YPF 1Q26: Shale Is Working, Spreads Are Not Waiting

Shale scale and improving credit metrics reinforce Overweight, while valuation now favors selective exposure

We maintain our Overweight recommendation on YPF (B2/B-/CCC+), as 1Q26 further supports our view that the company’s transition toward a lower-cost, oil-weighted, and more shale-centered asset base is improving credit resilience. Operating performance was strong, with adjusted EBITDA supported by stronger pricing, higher shale production, lower lifting costs, and better refinery processing levels. Shale oil production reached 205 kbbl/d, representing nearly 76% of total crude output, while total lifting costs declined to $8.8/boe. Credit metrics also improved, with gross leverage declining to 2.01x, net leverage falling to 1.69x, and interest coverage increasing to 4.86x. We think the quarter reinforces the underlying credit trajectory and supports a continued Overweight stance.

However, valuation now requires more discipline. YPF bonds have tightened meaningfully since our 4Q25 report, with compression especially sharp in the 8.250% 2034 notes. The Z-spread on the 2034s has tightened 93 bps to 330 bps from 423 bps at 4Q25, compared with a 52 bps move in the 2033s, a 42 bps move in the 2031s, and a 38 bps move in the 2047s. The 2034s also no longer offer the same relative spread concession versus the 2033s. The Z-spread pickup has narrowed to about 19 bps from roughly 60 bps at 4Q25, reducing the relative value argument that previously made the 2034s the cleaner belly expression. The strong performance leaves less room for another broad leg of spread compression, particularly with YPF already trading materially inside Argentina sovereign risk. The Z-spread differential between Argentina 2038s and YPF 2033s is now about 255 bps, compared with a 1-year average of 357 bps, suggesting that a meaningful portion of the credit decoupling is already reflected in prices.