigraphic test well. A stratigraphic test well is a drilling effort, geologically directed, to obtain information pertaining to a specific geologic condition. Such wells customarily are 
drilled without the intent of being completed for hydrocarbon production. The classification also includes tests identified as core tests and all types of expendable holes related to hydrocarbon 
exploration. Stratigraphic tests are classified as  “exploratory type” if not drilled in a known area or “development type” if drilled in a known area. 

(31)     Undeveloped oil and gas reserves. Undeveloped oil and gas reserves are reserves of any category that are expected to be recovered from new wells on undrilled acreage, or from existing 
wells where a relatively major expenditure is required for recompletion. 

(i)

Reserves on undrilled acreage shall be limited to those directly offsetting development spacing areas that are reasonably certain of production when drilled, unless evidence using 
reliable technology exists that establishes reasonable certainty of economic producibility at greater distances.

(ii) Undrilled locations can be classified as having undeveloped reserves only if a development plan has been adopted indicating that they are scheduled to be drilled within five years, 

unless the specific circumstances, justify a longer time.

(iii) Under no circumstances shall estimates for undeveloped reserves be attributable to any acreage for which an application of fluid injection or other improved recovery technique is 

contemplated, unless such techniques have been proved effective by actual projects in the same reservoir or an analogous reservoir, as defined in paragraph (a)(2) of this section, or 
by other evidence using reliable technology establishing reasonable certainty.

(32)     Unproved properties. Properties with no proved reserves. 

 
 
 
Gaffney, Cline & Associates

APPENDIX III TO LETTER: 

Technical Qualifications of Person Responsible for Audit 

  
  
  
  
  
 
   
   
   
   
 
Statement of Qualifications 
D. K. Morgan 

Gaffney, Cline & Associates

D. K. Morgan is one of GCA’s Senior Technical Mangers and was responsible for overseeing the preparation of the audit. Mr. Morgan has over 42 years of diversified international industry 
experience mainly in reservoir-engineering, geology, reserves estimates, project development, economics and training in the assessment, classification and reporting of reserves and resources. 
Over the past 5 years he has been responsible for project review and oversight for GCA’s Houston office as it pertains to exploration and production activities including thereserves audits 
conducted on behalf of Repsol YPF S.A. and YPF S.A. He is a member of the Society of Petroleum Engineers (SPE) and holds a petroleum engineering degree from Marietta College. 

 
Exhibit 99.2

DEGOLYER AND MACNAUGHTON 

5001 SPRING VALLEY ROAD 
SUITE 800EAST 
DALLAS, TEXAS 75244 

This is a digital representation of a DeGolyer and MacNaughton report. 

Each file contained herein is intended to be a manifestation of certain data in the subject report and as such is subject to the definitions, qualifications, explanations, conclusions, and other 

conditions thereof. The information and data contained in each file may be subject to misinterpretation; therefore, the signed and bound copy of this report should be considered the only 
authoritative source of such information. 

  
  
  
 
 
 
 
 
 
 
 
 
 
 
 
   
DEGOLYER AND MACNAUGHTON 

5001 SPRING VALLEY ROAD 
SUITE 800 EAST 
DALLAS, TEXAS 75244 

January 25, 2011 

YPF S. A. 
Macacha Güemes 515 
Ciudad Autonóma de Buenos Aires 
Argentina 

Gentlemen: 

Pursuant to your request, we have conducted a reserves audit of the net proved crude oil, condensate, and natural gas reserves, as of September 30, 2010, of certain properties owned by 

YPF S. A. (YPF) located in Argentina. This evaluation was completed on January 25, 2011. Reserves for these properties are termed Package 1. YPF has represented that these properties 
account for 32 percent on a net equivalent barrel basis of YPF’s net proved reserves as of September 30, 2010, that the proved undeveloped reserves estimated in this report constitute 
approximately 37 percent of all YPF’s proved undeveloped reserves, and that the net proved reserves estimates have been prepared in accordance with the reserves definitions of Rules 4-10(a) 
(l)-(32) of Regulation S-X of the Securities and Exchange Commission (SEC) of the United States. We have reviewed information provided to us by YPF that it represents to be YPF’s estimates 
of the net reserves, as of September 30, 2010, for the same properties as those which we evaluated. 

Reserves included herein are expressed as net reserves as represented by YPF. Gross reserves are defined as the total estimated petroleum to be produced from these properties after 

September 30, 2010. Net reserves are defined as that portion of the gross reserves attributable to the interests owned by YPF after deducting all interests owned by others. 

Estimates of oil, condensate, and natural gas should be regarded only as estimates that may change as further production history and additional information become available. Not only are 

such reserves estimates based on that information which is currently available, but such estimates are also subject to the uncertainties inherent in the application of judgmental factors in 
interpreting such information. 

  
  
 
 
 
DEGOLYER AND MACNAUGHTON

2

Data used in this audit were obtained from reviews with YPF personnel, YPF files, from records on file with the appropriate regulatory agencies, and from public sources. In the 

preparation of this report we have relied, without independent verification, upon such information furnished by YPF with respect to property interests, production from such properties, current 
costs of operation and development, current prices for production, agreements relating to current and future operations and sale of production, and various other information and data that were 
accepted as represented. A field examination of the properties was not considered necessary for the purposes of this report. 

Methodology and Procedures

Estimates of reserves were prepared by the use of appropriate geologic, petroleum engineering, and evaluation principles and techniques that are in accordance with practices recognized by 

the petroleum industry as presented in the publication of the Society of Petroleum Engineers entitled “Standards Pertaining to the Estimating and Auditing of Oil and Gas Reserves Information 
(Revision as of February 19, 2007).” The method or combination of methods used in the analysis of each reservoir was tempered by experience with similar reservoirs, stage of development, 
quality and completeness of basic data, and production history, and were methods that we considered to be appropriate and necessary to establish reserves quantities and reserves categorization 
that conform to SEC definitions and guidelines. 

When applicable, the volumetric method was used to estimate the original oil in place (OOIP) and the original gas in place (OGIP). Structure and isopach maps were constructed to 
estimate reservoir volume. Electrical logs, radioactivity logs, core analyses, and other available data were used to prepare these maps as well as to estimate representative values for porosity and 
water saturation. When adequate data were available and when circumstances justified, material balance and other engineering methods were used to estimate OOIP or OGIP. 

Estimates of ultimate recovery were obtained after applying recovery factors to OOIP or OGIP. These recovery factors were based on consideration of the type of energy inherent in the 

reservoirs, analyses of the petroleum, the structural positions of the properties, and the production histories. When applicable, material balance and other engineering methods were used to 
estimate recovery factors. An analysis 

 
 
 
DEGOLYER AND MACNAUGHTON

3

of reservoir performance, including production rate, reservoir pressure, and gas-oil ratio behavior, was used in the estimation of reserves. 

For depletion-type reservoirs or those whose performance disclosed a reliable decline in producing-rate trends or other diagnostic characteristics, reserves were estimated by the application 
of appropriate decline curves or other performance relationships. In the analyses of production-decline curves, reserves were estimated only to the limits of economic production or to the limit of 
the production licenses as appropriate. 

Definition of Reserves

Petroleum reserves estimated by YPF and by us included in this report are classified as proved. Only proved reserves have been evaluated for this report. Reserves classifications used by 
YPF and by us in this report are in accordance with the reserves definitions of Rules 4-10(a) (l)-(32) of Regulation S-X of the SEC. Reserves are judged to be economically producible in future 
years from known reservoirs under existing economic and operating conditions and assuming continuation of current regulatory practices using conventional production methods and equipment. 
In the analyses of production-decline curves, reserves were estimated only to the limit of economic rates of production under existing economic and operating conditions using prices and costs 
consistent with the effective date of this report, including consideration of changes in existing prices provided only by contractual arrangements but not including escalations based upon future 
conditions. The petroleum reserves are classified as follows: 

Proved oil and gas reserves – Proved oil and gas reserves are those quantities of oil and gas, which, by analysis of geoscience and engineering data, can be estimated with reasonable 
certainty to be economically producible—from a given date forward, from known reservoirs, and under existing economic conditions, operating methods, and government regulations—
prior to the time at which contracts providing the right to operate expire, unless evidence indicates that renewal is reasonably certain, regardless of whether deterministic or probabilistic 
methods are used for the estimation. The project to extract the hydrocarbons must have commenced or the operator must be reasonably certain that it will commence the project within a 
reasonable time.

 
 
 
DEGOLYER AND MACNAUGHTON

(i) The area of the reservoir considered as proved includes:

4

(A) The area identified by drilling and limited by fluid contacts, if any, and (B) Adjacent undrilled portions of the reservoir that can, with reasonable certainty, be judged to be 
continuous with it and to contain economically producible oil or gas on the basis of available geoscience and engineering data.

(ii) In the absence of data on fluid contacts, proved quantities in a reservoir are limited by the lowest known hydrocarbons (LKH) as seen in a well penetration unless geoscience, 
engineering, or performance data and reliable technology establishes a lower contact with reasonable certainty.

(iii) Where direct observation from well penetrations has defined a highest known oil (HKO) elevation and the potential exists for an associated gas cap, proved oil reserves may be 
assigned in the structurally higher portions of the reservoir only if geoscience, engineering, or performance data and reliable technology establish the higher contact with reasonable 
certainty.

(iv) Reserves which can be produced economically through application of improved recovery techniques (including, but not limited to, fluid injection) are included in the proved 
classification when:

(A) Successful testing by a pilot project in an area of the reservoir with properties no more favorable than in the reservoir as a whole, the operation of an installed program in the 
reservoir or an analogous reservoir, or other evidence using reliable technology establishes the reasonable certainty of the engineering analysis on which the project or program was 
based; and (B) The project has been approved for development by all necessary parties and entities, including governmental entities.

(v) Existing economic conditions include prices and costs at which economic producibility from a reservoir is to be determined. The price shall be the average price during the 12-
month period prior to the ending date of the period covered

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
DEGOLYER AND MACNAUGHTON

5

by the report, determined as an unweighted arithmetic average of the first-day-of-the-month price for each month within such period, unless prices are defined by contractual 
arrangements, excluding escalations based upon future conditions.

Developed oil and gas reserves – Developed oil and gas reserves are reserves of any category that can be expected to be recovered:

(i) Through existing wells with existing equipment and operating methods or in which the cost of the required equipment is relatively minor compared to the cost of a new well; and

(ii) Through installed extraction equipment and infrastructure operational at the time of the reserves estimate if the extraction is by means not involving a well.

Undeveloped oil and gas reserves – Undeveloped oil and gas reserves are reserves of any category that are expected to be recovered from new wells on undrilled acreage, or from existing 
wells where a relatively major expenditure is required for recompletion.

(i) Reserves on undrilled acreage shall be limited to those directly offsetting development spacing areas that are reasonably certain of production when drilled, unless evidence using 
reliable technology exists that establishes reasonable certainty of economic producibility at greater distances.

(ii) Undrilled locations can be classified as having undeveloped reserves only if a development plan has been adopted indicating that they are scheduled to be drilled within five years, 
unless the specific circumstances justify a longer time.

(iii) Under no circumstances shall estimates for undeveloped reserves be attributable to any acreage for which an application of fluid injection or other improved recovery technique is 
contemplated, unless such techniques have been proved effective by actual projects in the same reservoir or an analogous reservoir, as defined in [section 210.4-10 (a)

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
DEGOLYER AND MACNAUGHTON

6

Definitions], or by other evidence using reliable technology establishing reasonable certainty.

Primary Economic Assumptions

The following economic assumptions were used for estimating existing and future prices and costs: 

Oil, Condensate, and NGL Prices 

Based on information provided by YPF, the government-regulated price of oil and condensate was U.S.$52.71 per barrel for the Medanito area and U.S.$47.33 per barrel for the 
Escalante area. According to information provided by YPF, the government-regulated oil prices will expire at year-end 2011. YPF has represented that, after such time, the oil and 
condensate prices provided by YPF were based on a 12-month average West Texas Intermediate price, calculated as the unweighted arithmetic average of the first-day-of-the-month 
price for each month within the 12-month period prior to the end of the reporting period, unless prices are defined by contractual arrangements. YPF supplied differentials by field to 
a West Texas Intermediate reference price of U.S.$79.40 per barrel and the prices were held constant thereafter. The volume-weighted average price was U.S.$70.00 per barrel.

YPF has represented that NGL prices of U.S.$18.43 per barrel for the Loma La Lata area and U.S.$23.79 per barrel for the Barrancas area. YPF has represented that these prices were 
calculated as the unweighted arithmetic average of the first-day-of-the-month price for each month within the 12-month period prior to the end of the reporting period, unless prices 
are defined by contractual arrangements. The volume-weighted average price was U.S.$18.46 per barrel.

 
 
 
 
 
 
 
 
 
DEGOLYER AND MACNAUGHTON

Natural Gas Prices

7

YPF has represented that the natural gas prices were U.S.$2.29 per thousand cubic feet (Mcf) for Aguada Toledo-Sierra Barrosa Area, U.S.$2.50 per thousand cubic feet (Mcf) for 
Loma La Lata Area, and U.S.$3.57 per Mcf for Barrancas Area and were held constant thereafter. YPF has represented that these prices were calculated as the unweighted arithmetic 
average of the first-day-of-the-month price for each month within the 12-month period prior to the end of the reporting period, unless prices are defined by contractual arrangements. 
The volume-weighted average price was U.S.$2.49 per Mcf.

Operating Expenses and Capital Costs

Operating expenses and capital costs, based on information provided by YPF, were used in estimating future costs required to operate the properties. In certain cases, future costs, 
either higher or lower than existing costs, may have been used because of anticipated changes in operating conditions. These costs were not escalated for inflation.

While the oil and gas industry may be subject to regulatory changes from time to time that could affect an industry participant’s ability to recover its oil and gas reserves, we are not aware 

of any such governmental actions which would restrict the recovery of the September 30, 2010, estimated oil and gas volumes. The reserves estimated in this report can be produced under 
current regulatory guidelines. 

YPF has represented that estimated net proved reserves attributable to the reviewed properties are based on the definitions of proved reserves of the SEC. YPF represents that its estimates 

of the net proved reserves attributable to these properties which represent 32 percent of YPF’s reserves on a net equivalent basis are as follows, expressed in thousands of barrels (Mbbl), millions 
of cubic feet (MMcf), and thousands of barrels of oil equivalent (Mboe): 

 
 
 
 
 
 
 
 
DEGOLYER AND MACNAUGHTON

8

Argentina Area

Proved Developed
  Barrancas
  Cerro Fortunoso
  El Manzano
  Barranca de los Loros
  Las Manadas
  Cerro Liupuca
  Cerro Negro
  Aguada Toledo-Sierra Barrosa
  Loma La Lata

Total Proved Developed
Proved Undeveloped
  Barrancas
  Cerro Fortunoso
  El Manzano
  Barranca de los Loros
  Las Manadas
  Cerro Liupuca
  Cerro Negro
  Aguada Toledo-Sierra Barrosa
  Loma La Lata

Total Proved Undeveloped
Total Proved
  Barrancas
  Cerro Fortunoso
  El Manzano
  Barranca de los Loros
  Las Manadas
  Cerro Liupuca
  Cerro Negro
  Aguada Toledo-Sierra Barrosa
  Loma La Lata

Total Proved

Estimated by YPF Net Proved Reserves
as of September 30, 2010

Total 
Liquids 
(Mbbl) 

Marketable
Gas 
(MMcf)

Oil
Equivalent 
(Mboe)

11,714
7,831
91
180
321
26
184
5,171
47,644

558
0
0
80
0
0
0
97,304
845,732

11,807
7,831
91
194
321
26
184
21,388
188,599

73,162

943,674

230,441

642
323
0
0
582
0
0
3,089
17,130

16
0
0
0
0
0
0
11,110
354,603

21,766

365,729

12,355
8,154
91
180
903
26
184
8,260
64,775

574
0
0
80
0
0
0
108,414
1,200,335

644
323
0
0
582
0
0
4,941
76,231

82,721

12,451
8,154
91
194
903
26
184
26,329
264,830

94,928

1,309,402

313,162

Note: Gas is converted to oil equivalent using a factor of 6,000 cubic feet of gas per 1 barrel of oil equivalent.

Our estimates of YPF’s net proved reserves attributable to the reviewed properties are based on the definitions of proved reserves of the SEC and are as 

 
 
 
DEGOLYER AND MACNAUGHTON

9

follows, expressed in thousands of barrels (Mbbl), millions of cubic feet (MMcf), and thousands of barrels of oil equivalent (Mboe): 

Argentina Area

Proved Developed
  Barrancas
  Cerro Fortunoso
  El Manzano
  Barranca de los Loros
  Las Manadas
  Cerro Liupuca
  Cerro Negro
  Aguada Toledo-Sierra Barrosa
  Loma La Lata

Total Proved Developed
Proved Undeveloped
  Barrancas
  Cerro Fortunoso
  El Manzano
  Barranca de los Loros
  Las Manadas
  Cerro Liupuca
  Cerro Negro
  Aguada Toledo-Sierra Barrosa
  Loma La Lata

Total Proved Undeveloped
Total Proved
  Barrancas
  Cerro Fortunoso
  El Manzano
  Barranca de los Loros
  Las Manadas
  Cerro Liupuca
  Cerro Negro
  Aguada Toledo-Sierra Barrosa
  Loma La Lata

Total Proved

Note: Gas is converted to oil equivalent using a factor of 6,000 cubic feet of gas per 1 barrel of oil equivalent.

Estimated by DeGolyer and MacNaughton
Net Proved Reserves 
as of September 30, 2010

Total 
Liquids 
(Mbbl) 

Marketable
Gas 
(MMcf)

Oil
Equivalent 
(Mboe)

10,966
7,994
89
167
314
27
175
4,922
49,897

548
0
0
23
0
0
0
100,147
872,248

11,057
7,994
89
171
314
27
175
21,613
195,272

74,551

972,966

236,712

661
331
0
0
574
0
0
3,088
16,963

16
0
0
0
0
0
0
11,110
351,779

21,617

362,904

11,627
8,325
89
167
888
27
175
8,010
66,860

564
0
0
23
0
0
0
111,256
1,224,026

664
331
0
0
574
0
0
4,940
75,593

82,101

11,721
8,325
89
171
888
27
175
26,553
270,864

96,168

1,335,870

318,813

 
 
DEGOLYER AND MACNAUGHTON

10

In our opinion, the information relating to estimated proved reserves of oil, condensate, natural gas liquids, and gas contained in this report has been prepared in accordance with 
Paragraphs 932-235-50-4, 932-235-50-6, 932-235-50-7, and 932-235-50-9 of the Accounting Standards Update 932-235-50, Extractive Industries - Oil and Gas (Topic 932): Oil and Gas 
Reserve Estimation and Disclosures (January 2010) of the Financial Accounting Standards Board and Rules 4-10(a) (1)-(32) of Regulation S-X and Rules 302(b), 1201, 1202(a) (1), (2), (3), (4), 
(8), and 1203(a) of Regulation S-K of the Securities and Exchange Commission. 

To the extent the above-enumerated rules, regulations, and statements require determinations of an accounting or legal nature, we, as engineers, are necessarily unable to express an opinion 

as to whether the above-described information is in accordance therewith or sufficient therefor. 

In comparing the detailed net proved reserves estimates prepared by us and by YPF, we have found differences, both positive and negative, resulting in an aggregate difference of 1.8 

percent when compared on the basis of net equivalent barrels. It is our opinion that the net proved reserves estimates prepared by YPF on the properties reviewed by us and referred to above, 
when compared on the basis of net equivalent barrels, in aggregate, do not differ materially from those prepared by us. 

DeGolyer and MacNaughton is an independent petroleum engineering consulting firm that has been providing petroleum consulting services throughout the world since 1936. DeGolyer 
and MacNaughton does not have any financial interest, including stock ownership, in YPF. Our fees were not contingent on the results of our evaluation. This letter report has been prepared at 
the request of YPF. DeGolyer and MacNaughton has used all assumptions, data, procedures, and methods that it considers necessary and appropriate to prepare this report. 

Submitted,

DeGOLYER and MacNAUGHTON  
Texas Registered Engineering Firm F-716  
/s/ R. M. Shuck                                          
R. M. Shuck, P.E.  
Senior Vice President  
DeGolyer and MacNaughton

 
  
  
 
 
 
DEGOLYER AND MACNAUGHTON

CERTIFICATE of QUALIFICATION 

I, R. M. Shuck, Petroleum Engineer with DeGolyer and MacNaughton, 5001 Spring Valley Road, Suite 800 East, Dallas, Texas, 75244 U.S.A., hereby certify: 

1.

2.

That I am a Senior Vice President with DeGolyer and MacNaughton, which company did prepare the letter report addressed to YPF dated January 31, 2010, and that I, as Senior Vice 
President, was responsible for the preparation of this report.

That I attended University of Houston, and that I graduated with a Bachelor of Science degree in Chemical Engineering in the year 1977; that I am a Registered Professional Engineer in the 
State of Texas; that I am a member of the International Society of Petroleum Engineers and the American Association of Petroleum Geologists; and that I have in excess of 32 years of 
experience in oil and gas reservoir studies and reserves evaluations.

/s/ R. M. Shuck                                          

R. M. Shuck, P.E.  
Senior Vice President  
DeGolyer and MacNaughton

 
 
 
 
 
 
 
 
   
 
 
 
 
DEGOLYER AND MACNAUGHTON 

5001 SPRING VALLEY ROAD 
SUITE 800 EAST 
DALLAS, TEXAS 75244 

Exhibit 99.3

This is a digital representation of a DeGolyer and MacNaughton report. 

Each file contained herein is intended to be a manifestation of certain data in the subject report and as such is subject to the definitions, qualifications, explanations, conclusions, and other 

conditions thereof. The information and data contained in each file may be subject to misinterpretation; therefore, the signed and bound copy of this report should be considered the only 
authoritative source of such information. 

  
 
 
DEGOLYER AND MACNAUGHTON 

5001 SPRING VALLEY ROAD 
SUITE 800 EAST 
DALLAS, TEXAS 75244 

January 25, 2011 

YPF S. A. 
Macacha Güemes 515 
Ciudad Autonóma de Buenos Aires 
Argentina 

Gentlemen: 

Pursuant to your request, we have conducted a reserves audit of the net proved crude oil, condensate, and natural gas reserves, as of September 30, 2010, of certain properties owned by 

YPF S. A. (YPF), located in Argentina. This evaluation was completed on January 25, 2011. Reserves for these properties are termed Package 2. YPF has represented that these properties 
account for 15 percent on a net equivalent barrel basis of YPF’s net proved reserves as of September 30, 2010, that the proved undeveloped reserves estimated in this report constitute 
approximately 22 percent of all YPF’s proved undeveloped reserves, and that the net proved reserves estimates have been prepared in accordance with the reserves definitions of Rules 4-10(a) 
(1)-(32) of Regulation S-X of the Securities and Exchange Commission (SEC) of the United States. We have reviewed information provided to us by YPF that it represents to be YPF’s estimates 
of the net reserves, as of September 30, 2010, for the same properties as those which we evaluated. 

Reserves included herein are expressed as net reserves as represented by YPF. Gross reserves are defined as the total estimated petroleum to be produced from these properties after 

September 30, 2010. Net reserves are defined as that portion of the gross reserves attributable to the interests owned by YPF after deducting all interests owned by others. 

Estimates of oil, condensate, and natural gas should be regarded only as estimates that may change as further production history and additional information become available. Not only are 

such reserves estimates based on that information which is currently available, but such estimates are also subject to the uncertainties inherent in the application of judgmental factors in 
interpreting such information. 

  
 
DEGOLYER AND MACNAUGHTON

2

Data used in this audit were obtained from reviews with YPF personnel, YPF files, from records on file with the appropriate regulatory agencies, and from public sources. In the 

preparation of this report we have relied, without independent verification, upon such information furnished by YPF with respect to property interests, production from such properties, current 
costs of operation and development, current prices for production, agreements relating to current and future operations and sale of production, and various other information and data that were 
accepted as represented. A field examination of the properties was not considered necessary for the purposes of this report. 

Methodology and Procedures

Estimates of reserves were prepared by the use of appropriate geologic, petroleum engineering, and evaluation principles and techniques that are in accordance with practices recognized by 

the petroleum industry as presented in the publication of the Society of Petroleum Engineers entitled “Standards Pertaining to the Estimating and Auditing of Oil and Gas Reserves Information 
(Revision as of February 19, 2007).” The method or combination of methods used in the analysis of each reservoir was tempered by experience with similar reservoirs, stage of development, 
quality and completeness of basic data, and production history, and were methods that we considered to be appropriate and necessary to establish reserves quantities and reserves categorization 
that conform to SEC definitions and guidelines. 

When applicable, the volumetric method was used to estimate the original oil in place (OOIP) and the original gas in place (OGIP). Structure and isopach maps were constructed to 
estimate reservoir volume. Electrical logs, radioactivity logs, core analyses, and other available data were used to prepare these maps as well as to estimate representative values for porosity and 
water saturation. When adequate data were available and when circumstances justified, material balance and other engineering methods were used to estimate OOIP or OGIP. 

Estimates of ultimate recovery were obtained after applying recovery factors to OOIP or OGIP. These recovery factors were based on consideration of the type of energy inherent in the 

reservoirs, analyses of the petroleum, the structural positions of the properties, and the production histories. When applicable, material balance and other engineering methods were used to 
estimate recovery factors. An analysis 

  
  
 
 
DEGOLYER AND MACNAUGHTON

3

of reservoir performance, including production rate, reservoir pressure, and gas-oil ratio behavior, was used in the estimation of reserves. 

For depletion-type reservoirs or those whose performance disclosed a reliable decline in producing-rate trends or other diagnostic characteristics, reserves were estimated by the application 
of appropriate decline curves or other performance relationships. In the analyses of production-decline curves, reserves were estimated only to the limits of economic production or to the limit of 
the production licenses as appropriate. 

Definition of Reserves

Petroleum reserves estimated by YPF and by us included in this report are classified as proved. Only proved reserves have been evaluated for this report. Reserves classifications used by 
YPF and by us in this report are in accordance with the reserves definitions of Rules 4-10(a) (1)-(32) of Regulation S-X of the SEC. Reserves are judged to be economically producible in future 
years from known reservoirs under existing economic and operating conditions and assuming continuation of current regulatory practices using conventional production methods and equipment. 
In the analyses of production-decline curves, reserves were estimated only to the limit of economic rates of production under existing economic and operating conditions using prices and costs 
consistent with the effective date of this report, including consideration of changes in existing prices provided only by contractual arrangements but not including escalations based upon future 
conditions. The petroleum reserves are classified as follows: 

Proved oil and gas reserves — Proved oil and gas reserves are those quantities of oil and gas, which, by analysis of geoscience and engineering data, can be estimated with reasonable 
certainty to be economically producible—from a given date forward, from known reservoirs, and under existing economic conditions, operating methods, and government regulations—
prior to the time at which contracts providing the right to operate expire, unless evidence indicates that renewal is reasonably certain, regardless of whether deterministic or probabilistic 
methods are used for the estimation. The project to extract the hydrocarbons must have commenced or the operator must be reasonably certain that it will commence the project within a 
reasonable time.

  
 
 
 
DEGOLYER AND MACNAUGHTON

4

(i) The area of the reservoir considered as proved includes:

(A) The area identified by drilling and limited by fluid contacts, if any, and (B) Adjacent undrilled portions of the reservoir that can, with reasonable certainty, be judged to be 
continuous with it and to contain economically producible oil or gas on the basis of available geoscience and engineering data.

(ii) In the absence of data on fluid contacts, proved quantities in a reservoir are limited by the lowest known hydrocarbons (LKH) as seen in a well penetration unless geoscience, 
engineering, or performance data and reliable technology establishes a lower contact with reasonable certainty.

(iii) Where direct observation from well penetrations has defined a highest known oil (HKO) elevation and the potential exists for an associated gas cap, proved oil reserves may be 
assigned in the structurally higher portions of the reservoir only if geoscience, engineering, or performance data and reliable technology establish the higher contact with reasonable 
certainty.

(iv) Reserves which can be produced economically through application of improved recovery techniques (including, but not limited to, fluid injection) are included in the proved 
classification when:

(A) Successful testing by a pilot project in an area of the reservoir with properties no more favorable than in the reservoir as a whole, the operation of an installed program in the 
reservoir or an analogous reservoir, or other evidence using reliable technology establishes the reasonable certainty of the engineering analysis on which the project or program was 
based; and (B) The project has been approved for development by all necessary parties and entities, including governmental entities.

(v) Existing economic conditions include prices and costs at which economic producibility from a reservoir is to be determined. The price shall be the average price during the

  
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
DEGOLYER AND MACNAUGHTON

5

12-month period prior to the ending date of the period covered by the report, determined as an unweighted arithmetic average of the first-day-of-the-month price for each month 
within such period, unless prices are defined by contractual arrangements, excluding escalations based upon future conditions.

Developed oil and gas reserves – Developed oil and gas reserves are reserves of any category that can be expected to be recovered:

(i) Through existing wells with existing equipment and operating methods or in which the cost of the required equipment is relatively minor compared to the cost of a new well; and

(ii) Through installed extraction equipment and infrastructure operational at the time of the reserves estimate if the extraction is by means not involving a well.

Undeveloped oil and gas reserves – Undeveloped oil and gas reserves are reserves of any category that are expected to be recovered from new wells on undrilled acreage, or from existing 
wells where a relatively major expenditure is required for recompletion.

(i) Reserves on undrilled acreage shall be limited to those directly offsetting development spacing areas that are reasonably certain of production when drilled, unless evidence using 
reliable technology exists that establishes reasonable certainty of economic producibility at greater distances.

(ii) Undrilled locations can be classified as having undeveloped reserves only if a development plan has been adopted indicating that they are scheduled to be drilled within five years, 
unless the specific circumstances justify a longer time.

(iii) Under no circumstances shall estimates for undeveloped reserves be attributable to any acreage for which an application of fluid injection or other improved recovery technique is 
contemplated, unless such techniques have been proved effective by actual projects in the same reservoir or an

  
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
DEGOLYER AND MACNAUGHTON

6

analogous reservoir, as defined in [section 210.4-10 (a) Definitions], or by other evidence using reliable technology establishing reasonable certainty.

Primary Economic Assumptions

The following economic assumptions were used for estimating existing and future prices and costs: 

Oil and Condensate Prices 

Based on information provided by YPF, the government regulated price of oil and condensate was U.S.$48.19 per barrel for the Santa Cruz area and U.S.$47.33 per barrel for the 
Chubut area. According to information provided by YPF, the government regulated oil prices will expire at year end of 2011. After such time, YPF has represented that the oil and 
condensate prices were based on a 12-month average West Texas Intermediate price, calculated as the unweighted arithmetic average of the first-day-of-the-month price for each 
month within the 12-month period prior to the end of the reporting period, unless prices are defined by contractual arrangements. YPF supplied differentials by field to a West Texas 
Intermediate reference price of U.S.$79.40 per barrel and the prices were held constant thereafter. The volume-weighted average price was U.S.$67.65 per barrel.

Natural Gas Prices 

YPF has represented that the natural gas prices were U.S.$2.26 per Mcf for Barranca Baya field, U.S.$2.18 per Mcf for Lomas del Cuy field, U.S.$2.33 per Mcf for Los Perales field, 
U.S.$2.45 per Mcf for Seco Leon field, and U.S.$2.34 per Mcf for Chubut area and were held constant thereafter. YPF has denoted that these prices were calculated as the 
unweighted arithmetic average of the first-day-of-the-month price for each month within the 12-month period prior to the end of the reporting period, unless prices are defined by 
contractual

  
  
 
 
 
 
 
 
 
 
 
 
DEGOLYER AND MACNAUGHTON

7

arrangements. The volume weighted average price was U.S.$2.34 per Mcf.Natural Gas Prices

Operating Expenses and Capital Costs 

Operating expenses and capital costs, based on information provided by YPF, were used in estimating future costs required to operate the properties. In certain cases, future costs, 
either higher or lower than existing costs, may have been used because of anticipated changes in operating conditions. These costs were not escalated for inflation.

While the oil and gas industry may be subject to regulatory changes from time to time that could affect an industry participant’s ability to recover its oil and gas reserves, we are not aware 

of any such governmental actions which would restrict the recovery of the September 30, 2010, estimated oil and gas volumes. The reserves estimated in this report can be produced under 
current regulatory guidelines. 

YPF has represented that estimated net proved reserves attributable to the reviewed properties are based on the definitions of proved reserves of the SEC. YPF represents that its estimates 

of the net proved reserves attributable to these properties which represent 15 percent of YPF’s reserves on a net equivalent basis are as follows, expressed in thousands of barrels (Mbbl), millions 
of cubic feet (MMcf), and thousands of barrels of oil equivalent (Mboe): 

Estimated by YPF

  
  
 
 
 
 
 
 
 
 
 
DEGOLYER AND MACNAUGHTON

8

Argentina Area

Proved Developed
  Manantiales Behr Area
  Restinga Alí Area
  Barranca Baya Area
  Lomas del Cuy Area
  Los Monos area
  Los Perales Area
  Seco León Area

Total Proved Developed
Proved Undeveloped
  Manantiales Behr Area
  Restinga Alí Area
  Barranca Baya Area
  Lomas del Cuy Area
  Los Monos area
  Los Perales Area
  Seco León Area

Total Proved Undeveloped
Total Proved
  Manantiales Behr Area
  Restinga Alí Area
  Barranca Baya Area
  Lomas del Cuy Area
  Los Monos area
  Los Perales Area
  Seco León Area

Total Proved

Net Proved Reserves 
as of  
September 30, 2010

Total  
Liquids  
(Mbbl) 

Marketable
Gas  
(MMcf)

Oil 
Equivalent 
(Mboe)

20,777
216
16,059
9,353
313
24,437
14,560

85,715

8,350
0
11,589
3,635
0
14,271
9,696

47,541

29,127
216
27,648
12,988
313
38,708
24,255

12,101
125
2,843
5,687
325
53,043
12,359

22,794
237
16,533
10,301
367
33,278
16,619

86,483

100,129

2,979
0
2,032
765
0
5,014
6,161

16,951

15,080
125
4,875
6,452
325
58,057
18,520

8,847
0
11,928
3,763
0
15,106
10,722

50,366

31,640
237
28,461
14,064
367
48,384
27,342

133,256

103,434

150,495

Note: Gas is converted to oil equivalent using a factor of 6,000 cubic feet of gas per 1 barrel of oil equivalent.

Our estimates of YPF’s net proved reserves attributable to the reviewed properties are based on the definitions of proved reserves of the SEC and are as 

  
  
 
 
DEGOLYER AND MACNAUGHTON

9

follows, expressed in thousands of barrels (Mbbl), millions of cubic feet (MMcf), and thousands of barrels of oil equivalent (Mboe): 

Argentina Area

Proved Developed
  Manantiales Behr Area
  Restinga Alí Area
  Barranca Baya Area
  Lomas del Cuy Area
  Los Monos area
  Los Perales Area
  Seco León Area

Total Proved Developed
Proved Undeveloped
  Manantiales Behr Area
  Restinga Alí Area
  Barranca Baya Area
  Lomas del Cuy Area
  Los Monos area
  Los Perales Area
  Seco León Area

Total Proved Undeveloped
Total Proved
  Manantiales Behr Area
  Restinga Alí Area
  Barranca Baya Area
  Lomas del Cuy Area
  Los Monos area
  Los Perales Area
  Seco León Area

Total Proved

Note: Gas is converted to oil equivalent using a factor of 6,000 cubic feet of gas per 1 barrel of oil equivalent.

Estimated by DeGolyer and MacNaughton 
Net Proved Reserves  
as of  
September 30, 2010

Total 
Liquids 
(Mbbl) 

Marketable
Gas 
(MMcf)

Oil
Equivalent 
(Mboe)

19,912
191
15,666
9,142
201
23,951
14,361

83,424

7,967
0
10,902
3,450
0
12,760
9,176

44,255

27,879
191
26,568
12,592
201
36,711
23,537

127,679

11,594
110
2,831
5,303
210
52,144
11,864

84,055

2,767
0
1,852
790
0
3,840
5,192

14,441

14,362
110
4,683
6,092
210
55,984
17,055

98,496

21,844
209
16,138
10,026
236
32,642
16,338

97,433

8,428
0
11,211
3,582
0
13,400
10,041

46,662

30,273
209
27,348
13,607
236
46,042
26,380

144,095

  
  
 
 
 
 
DEGOLYER AND MACNAUGHTON

10

In our opinion, the information relating to estimated proved reserves of oil, condensate, natural gas liquids, and gas contained in this report has been prepared in accordance with 
Paragraphs 932-235-50-4, 932-235-50-6, 932-235-50-7, and 932-235-50-9 of the Accounting Standards Update 932-235-50, Extractive Industries – Oil and Gas (Topic 932): Oil and Gas 
Reserve Estimation and Disclosures (January 2010) of the Financial Accounting Standards Board and Rules 4-10(a) (l)-(32) of Regulation S-X and Rules 302(b), 1201, 1202(a) (1), (2), (3), (4), 
(8), and 1203(a) of Regulation S-K of the Securities and Exchange Commission. 

To the extent the above-enumerated rules, regulations, and statements require determinations of an accounting or legal nature, we, as engineers, are necessarily unable to express an opinion 

as to whether the above-described information is in accordance therewith or sufficient therefor. 

In comparing the detailed net proved reserves estimates prepared by us and by YPF, we have found differences, both positive and negative, resulting in an aggregate difference of 4.3 

percent when compared on the basis of net equivalent barrels. It is our opinion that the net proved reserves estimates prepared by YPF on the properties reviewed by us and referred to above, 
when compared on the basis of net equivalent barrels, in aggregate, do not differ materially from those prepared by us. 

DeGolyer and MacNaughton is an independent petroleum engineering consulting firm that has been providing petroleum consulting services throughout the world since 1936. DeGolyer 
and MacNaughton does not have any financial interest, including stock ownership, in YPF. Our fees were not contingent on the results of our evaluation. This letter report has been prepared at 
the request of YPF. DeGolyer and MacNaughton has used all assumptions, data, procedures, and methods that it considers necessary and appropriate to prepare this report. 

Submitted,

DeGOLYER and MacNAUGHTON  
Texas Registered Engineering Firm F-716  
/s/ R. M. Shuck                                          
R. M. Shuck, P.E.  
Senior Vice President  
DeGolyer and MacNaughton

  
  
 
 
 
 
DEGOLYER AND MACNAUGHTON

11

I, R. M. Shuck, Petroleum Engineer with DeGolyer and MacNaughton, 5001 Spring Valley Road, Suite 800 East, Dallas, Texas, 75244 U.S.A., hereby certify: 

CERTIFICATE of QUALIFICATION 

1.

2.

That I am a Senior Vice President with DeGolyer and MacNaughton, which company did prepare the letter report addressed to YPF dated January 25, 2011, and that I, as Senior Vice 
President, was responsible for the preparation of this report.

That I attended University of Houston, and that I graduated with a Bachelor of Science degree in Chemical Engineering in the year 1977; that I am a Registered Professional Engineer 
in the State of Texas; that I am a member of the International Society of Petroleum Engineers and the American Association of Petroleum Geologists; and that I have in excess of 32 
years of experience in oil and gas reservoir studies and reserves evaluations.

/s/ R. M. Shuck                                          

R. M. Shuck, P.E. 
Senior Vice President  
DeGolyer and MacNaughton