Edgar Filing: YPF SOCIEDAD ANONIMA

Form 6-K

FORM 6-K

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Report of Foreign Issuer

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

the Securities Exchange Act of 1934

For the month of April, 2005

Commission File Number: 001-12102

YPF Sociedad Anónima

(Exact name of registrant as specified in its charter)

Av. Pte. R.S. Peña 777 – 8th Floor

1354 Buenos Aires, Argentina

(Address of principal executive office)

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

Form 20-F X Form 40-F

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

Yes No X

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

Yes No X

Indicate by check mark whether by furnishing the information contained in this Form, the Registrant is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934:

Yes No X

If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): N/A

YPF Sociedad Anónima

TABLE OF CONTENTS


Item
1		Translation of financial statements as of December 31, 2004, 2003 and 2002, Report of Independent Public Accountants, and Statutory Audit Committee’s Report.

Item 1

SOCIEDAD ANONIMA

Financial Statements as of December 31, 2004, 2003 and 2002

Report of Independent Public Accountants

Statutory Audit Committee’s Report

English translation of the report originally issued in Spanish, except for the omission of certain disclosures related to formal legal requirements for reporting in Argentina and the addition of the last paragraph.

Report of Independent Public Accountants

To the Board of Directors of YPF SOCIEDAD ANONIMA:

We have audited the balance sheets of YPF SOCIEDAD ANONIMA (an Argentine Corporation) as of December 31, 2004, 2003 and 2002, and the related statements of income, changes in shareholders’ equity and cash flows for the years then ended and the notes 1 to 12 and exhibits A, C, E, F, G and H. We have also audited the consolidated balance sheets of YPF SOCIEDAD ANONIMA and its controlled and jointly controlled companies as of December 31, 2004, 2003 and 2002, and the related consolidated statements of income and cash flows for the years then ended and the Notes 1 to 4 and exhibits A and H, which are presented as supplemental information in Schedule I. These financial statements are the responsibility of the Company’s Management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing standards in Argentina. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. 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 statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements of YPF SOCIEDAD ANONIMA as of December 31, 2004, 2003 and 2002 referred to in the first paragraph present fairly, in all material respects, the financial position of YPF SOCIEDAD ANONIMA and the consolidated financial position of YPF SOCIEDAD ANONIMA and its controlled and jointly controlled companies as of December 31, 2004, 2003 and 2002 and the related results of operations and cash flows for the years then ended in accordance with generally accepted accounting principles in Buenos Aires City, Argentina.

Certain accounting practices of YPF SOCIEDAD ANONIMA used in preparing the accompanying financial statements conform with accounting principles generally accepted in Buenos Aires City, Argentina, but do not conform with accounting principles generally accepted in the United States of America (see Note 12 to the accompanying primary financial statements).

Buenos Aires, Argentina

March 10, 2005

Deloitte & Co. S.R.L.

Ricardo C. Ruiz

Partner

YPF SOCIEDAD ANONIMA

FINANCIAL STATEMENTS AS OF DECEMBER 31, 2004, 2003 AND 2002

INDEX


		Page
–	Cover	1
–	Consolidated balance sheets	2
–	Consolidated statements of income	3
–	Consolidated statements of cash flows	4
–	Notes to consolidated financial statements	5
–	Exhibits to consolidated financial statements	18
–	Balance sheets	20
–	Statements of income	21
–	Statements of changes in shareholders’ equity	22
–	Statements of cash flows	23
–	Notes to financial statements	24
–	Exhibits to financial statements	56

English translation of the financial statements originally issued in Spanish, except for the inclusion of Note 12 to the primary financial statements in the English translation

YPF SOCIEDAD ANONIMA

Avenida Presidente Roque Sáenz Peña 777 – Buenos Aires City

FISCAL YEARS NUMBER 28, 27 AND 26

BEGINNING ON JANUARY 1, 2004, 2003 AND 2002

FINANCIAL STATEMENTS AS OF DECEMBER 31, 2004, 2003 AND 2002

Principal business of the Company: exploration, development and production of oil and natural gas and other minerals and refining, transportation, marketing and distribution of oil and petroleum products and petroleum derivatives, including petrochemicals and chemicals, generation of electric power from hydrocarbons, as well as rendering telecommunications services.

Date of registration with the Public Commerce Register: June 2, 1977.

Duration of the Company: through June 15, 2093.

Last amendment to the bylaws: April 10, 2003.

Capital structure as of December 31, 2004

(expressed in Argentine pesos)


		Subscribed, paid-in and authorized for stock exchange listing (Note 4 to primary financial statements)
– Shares of Common Stock, Argentine pesos 10 par value, 1 vote per share		3,933,127,930

ENRIQUE LOCUTURA RUPEREZ

Vicepresident

Schedule I

1 of 3

English translation of the financial statements originally issued in Spanish,

except for the inclusion of Note 12 to the primary financial statements in the English translation

YPF SOCIEDAD ANONIMA AND CONTROLLED AND JOINTLY CONTROLLED COMPANIES

CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 2004, 2003 AND 2002

(amounts expressed in millions of Argentine pesos - Note 1 to the primary financial statements)


	2004		2003		2002
Current Assets
Cash	492		355		309
Investments (Note 2.a)	408		952		512
Trade receivables (Note 2.b)	2,049		1,814		1,949
Other receivables (Note 2.c)	3,871		6,397		5,176
Inventories (Note 2.d)	1,134		806		743
Other assets (Note 1.c)	380		120		132

Total current assets	8,334		10,444		8,821

Noncurrent Assets
Trade receivables (Note 2.b)	72		84		81
Other receivables (Note 2.c)	1,457		1,423		1,745
Investments (Note 2.a)	490		573		399
Fixed assets (Note 2.e)	20,554		20,388		20,668
Intangible assets	15		32		42

Total noncurrent assets	22,588		22,500		22,935

Total assets	30,922		32,944		31,756

Current Liabilities
Accounts payable (Note 2.f)	2,025		1,677		1,737
Loans (Note 2.g)	246		913		1,792
Salaries and social security	121		102		103
Taxes payable	1,999		3,393		581
Net advances from crude oil purchasers	264		260		401
Dividends payable	—		—		2
Reserves	130		98		142

Total current liabilities	4,785		6,443		4,758

Noncurrent Liabilities
Accounts payable (Note 2.f)	854		454		288
Loans (Note 2.g)	1,684		2,085		3,760
Salaries and social security	68		114		136
Taxes payable	23		21		64
Net advances from crude oil purchasers	634		881		1,327
Reserves	898		537		541

Total noncurrent liabilities	4,161		4,092		6,116

Total liabilities	8,946		10,535		10,874

Temporary differences
Foreign companies' translation	(107	)	(115	)	—
Valuation of derivative instruments	(4	)	(10	)	(14	)
Shareholders' Equity	22,087		22,534		20,896

Total liabilities, temporary differences and shareholders' equity	30,922		32,944		31,756

Notes 1 to 4, the accompanying exhibits A and H to Schedule I and the primary financial statements of YPF, are an integral part of and should be read in conjunction with these statements.

ENRIQUE LOCUTURA RUPEREZ

Vicepresident

Schedule I

2 of 3

English translation of the financial statements originally issued in Spanish,

except for the inclusion of Note 12 to the primary financial statements in the English translation

YPF SOCIEDAD ANONIMA AND CONTROLLED AND JOINTLY CONTROLLED COMPANIES

CONSOLIDATED STATEMENTS OF INCOME

FOR THE YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002

(amounts expressed in millions of Argentine pesos, except for per share amounts

in Argentine pesos - Note 1 to the primary financial statements)


	2004		2003		2002
Net sales (Note 4)	19,931		17,514		17,050
Cost of sales	(9,212	)	(7,756	)	(8,626	)

Gross profit	10,719		9,758		8,424

Administrative expenses (Exhibit H)	(463	)	(378	)	(411	)
Selling expenses (Exhibit H)	(1,403	)	(1,148	)	(1,077	)
Exploration expenses (Exhibit H)	(382	)	(277	)	(240	)

Operating income	8,471		7,955		6,696

Income (Loss) on long-term investments (Note 4)	154		150		(450	)
Amortization of goodwill	—		—		(13	)
Other expenses, net (Note 2.h)	(1,012	)	(152	)	(245	)
Financial income (expense), net and holding gains:
Gains (Losses) on assets
Interests	166		232		259
Exchange differences	77		(902	)	2,049
Holding gains on inventories	203		47		69
Losses on exposure to inflation	—		(8	)	(1,715	)
(Losses) Gains on liabilities
Interests	(221	)	(252	)	(679	)
Exchange differences	(87	)	819		(4,195	)
Gains on exposure to inflation	—		14		1,221
Income from sale of long-term investments	—		—		690

Net income before income tax	7,751		7,903		3,687
Income tax	(3,017	)	(3,290	)	(58	)

Net income from continuing operations	4,734		4,613		3,629

Income (Loss) on discontinued operations (Note 1.c)	3		15		(13	)
Income from sale of discontinued operations (Note 1.c)	139		—		—

Net income	4,876		4,628		3,616

Earnings per share	12.40		11.77		9.19

Notes 1 to 4, the accompanying exhibits A and H to Schedule I and the primary financial statements of YPF,

are an integral part of and should be read in conjunction with these statements.

ENRIQUE LOCUTURA RUPEREZ

Vicepresident

Schedule I

3 of 3

English translation of the financial statements originally issued in Spanish,

except for the inclusion of Note 12 to the primary financial statements in the English translation

YPF SOCIEDAD ANONIMA AND CONTROLLED AND JOINTLY CONTROLLED COMPANIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002

(amounts expressed in millions of Argentine pesos - Note 1 to the primary financial statements)


	2004		2003		2002
Cash Flows from Operating Activities
Net income	4,876		4,628		3,616
Adjustments to reconcile net income to net cash provided by operating activities:
(Income) Loss on long-term investments and amortization of goodwill	(154	)	(150	)	463
(Income) Loss on discontinued operations	(3	)	(15	)	13
Income from sale of discontinued operations	(139	)	—		—
Income from sale of long-term investments	—		—		(690	)
Dividends from long-term investments	61		36		48
Depreciation of fixed assets	2,470		2,307		2,161
Consumption of materials and fixed assets retired, net of allowances	417		449		282
Increase in allowances for fixed assets	124		67		73
Net increase (decrease) in reserves	393		(43	)	365
Changes in assets and liabilities:
Trade receivables	(256	)	117		(1,073	)
Other receivables	2,539		(1,518	)	(1,374	)
Inventories	(357	)	(62	)	(80	)
Accounts payable	317		(15	)	829
Salaries and social security	(38	)	(30	)	119
Taxes payable	(1,380	)	2,773		536
Net advances from crude oil purchasers	(258	)	(415	)	(556	)
Exchange differences, interests and others	(97	)	(712	)	1,386

Net cash flows provided by operating activities	8,515	⁽¹⁾	7,417	⁽¹⁾	6,118	⁽¹⁾

Cash Flows from Investing Activities
Acquisitions of fixed assets	(2,867	)	(2,418	)	(2,898	)
Capital distributions from long-term investments	15		—		—
Capital contributions in long-term investments	—		(6	)	(27	)
Proceeds from sale of discontinued operations	244		—		—
Proceeds from sale of long-term investments	—		—		1,490
Investments (non cash and equivalents)	24		(42	)	54

Net cash flows used in investing activities	(2,584	)	(2,466	)	(1,381	)

Cash Flows from Financing Activities
Payment of loans	(1,260	)	(1,552	)	(4,167	)
Proceeds from loans	280		36		138
Dividends paid	(5,310	)	(2,990	)	(37	)

Net cash flows used in financing activities	(6,290	)	(4,506	)	(4,066	)

(Decrease) Increase in Cash and Equivalents	(359	)	445		671
Cash and equivalents at the beginning of years	1,246		806		298
Effect of changes in the purchasing power of Argentine pesos on cash and equivalents	—		(5	)	(163	)

Cash and equivalents at the end of years	887		1,246		806

For supplemental information on cash and equivalents, see Note 2.a.

(1)	Includes (4,786), (233) and (222) corresponding to income tax and minimum presumed income tax payments and (189), (300) and (525) corresponding to interest payments for the years ended December 31, 2004, 2003 and 2002, respectively.

Notes 1 to 4, the accompanying exhibits A and H to Schedule I and the primary financial statements of YPF,

are an integral part of and should be read in conjunction with these statements.

ENRIQUE LOCUTURA RUPEREZ

Vicepresident

Schedule I

English translation of the financial statements originally issued in Spanish,

except for the inclusion of Note 12 to the primary financial statements in the English translation

YPF SOCIEDAD ANONIMA AND CONTROLLED AND JOINTLY CONTROLLED COMPANIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002

(amounts expressed in millions of Argentine pesos - Note 1 to the primary financial statements, except where otherwise indicated)

1. CONSOLIDATED FINANCIAL STATEMENTS

a)	Consolidation policies:

Following the methodology established by Technical Resolution No. 21 of the Argentine Federation of Professional Councils in Economic Sciences (“F.A.C.P.C.E.”), YPF Sociedad Anónima (the “Company” or “YPF”) has consolidated its balance sheets and the related statements of income and cash flows for the years ended December 31, 2004, 2003 and 2002, 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, expenses and, if applicable, temporary differences, which are aggregated to the Company’s balances after the elimination of intercompany profits, transactions, balances and other consolidation adjustments. If applicable, minority shareholders’ interest on equity and net income is disclosed separately in the balance sheets and income statements, respectively.

•

Investments and income (loss) related to companies in which YPF holds joint control are consolidated line by line on the basis of the Company’s proportionate share in their assets, liabilities, net revenues, cost, expenses and, if applicable, temporary differences, considering intercompany profits, transactions, balances and other consolidation adjustments.

Under General Resolution No. 368 from the Argentine Securities Commission (“CNV”), the Company discloses its consolidated financial statements, included in Schedule I, preceding its primary financial statements.

b)	Financial statements used for consolidation:

The consolidated financial statements are based upon the last 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 have produced changes on the latter shareholders’ equity.

c)	Valuation criteria:

In addition to the valuation criteria disclosed in the notes to YPF primary financial statements, the following additional valuation criteria have been applied in the preparation of the consolidated financial statements:

Income (Loss) on discontinued operations and income from sale of discontinued operations

As mentioned in Note 11 to the primary financial statements, during the year ended December 31, 2004, YPF Holdings Inc. and YPF International S.A. sold their interests in Global Companies LLC and affiliates (“Global”) and in YPF Indonesia Ltd., respectively. Income from these sales was included in the “Income from sale of discontinued operations” account of the statement of income.

Financial statements presented for comparative purposes were restated to give retroactive effect to the mentioned divestitures. As a consequence, Global and YPF Indonesia Ltd. results were disclosed in “Income (Loss) on discontinued operations” account of the statement of income. Assets and liabilities of these companies amounted to 493 and 373 as of December 31, 2003, and to 507 and 375 as of December 31, 2002, respectively, and were disclosed net in the “Other assets” account of the balance sheet.

Net sales and operating income of these operations amounted to 3,658 and 29, and to 2,695 and 29, for the years ended December 31, 2003 and 2002, respectively.

Fixed assets

Mineral properties on foreign unproved properties have been valued at cost and translated into pesos as detailed in Note 2.e to the primary financial statements. Capitalized costs related to unproved properties are reviewed periodically by Management to ensure the carrying value does not exceed their estimated recoverable value.

Intangible assets

Correspond to start up and organization costs, valued at acquisition cost restated as detailed in Note 1 to the primary financial statements, less corresponding accumulated amortization, which is calculated using the straight-line method over its estimated useful life of five years.

In Management’s opinion, future activities will generate enough economic benefits to recover incurred costs.

Salaries and Social Security – Pensions and other Postretirement and Postemployment Benefits

YPF Holdings Inc., a YPF subsidiary with operations in United States of America, has a number of trustee noncontributory pension plans and postretirement benefits.

The funding policy related to trustee noncontributory pension plans is to contribute amounts to the plans sufficient to meet the minimum funding requirements under governmental regulations, plus such additional amounts as Management may determine to be appropriate. The benefits related to the plans are accrued based on years of service and compensation earned during years of employment. YPF Holdings Inc. also has a noncontributory supplemental retirement plan for executive officers and other selected key employees.

YPF Holding 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 the case employment is terminated by YPF Holdings Inc. before their normal retirement. YPF Holdings Inc. accrues the estimated cost of retiree benefit payments, other than pensions, during employees’ active service periods. Employees become eligible for these benefits if they meet minimum age and years of service requirements. YPF Holdings Inc. accounts for benefits provided when the minimum service period is met, payment of the benefit is probable and the amount of the benefit can be reasonably estimated. Other postretirement and postemployment benefits are funded as claims are incurred.

Recognition of revenues and costs of construction activities

Revenues and costs related to construction activities 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 when identified.

Derivative instruments

As of December 31, 2004, Profertil S.A. has entered into cash flow hedges, to establish a protection against variability in cash flows due to changes in interest rates established in financial obligation contracts. Additionally, in December 2004, Compañía Mega S.A. (“Mega”) has settled its derivative instruments that hedged its financial obligations. Changes in the fair value of cash flow hedges were initially deferred in “Temporary differences - Valuation of derivative instruments” account in the balance sheet and charged to financial expenses of the statement of income as the related transactions are recognized. Fair value of these derivative instruments generated an increase in liabilities of 4, 10 and 14 as of December 31, 2004, 2003 and 2002, respectively, and were included in the “Loans” account of the balance sheet.

2. ANALYSIS OF THE MAIN ACCOUNTS OF THE CONSOLIDATED FINANCIAL STATEMENTS

Details regarding the significant accounts included in the accompanying consolidated financial statements are as follows:

Consolidated Balance Sheet Accounts

Assets

a)	Investments:


	2004				2003				2002
	Current		Noncurrent		Current		Noncurrent		Current		Noncurrent
Short-term investments and government securities	408	⁽¹⁾	4		952	⁽¹⁾	9		512	⁽¹⁾	12
Long-term investments	—		811		—		857		—		578
Allowance for reduction in value of holdings in long-term investments	—		(325	)	—		(293	)	—		(191	)

	408		490		952		573		512		399

(1)	Includes 395, 891 and 497 as of December 31, 2004, 2003 and 2002, respectively, with an original maturity of less than three months.

b)	Trade receivables:


	2004			2003			2002
	Current		Noncurrent	Current		Noncurrent	Current		Noncurrent
Accounts receivable	1,939		72	1,761		84	1,925		81
Related parties	469		—	428		—	477		—

	2,408		72	2,189		84	2,402		81

Allowance for doubtful trade receivables	(359	)	—	(375	)	—	(453	)	—

	2,049		72	1,814		84	1,949		81

c)	Other receivables:


	2004				2003				2002
	Current		Noncurrent		Current		Noncurrent		Current		Noncurrent
Deferred income tax	—		422		—		203		—		444
Tax credits and export rebates	348		24		285		106		311		191
Trade	21		—		40		—		28		—
Prepaid expenses	52		139		46		251		69		341
Concessions charges	19		105		18		125		17		144
Related parties	3,110	⁽¹⁾	617		5,906	⁽¹⁾	615		4,571	⁽¹⁾	447
Loans to clients	10		87		9		87		11		92
From the renegotiation of long-term contracts	—		21		—		25		—		27
From joint ventures and other agreements	6		—		29		—		38		—
Miscellaneous	435		112		186		91		236		156

	4,001		1,527		6,519		1,503		5,281		1,842

Allowance for other doubtful accounts	(130	)	—		(122	)	—		(105	)	—
Allowance for valuation of other receivables to their estimated realizable value	—		(70	)	—		(80	)	—		(97	)

	3,871		1,457		6,397		1,423		5,176		1,745

(1)	Includes 1,739, which accrues an annual interest rate from 2.16% to 3.10% as of December 31, 2004, and 4,393 and 2,716 as of December 31, 2003 and 2002, respectively, with Repsol International Finance B.V. (other related party under common control).

d)	Inventories:


	2004	2003	2002
Refined products and other manufactured for sale	617	413	362
Crude oil	355	268	223
Products in process of refining and separation	13	16	14
Raw materials, packaging materials and others	149	109	144

	1,134	806	743

e)	Fixed assets:


	2004		2003		2002
Net book value of fixed assets (Exhibit A)	20,617		20,474		20,795
Allowance for unproductive exploratory drilling	(16	)	(39	)	(44	)
Allowance for obsolescence of materials	(25	)	(26	)	(26	)
Allowance for fixed assets to be disposed of	(22	)	(21	)	(57	)

	20,554		20,388		20,668

Liabilities

f)	Accounts payable:


	2004		2003		2002
	Current	Noncurrent	Current	Noncurrent	Current	Noncurrent
Trade	1,628	32	1,367	37	1,393	4
Hydrocarbon wells abandonment obligations	—	648	—	347	—	199
Related parties	172	—	144	—	118	—
From joint ventures and other agreements	136	—	104	—	113	—
Miscellaneous	89	174	62	70	113	85

	2,025	854	1,677	454	1,737	288

g)	Loans:


			2004		2003		2002
	Interest rates⁽¹⁾	Principal maturity	Current	Noncurrent	Current	Noncurrent	Current	Noncurrent
YPF Negotiable Obligations	7.75- 10.00%	2007-2028	29	1,078	574	1,075	983	2,406
Related parties⁽²⁾	10.77%	2005-2014	2	71	48	—	378	5
Mega Negotiable Obligations	10.77%	2005-2014	3	116	29	409	34	503
Profertil syndicated loan	4.37-7.22%	2005-2010	56	261	41	366	34	451
Interest rate swaps	—	—	—	4	1	9	2	12
Subordinated liabilities with shareholders	5.00%	2005	13	—	—	—	—	—
Other bank loans and other creditors	3.00-5.10%	2005-2007	143	154	214	226	275	379
Maxus Negotiable Obligations	—	—	—	—	6	—	86	4

			246	1,684	913	2,085	1,792	3,760

(1)	Annual interest rates as of December 31, 2004.

(2)	Includes 73 and 44 granted by Repsol Netherlands Finance B.V. as of December 31, 2004 y 2003, respectively, and 32 and 346 granted by Repsol International Finance B.V. and Repsol Netherlands Finance B.V., respectively, as of December 31, 2002.

Consolidated Statements of Income Accounts

h)	Other expenses, net:


	Income (Expense)
	2004		2003		2002
Reserve for pending lawsuits and other claims	(541	)	(140	)	(118	)
Environmental remediation	(333	)	(72	)	(72	)
Miscellaneous	(138	)	60		(55	)

	(1,012	)	(152	)	(245	)

3. COMMITMENTS AND CONTINGENCIES IN CONTROLLED COMPANIES

Laws and regulations relating to health and environmental quality in the United States affect nearly all of 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.

YPF Holdings Inc. believes that its policies and procedures in the area of pollution 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, inherent in particular operations of YPF Holdings Inc. and, as discussed below, Maxus Energy Corporation (“Maxus”) and Tierra Solutions, Inc. (“TS”) have certain potential liabilities associated with operations of Maxus’ former chemical subsidiary, Diamond Shamrock Chemicals Company (“Chemicals”). 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 laws or 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 tasks, possible dredging requirements and in certain other respects. 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.

As of December 31, 2004, reserves for the environmental contingencies totaled approximately 289. Management believes it has adequately reserved for all environmental contingencies, which are probable and can be reasonably estimated; however, changes in circumstances could result in changes, including additions, to such reserves in the future.

In connection with the sale of Maxus’ former chemical subsidiary, 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 September 4, 1986 closing date (the “Closing Date”), including certain environmental liabilities relating to certain chemical plants and waste disposal sites used by Chemicals prior to the Closing Date.

In addition, under the agreement pursuant to which Maxus sold Chemicals to Occidental, Maxus is obligated to indemnify Chemicals and Occidental for 50% of certain environmental costs incurred on projects involving remedial activities relating to chemical plant sites or other property used in the conduct of the business of Chemicals 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, with Maxus’ aggregate exposure for this cost sharing being limited to US$ 75 million. The total expended by YPF Holdings Inc. under this cost sharing arrangement was approximately US$ 70 million as of December 31, 2004. The remaining portion of this cost sharing arrangement (16 as of December 31, 2004) has been reserved. TS has agreed to assume essentially all of Maxus’ aforesaid indemnity obligations to Occidental in respect of Chemicals. In the following discussions concerning plant sites and third party sites, references to YPF Holdings Inc. include, as appropriate and solely for ease of reference, references to Maxus and TS. As indicated above, TS is also a subsidiary of YPF Holdings Inc. 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 and Energy (the “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 Chemicals’ former Newark, New Jersey agricultural chemicals plant. In 1998, the EPA approved the remedial design. TS believes the construction of the approved remedy has been completed and has submitted to the EPA its report in connection with the required optimization phase, which included testing and related operations. TS is awaiting the EPA’s response to such report so that it may move beyond the optimization phase. This work was supervised and paid for by TS pursuant to the above described indemnification obligation to Occidental. YPF Holdings Inc. has fully reserved the estimated costs required to conduct ongoing operation and maintenance of such remedy, at an average cost of approximately US$ 1 million annually, for 10 years from and after January 1, 2004.

Passaic River, New Jersey. Studies have indicated that sediments of the Newark Bay watershed, including the Passaic River adjacent to the former Newark plant, are contaminated with hazardous chemicals from many sources. These studies suggest that the older and more contaminated sediments located adjacent to the former Newark plant generally are buried under more recent sediment deposits. Maxus, on behalf of Occidental, negotiated an agreement with the EPA under which TS is conducting further testing and studies to characterize contaminated sediment and biota in a six-mile portion of the Passaic River near the plant site. The stability of the sediments in the entire six-mile portion of the Passaic River study area is also being examined as a part of TS’ studies. YPF Holdings Inc. currently expects the testing and studies to be completed in 2005 and the cost to be incurred are approximately 9 after December 31, 2004, which amount has been fully reserved. Maxus and TS have been conducting similar studies under their own auspices for several years. In addition, the EPA and other agencies are addressing for the lower Passaic River in a cooperative effort designated as the Lower Passaic River Restoration Initiative (the “PRRI”). TS has agreed, along with approximately thirty other entities, to participate in a remedial investigation and feasibility study proposed in connection with the PRRI. Additional parties are currently negotiating to join in helping fund the EPA’s activities in this regard, eight additional parties having sent letters of intent to participate. The EPA has agreed to amend the order regarding this study when a total of nine additional parties (making a total of 40 entities) agree to participate. TS’ estimated share of the cost of this remedial investigation and feasibility study is 1 over the next three years, which amount has been fully reserved. As of December 31, 2004, there is a total of 35 reserved in connection with continuing such other studies and related matters related to the Passaic River and the Newark Bay (see discussion of the DEP’s Directive No. 1 and the Administrative Order on Consent (the “AOC”) below). Studies are ongoing with respect to the Passaic River and the Newark Bay watershed. Until these studies are completed and evaluated, YPF Holdings Inc. cannot estimate what additional costs, if any, will be required to be incurred. However, it is possible that additional work, including interim remedial measures, may be ordered with respect to the Passaic River and/or Newark Bay.

On September 19, 2003, the DEP issued its Directive No. 1 for Natural Resource Injury Assessment and Interim Compensatory Restoration of Natural Resources for the Lower Passaic River (“Directive No. 1”). Directive No. 1 was served on approximately sixty six entities, including Occidental and Maxus and certain of their respective related entities, and seeks to address natural resource damages allegedly resulting from almost 200 years of historic industrial and commercial development of the lower 17 miles 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 has been designated as a Superfund site and is a subject of the PRRI, a congressional urban rivers restoration initiative designed to address urban rivers such as the Passaic through a joint federal, state, local and private sector cooperative effort. Directive No. 1 calls for the following actions: interim compensatory restoration, injury identification, injury quantification and value determination. Maxus and TS have filed a response to Directive No. 1 on behalf of themselves and Occidental, as successor to Chemicals, which sets forth both how these parties are complying with Directive No. 1 and certain defenses thereto. Settlement discussions between the DEP and the named entities have been held; however, no agreement has been reached or is assured.

On February 13, 2004, the EPA and Occidental entered into the AOC pursuant to which TS (on behalf of Occidental) has agreed to conduct testing and studies to characterize contaminated sediment and biota in the Newark Bay. TS presented a proposed initial work plan to the EPA. TS anticipates that the initial work plan, a study that would include sampling in Newark Bay, will be approved in early 2005. TS currently plans to conduct this study in 2005 at an estimated cost of 13. Such amount has been fully reserved. After the data has been collected in the initial study, a determination will be made as to what additional work, if any, might be required. In January 2005, several environmental groups sued the U.S. Army Corps of Engineers (the “Army Corps”) challenging the Army Corps’ failure to prepare a supplemental environmental impact statement that plaintiffs’ allege is required in connection with a dredging project proposed for New York – New Jersey Harbor. Although neither YPF Holdings Inc. nor any of its subsidiaries is a party to this lawsuit, it could impact the timing, cost and approval of the proposed initial work plan.

Hudson County, New Jersey. Until 1972, Chemicals operated a chromite ore processing plant at Kearny, New Jersey (the “Kearny’s 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 successor to Chemicals, 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. TS, on behalf of Occidental, is providing financial assurance in the amount of US$ 20 million for performance of the work. This financial assurance may be reduced with the approval of the DEP following any annual cost review. While TS has participated in the cost of studies and is implementing interim remedial actions and conducting remedial investigations, the ultimate cost of remediation is uncertain. TS submitted its remedial investigation reports to the DEP in late 2001, and the DEP continues to review these reports. The results of the DEP’s review of these reports could increase the cost of any further remediation that may be required. YPF Holdings Inc. has reserved its best estimate of the remaining cost to perform the investigations and remedial work as being approximately 75 as of December 31, 2004. Also, the DEP has indicated that it expects Occidental and Maxus to participate with the other chromium manufacturers in the funding of certain remedial activities with respect to a number of so-called “orphan” chrome sites located in Hudson County, New Jersey. Occidental and Maxus have declined participation as to those sites for which there is no evidence of the presence of residue generated by Chemicals. The State of New Jersey has expressed an increased interest in possibly instituting legal action seeking recovery of its expenditures in connection with these sites. The parties have settled the DEP’s claims of natural resource damages related to chromite ore residue both at said orphan sites and other known and unknown sites in Hudson and Essex Counties, New Jersey. While Maxus and TS expect settlement discussions to continue on the other aspects of the DEP’s claims, there can be no assurance of a negotiated resolution to these claims. In addition, in June 2004, the DEP expressed a desire that a sediments testing program be conducted on a portion of the Hackensack River, near the former Kerny Plant. TS, on behalf of Occidental, and other parties are engaged in discussions with the DEP regarding this issue. The Governor of New Jersey issued an Executive Order requiring state agencies to provide specific justification for any state requirements more stringent than federal requirements. In 1998, the DEP proposed new soil action levels for chromium. While the proposal remains incomplete in certain regards, the DEP is currently reviewing the proposed action levels.

Painesville, Ohio. From about 1912 through 1976, Chemicals operated manufacturing facilities in Painesville, Ohio (the “Painesville Works”). The operations over the years involved several discrete but contiguous plant sites over an area of about 1,300 acres. The primary area of concern historically has been Chemicals’ former chromite ore processing plant (the “Chrome Plant”). For many years, the site of the Chrome Plant has been under the administrative control of the EPA pursuant to an administrative consent order under which Chemicals is required to maintain a clay cap over the Chrome Plant site and to conduct certain ground water and surface water monitoring. Certain other areas have previously been clay-capped, and one specific site, which was a waste disposal site from the mid-1960s until the 1970s, has been encapsulated and is being controlled and monitored. In 1995, the Ohio Environmental Protection Agency (the “OEPA”) issued its Director’s Final Findings and Order (the “Director’s Order”) by consent ordering that a remedial investigation and feasibility study (the “RIFS”) be conducted at the former Painesville Works area. TS has agreed to

participate in the RIFS as required by the Director’s Order. TS submitted the remedial investigation report to the OEPA, which was finalized in 2003. TS will submit required feasibility reports separately. As of December 31, 2004, it is estimated that the remaining cost of performing the RIFS will be approximately 2. In addition, in the third quarter of 2004 and first quarter of 2005, the OEPA approved certain work, including the remediation of the site of a former cement plant, remediation of a former aluminum smelting plant and work associated with the development plans discussed below. TS expects these works to begin in 2005 and estimates its share of the costs associated with these projects to be approximately 26. As the OEPA approves additional projects for the site of the former Painesville Works, additional amounts may need to be reserved. In spite of the many remedial, maintenance and monitoring activities performed, the former Painesville Works site has been 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. YPF Holdings Inc. has reserved a total of 28 as of December 31, 2004 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 Works site and make any changes, including additions, to its reserve as may be required. TS has entered into an agreement with a developer for the possible development and use of all or portions of this site. However, there can be no assurance that this site will be successfully developed or that any productive use can be made of all or a portion of this site.

Third Party Sites. Chemicals has also been designated as a potentially responsible party (“PRP”) by the EPA under 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. 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. At December 31, 2004, YPF Holdings Inc. has reserved approximately 11 in connection with its estimated share of costs related to these sites.

The Port of Houston Authority (the “Port”) sued a number of parties, including Occidental (as successor to Chemicals) and Maxus, alleging in excess of US$ 25 million in damages to its property, plus the need for remediation at certain of its property, as a result of contamination allegedly emanating from a facility adjoining Greens Bayou formerly owned by Chemicals and at which DDT and certain other chemicals were manufactured. Chemicals conveyed the Greens Bayou facility to a company in which it owned a 50% interest in 1983 and later conveyed its interest in that company to Maxus. Subsequently in 1985, Maxus acquired a full ownership interest in the company and then conveyed all of its interest in such company to a third party. TS is handling this matter on behalf of Occidental. While some of the substances of concern may have been manufactured at the Greens Bayou facility prior to these conveyances, TS and Maxus believe that most of any contamination of the Port’s property that may have emanated from the Greens Bayou facility occurred after the conveyance of the company in 1985 or has been remediated. The Port’s claims have been settled for an initial payment of US$ 30 million and certain other undertakings, including an agreement to remediate various properties in the vicinity of the Greens Bayou facility, an agreement by another defendant to purchase a tract of land for up to US$ 5 million, and an agreement to indemnify the Port up to an aggregate of US$ 20 million in respect of certain matters. Based on current estimates, the cost of such remediation is not expected to exceed a total of US$ 44 million. Pursuant to a cost sharing agreement among the defendants, TS (on behalf of Occidental) contributed US$ 6 million toward the settlement, subject to the defendants’ agreement to arbitrate their respective obligations in connection with the settlement. The hearing in this arbitration was completed on October 14, 2004, and the arbitral tribunal issued its final award on January 7, 2005, after having issued an initial award in November 2004. The award, if it stands, would require TS (on behalf of Occidental) to pay the other defendants a total of approximately 76, and possibly interest (the “Current Payment Amount”), and bear approximately 70% of the costs of the aforesaid

remediation. Maxus and TS paid approximately 82 into a trust account in December 2004, which amount is to be made available to pay the Current Payment Amount if required. While the parties to the arbitration have engaged in preliminary discussions concerning possible settlement, on February 7, 2005, Maxus and TS have filed a notice of appeal to a second arbitration panel pursuant to the parties’ arbitration agreement. There is no assurance of success on appeal or that the settlement discussions will result in an agreement. As of December 31, 2004, YPF Holdings Inc. accrued a total of 92 related to this matter.

Legal Proceedings. In 1998, a subsidiary of Occidental filed a lawsuit in state court in Ohio seeking a declaration of the parties’ rights with respect to obligations for certain costs allegedly related to Chemicals’ Ashtabula, Ohio facility, as well as certain other costs. Both Maxus and Occidental filed motions for partial summary judgment. In 2002, the court granted Occidental’s and denied Maxus’ respective motions for partial summary judgment. In late 2004, the appellate court reversed the ruling of the trial court in certain respects and remanded the case for trial.

In 2001, the Texas State Comptroller assessed Midgard Energy Company, a subsidiary of YPF Holdings Inc., approximately 76 in Texas state franchise taxes, plus penalty and interest (currently estimated to be in excess of 150), for periods from 1997 back to 1984. The basis for the assessments essentially is the Comptroller’s attempt to characterize certain debt as capital contributions. This matter was settled in December 2004 for a total payment of approximately 15.

In 2001, the Texas State Comptroller also assessed Maxus Corporate Company, a former subsidiary of YPF Holdings Inc. that was merged into Maxus in December 1998, approximately 4 in Texas state sales taxes for the period of September 1, 1995 through December 31, 1998, plus penalty and interest. On August 19, 2004, the administrative law judge issued a decision affirming approximately 3 of such assessment, plus penalty and interest. Although YPF Holdings Inc. believes the proposed decision is erroneous, it has paid the revised tax assessment, penalty and interest (a total of approximately 5) under protest. Maxus filed 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 TS in state court in Dallas, Texas seeking a declaration that Maxus and TS 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, including claims related to “Agent Orange” and vinyl chloride monomer (VCM), notwithstanding the fact that (a) said agreement contains a 12-year cut-off for defense and indemnity obligations with respect to most litigation, and (b) TS is not a party to said agreement. This matter currently is set for trial in late 2005. In a related development, in June 2003, the U.S. Supreme Court affirmed, by a four to four vote, a decision of the Second Circuit Court of Appeals, which held that the 1984 settlement of the claims of Vietnam veterans does not preclude certain Vietnam veterans from asserting claims alleging injury due to Agent Orange exposure. While Maxus believes there are a number of valid defenses to any claims that may be asserted by Vietnam veterans who are not bound by the terms of the 1984 settlement, it also believes that Occidental is responsible for any Agent Orange lawsuits filed after the September 4, 1986 cut-off date.

In May 2003, the U.S. Internal Revenue Service (“IRS”) assessed Maxus (for 1994, 1995 and 1996) and YPF Holdings Inc. (for 1997) an aggregate of approximately 71 in additional income taxes. Maxus and YPF Holdings Inc. believe that most of these assessments are without substantial merit, and they have protested this assessment. On January 30, 2004, the IRS assessed YPF Holdings Inc. an additional 23 in withholding taxes, which the IRS contends should have been withheld from an interest payment to YPF International Ltd. in 1997. YPF Holdings Inc. believes this assessment is without substantial merit and has challenged same.

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 the subject of enforcement activities by the EPA and a lawsuit for damages brought by certain private parties. With respect to the EPA enforcement activities, Occidental is one of many PRPs that have been identified, and TS (which is handling this matter on behalf of Maxus) presently does not know the degree of Occidental’s alleged involvement as successor to Chemicals. Further, Occidental currently is not a defendant in the private lawsuit. Maxus is named as a defendant in this lawsuit; however, it believes it is improperly named.

YPF Holdings Inc., including its subsidiaries, is a party to various other lawsuits, the outcomes of which are not expected to have a material adverse affect on YPF Holdings Inc.’s financial condition. YPF Holdings Inc. has established reserves for legal contingencies in situations where a loss is probable and can be reasonably estimated.

YPF Holdings Inc. 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.

4. CONSOLIDATED BUSINESS SEGMENT INFORMATION

The Company organizes its business into five 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 natural gas sales and crude oil intersegment sales (“Exploration and Production”); the refining and marketing of crude oil to unrelated parties and petroleum derivatives (“Refining and Marketing”); the petrochemical operations (“Chemical”); the marketing of certain natural gas liquids and electric power generation (“Natural Gas and Electricity”); and other activities, not falling into these categories, are classified under “Corporate and Other” which principally includes corporate administration costs and assets, construction activities and environmental remediation activities related to YPF Holdings Inc. preceding operations mentioned in Note 3.

Operating income (loss) and assets for each segment have been determined after intersegment adjustments. Sales between business segments are made at internal transfer prices established by YPF, which approximate market prices.


	Exploration and Production	Refining and Marketing	Chemical	Natural Gas and Electricity		Corporate and Other		Consolidation Adjustments		Total
Year ended December 31, 2004
Net sales to unrelated parties	1,829	13,144	1,958	335		140		—		17,406
Net sales to related parties	510	1,773	—	242		—		—		2,525
Net intersegment sales	11,457	891	188	—		126		(12,662	)	—

Net sales	13,796	15,808	2,146	577	⁽¹⁾	266		(12,662	)	19,931

Operating income (loss)	6,878	1,324	564	262		(430	)	(127	)	8,471
Income on long-term investments	7	11	102	34		—		—		154
Depreciation	1,957	371	82	29		31		—		2,470
Acquisitions of fixed assets	2,599	434	86	3		52		—		3,174
Assets	15,778	8,244	2,143	984		4,616		(843	)	30,922


	Exploration and Production		Refining and Marketing		Chemical	Natural Gas and Electricity		Corporate and Other		Consolidation Adjustments		Total
Year ended December 31, 2003
Net sales to unrelated parties	1,208		11,856		1,369	267		119		—		14,819
Net sales to related parties	383		2,161		—	151		—		—		2,695
Net intersegment sales	10,547		650		184	—		117		(11,498	)	—

Net sales	12,138		14,667		1,553	418	⁽¹⁾	236		(11,498	)	17,514

Operating income (loss)	6,182		1,527		387	180		(311	)	(10	)	7,955
Income on long-term investments	17		15		69	49		—		—		150
Depreciation	1,812		367		72	27		29		—		2,307
Acquisitions of fixed assets	2,281		180		47	4		39		—		2,551
Assets	15,508		7,240		1,985	1,018		7,788		(595	)	32,944

Year ended December 31, 2002
Net sales to unrelated parties	1,427		11,663		1,216	240		205		—		14,751
Net sales to related parties	253		1,955		—	91		—		—		2,299
Net intersegment sales	11,322		778		367	16		258		(12,741	)	—

Net sales	13,002		14,396		1,583	347	⁽¹⁾	463		(12,741	)	17,050

Operating income (loss)	6,666		(126	)	340	137		(300	)	(21	)	6,696
Income on long-term investments	(7	)	64		—	(507	)	—		—		(450	)
Depreciation	1,643		333		128	78		32		—		2,214
Acquisitions of fixed assets	2,255		298		148	150		47		—		2,898
Assets	17,393		8,563		1,877	772		3,828		(677	)	31,756

(1)	Natural gas sales are recorded in the Exploration and Production segment.

Export revenues for the years ended December 31, 2004, 2003 and 2002 were 7,875, 7,422 and 8,605, respectively. The export sales were mainly to the United States of America, Brazil and Chile.

ENRIQUE LOCUTURA RUPEREZ

Vicepresident

Schedule I

Exhibit A

English translation of the financial statements originally issued in Spanish,

except for the inclusion of Note 12 to the primary financial statements in the English translation

YPF SOCIEDAD ANONIMA AND CONTROLLED AND JOINTLY CONTROLLED COMPANIES

CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 2004, 2003 AND 2002

FIXED ASSETS EVOLUTION

(amounts expressed in millions of Argentine pesos - Note 1 to the primary financial statements)


	2004
	Cost
Main Account	Amounts at Beginning of Year	Traslation Net Effect ⁽⁵⁾		Increases		Net Decreases and Transfers		Amounts at End of Year
Land and buildings	2,283	—		1		(26	)	2,258
Mineral property, wells and related equipment	39,162	1		316		1,920		41,399
Refinery equipment and petrochemical plants	8,433	—		5		(90	)	8,348
Transportation equipment	1,758	—		2		32		1,792
Materials and equipment in warehouse	274	—		572		(516	)	330
Drilling and work in progress	1,337	2		2,270		(2,043	)	1,566
Furniture, fixtures and installations	453	—		—		20		473
Selling equipment	1,240	—		—		18		1,258
Other property	324	—		8		(4	)	328

Total 2004	55,264	3		3,174	⁽²⁾	(689	)⁽¹⁾	57,752

Total 2003	53,422	(8	)	2,551	⁽²⁾	(701	)⁽¹⁾	55,264

Total 2002	53,117	1,268		2,898		(3,861	)⁽¹⁾⁽⁶⁾	53,422


	2004									2003		2002
	Depreciation
Main Account	Accumulated at Beginning of Year	Net Decreases and Transfers		Depreciation Rate		Increases	Accumulated at End of Year	Net Book Value		Net Book Value		Net Book Value
Land and buildings	921	(4	)	2	%	43	960	1,298		1,362		1,441
Mineral property, wells and related equipment	26,306	2		(4	)	1,936	28,244	13,155	⁽³⁾	12,856	⁽³⁾	12,661	⁽³⁾
Refinery equipment and petrochemical plants	4,966	(111	)	4-10	%	314	5,169	3,179		3,467		3,848
Transportation equipment	1,149	(11	)	4-5	%	53	1,191	601		609		544
Materials and equipment in warehouse	—	—		—		—	—	330		274		314
Drilling and work in progress	—	—		—		—	—	1,566		1,337		1,326
Furniture, fixtures and installations	388	(5	)	10	%	35	418	55		65		91
Selling equipment	810	3		10	%	74	887	371		430		502
Other property	250	1		10	%	15	266	62		74		68

Total 2004	34,790	(125	)⁽¹⁾			2,470	37,135	20,617

Total 2003	32,627	(144	)⁽¹⁾			2,307	34,790			20,474

Total 2002	31,086	(620	)⁽¹⁾⁽⁶⁾			2,161	32,627					20,795

(1)	Includes 147, 108 and 32 of net book value charged to fixed assets allowances for the years ended December 31, 2004, 2003 and 2002, respectively.

(2)	Includes 307 and 133 corresponding to the future cost of hydrocarbon wells abandonment obligations for the year ended December 31, 2004 y 2003, respectively.

(3)	Includes 1,387, 1,514 and 1,652 of mineral property as of December 31, 2004, 2003 and 2002, respectively, and 415 and 129 related to the future cost of hydrocarbon wells abandonment obligations as of December 31, 2004 and 2003, respectively.

(4)	Depreciation has been calculated according to the unit of production method.

(5)	Includes the net effect of the exchange differences, originated in the translation of net book values at beginning of year, related to investments in foreign companies.

(6)	Includes 2,927 corresponding to net decreases for the year ended as of December 31, 2002, related to the transactions mentioned in Note 11 to the primary financial statements.

ENRIQUE LOCUTURA RUPEREZ

Vicepresident

Schedule I

Exhibit H

English translation of the financial statements originally issued in Spanish,

except for the inclusion of Note 12 to the primary financial statements in the English translation

YPF SOCIEDAD ANONIMA AND CONTROLLED AND JOINTLY CONTROLLED COMPANIES

CONSOLIDATED STATEMENTS OF INCOME FOR THE YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002

EXPENSES INCURRED

(amounts expressed in millions of Argentine pesos - Note 1 to the primary financial statements)


	2004							2003	2002
	Production Costs	Administrative Expenses	Selling Expenses		Exploration Expenses	Total		Total	Total
Salaries and social security taxes	361	84	102		24	571		502	534
Fees and compensation for services	35	106	26		7	174		156	166
Other personnel expenses	130	42	26		15	213		177	135
Taxes, charges and contributions	143	17	192		—	352		300	278
Royalties and easements	1,629	—	—		3	1,632		1,470	1,603
Insurance	71	1	14		—	86		92	61
Rental of real estate and equipment	217	2	54		1	274		202	153
Survey expenses	—	—	—		102	102		94	55
Depreciation of fixed assets	2,323	27	120		—	2,470		2,307	2,161
Industrial inputs, consumable materials and supplies	466	13	21		6	506		481	556
Construction and other service contracts	390	57	44		11	502		421	559
Preservation, repair and maintenance	746	17	26		5	794		659	659
Contracts for the exploitation of productive areas	299	—	—		—	299		211	152
Unproductive exploratory drillings	—	—	—		197	197		87	99
Transportation, products and charges	432	—	688		—	1,120		933	888
(Recovery) allowance for doubtful trade receivables	—	—	(6	)	—	(6	)	18	39
Publicity and advertising expenses	—	42	58		—	100		86	60
Fuel, gas, energy and miscellaneous	387	55	38		11	491		434	533

Total 2004	7,629	463	1,403		382	9,877

Total 2003	6,827	378	1,148		277			8,630

Total 2002	6,963	411	1,077		240				8,691

ENRIQUE LOCUTURA RUPEREZ

Vicepresident

English translation of the financial statements originally issued in Spanish,

except for the inclusion of Note 12 in the English translation

YPF SOCIEDAD ANONIMA

BALANCE SHEETS AS OF DECEMBER 31, 2004, 2003 AND 2002

(amounts expressed in millions of Argentine pesos - Note 1)


	2004		2003		2002
Current Assets
Cash	267		233		216
Investments (Note 3.a)	180		673		374
Trade receivables (Note 3.b)	1,942		1,687		1,908
Other receivables (Note 3.c)	3,076		5,627		3,532
Inventories (Note 3.d)	1,005		675		594
Other assets (Note 2.d)	380		—		—

Total current assets	6,850		8,895		6,624

Noncurrent Assets
Trade receivables (Note 3.b)	71		80		81
Other receivables (Note 3.c)	1,413		1,184		1,424
Investments (Note 3.a)	2,344		2,533		2,262
Fixed assets (Note 3.e)	19,078		18,702		18,910

Total noncurrent assets	22,906		22,499		22,677

Total assets	29,756		31,394		29,301

Current Liabilities
Accounts payable (Note 3.f)	2,035		1,618		1,603
Loans (Note 3.g)	127		650		1,074
Salaries and social security	90		76		74
Taxes payable	1,923		3,344		507
Net advances from crude oil purchasers (Note 3.h)	264		260		401
Reserves (Exhibit E)	67		37		73

Total current liabilities	4,506		5,985		3,732

Noncurrent Liabilities
Accounts payable (Note 3.f)	768		436		273
Loans (Note 3.g)	1,232		1,295		2,746
Taxes payable	15		13		38
Net advances from crude oil purchasers (Note 3.h)	634		881		1,327
Reserves (Exhibit E)	621		365		289

Total noncurrent liabilities	3,270		2,990		4,673

Total liabilities	7,776		8,975		8,405

Temporary differences

Foreign companies' translation (Note 3.i)	(107	)	(115	)	—

Shareholders' Equity (per corresponding statements)	22,087		22,534		20,896

Total liabilities, temporary differences and shareholders’ equity	29,756		31,394		29,301

Notes 1 to 13 and the accompanying exhibits A, C, E, F, G and H and Schedule I

are an integral part of these statements.

ENRIQUE LOCUTURA RUPEREZ

Vicepresident

English translation of the financial statements originally issued in Spanish,

except for the inclusion of Note 12 in the English translation

YPF SOCIEDAD ANONIMA

STATEMENTS OF INCOME

FOR THE YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002

(amounts expressed in millions of Argentine pesos, except for per share amounts in Argentine pesos - Note 1)


	2004		2003		2002
Net sales (Note 3.j)	18,448		16,456		15,428
Cost of sales (Exhibit F)	(8,493	)	(7,251	)	(7,632	)

Gross profit	9,955		9,205		7,796

Administrative expenses (Exhibit H)	(398	)	(327	)	(327	)
Selling expenses (Exhibit H)	(1,311	)	(1,083	)	(981	)
Exploration expenses (Exhibit H)	(246	)	(154	)	(145	)

Operating income	8,000		7,641		6,343

Income (loss) on long-term investments	203		389		(715	)
Amortization of goodwill	—		—		(13	)
Other expenses, net (Note 3.k)	(665	)	(161	)	(188	)
Financial income (expense), net and holding gains:
Gains (Losses) on assets
Interests	147		207		227
Exchange differences	68		(854	)	1,966
Holding gains on inventories	185		57		18
Losses on exposure to inflation	—		(5	)	(1,498	)
(Losses) Gains on liabilities
Interests	(130	)	(154	)	(552	)
Exchange differences	(80	)	735		(3,781	)
Gains on exposure to inflation	—		14		1,276
Income from sale of long-term investments	—		—		576

Net income before income tax	7,728		7,869		3,659
Income tax (Note 3.l)	(2,852	)	(3,241	)	(43	)

Net income	4,876		4,628		3,616

Earnings per share (Note 1)	12.40		11.77		9.19

Notes 1 to 13 and the accompanying exhibits A, C, E, F, G and H and Schedule I

are an integral part of these statements.

ENRIQUE LOCUTURA RUPEREZ

Vicepresident

English translation of the financial statements originally issued in Spanish,

except for the inclusion of Note 12 in the English translation

YPF SOCIEDAD ANONIMA

STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

FOR THE YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002

(amounts expressed in millions of Argentine pesos - Note 1, except for per share amount in pesos)


	Shareholders' Contributions
	Subscribed Capital	Irrevocable Contributions		Adjustment to Capital and Contributions	Issuance Premiums	Total		Legal Reserve	Reserve for Future Dividends		Unappropriated Retained Earnings		Total Shareholders' Equity
Balance as of December 31, 2001	3,933	13		7,281	640	11,867		808	7		6,179		18,861

As decided by the Ordinary and Extraordinary Shareholders' meeting of April 10, 2002:
- Appropriation to Legal Reserve	—	—		—	—	—		56	—		(56	)	—
- Appropriation to Reserve for Future Dividends	—	—		—	—	—		—	1,707		(1,707	)	—
As decided by the Board of Directors' meeting of November 7, 2002:
- Cash dividends (Ps. 4 per share)	—	—		—	—	—		—	(1,581	)	—		(1,581	)
Net income	—	—		—	—	—		—	—		3,616		3,616

Balance as of December 31, 2002	3,933	13		7,281	640	11,867		864	133		8,032		20,896

As decided by the Ordinary and Extraordinary Shareholders' meeting of April 9, 2003:
- Cash dividends (Ps. 5 per share)	—	—		—	—	—		—	—		(1,967	)	(1,967	)
- Appropriation to Legal Reserve	—	—		—	—	—		167	—		(167	)	—
- Appropriation to Reserve for Future Dividends	—	—		—	—	—		—	1,023		(1,023	)	—
As decided by the Board of Directors' meeting of July 2, 2003:
- Cash dividends (Ps. 2.60 per share)	—	—		—	—	—		—	(1,023	)	—		(1,023	)
Net income	—	—		—	—	—		—	—		4,628		4,628

Balance as of December 31, 2003	3,933	13		7,281	640	11,867		1,031	133		9,503		22,534

As decided by the Ordinary Shareholders' meeting of April 21, 2004:
- Reversal of Reserve for Future Dividends	—	—		—	—	—		—	(133	)	133		—
- Cash dividends (Ps. 9 per share)	—	—		—	—	—		—	—		(3,540	)	(3,540	)
- Appropriation to Legal Reserve	—	—		—	—	—		255	—		(255	)	—
- Appropriation to Reserve for Future Dividends	—	—		—	—	—		—	1,770		(1,770	)	—
As decided by the Board of Directors' meeting of October 27, 2004:
- Cash dividends (Ps. 4.50 per share)	—	—		—	—	—		—	(1,770	)	—		(1,770	)
Conversion of Irrevocable Contributions into subordinated debt (Note 4)	—	(13	)	—	—	(13	)	—	—		—		(13	)
Net income	—	—		—	—	—		—	—		4,876		4,876

Balance as of December 31, 2004	3,933	—		7,281	640	11,854		1,286	—		8,947		22,087

Notes 1 to 13 and the accompanying exhibits A, C, E, F, G and H and Schedule I

are an integral part of these statements.

ENRIQUE LOCUTURA RUPEREZ

Vicepresident

English translation of the financial statements originally issued in Spanish,

except for the inclusion of Note 12 in the English translation

YPF SOCIEDAD ANONIMA

STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002

(amounts expressed in millions of Argentine pesos - Note 1)


	2004		2003		2002
Cash Flows from Operating Activities
Net income	4,876		4,628		3,616
Adjustments to reconcile net income to net cash provided by operating activities:
(Income) Loss on long-term investments and amortization of goodwill	(203	)	(389	)	728
Dividends from long-term investments	108		40		15
Depreciation of fixed assets	2,365		2,216		2,000
Income from sale of long-term investments	—		—		(576	)
Consumption of materials and fixed assets retired, net of allowances	194		280		249
Increase in allowances for fixed assets	124		67		73
Net increase in reserves	286		43		144
Changes in assets and liabilities:
Trade receivables	(246	)	206		(1,064	)
Other receivables	2,314		(2,329	)	(1,842	)
Inventories	(330	)	(81	)	(42	)
Accounts payable	330		43		693
Salaries and social security	14		3		12
Taxes payable	(1,419	)	2,816		434
Net advances from crude oil purchasers	(258	)	(415	)	(556	)
Exchange differences, interests and others	74		(200	)	2,240

Net cash flows provided by operating activities	8,229	⁽¹⁾	6,928	⁽¹⁾	6,124	⁽¹⁾

Cash Flows used in Investing Activities
Acquisitions of fixed assets	(2,752	)	(2,222	)	(2,682	)
Capital distributions from long-term investments	15		—		13
Capital contribution in long-term investments	—		(6	)	(26	)
Proceeds from sales of long-term investments	—		—		917
Investments (non cash and equivalents)	—		(18	)	29

Net cash flows used in investing activities	(2,737	)	(2,246	)	(1,749	)

Cash Flows used in Financing Activities
Payment of loans	(892	)	(1,397	)	(3,848	)
Proceeds from loans	280		—		58
Dividends paid	(5,310	)	(2,990	)	(37	)

Net cash flows used in financing activities	(5,922	)	(4,387	)	(3,827	)

(Decrease) Increase in Cash and Equivalents	(430	)	295		548
Cash and equivalents at the beginning of years	864		574		57
Effect of changes in the purchasing power of Argentine pesos on cash and equivalents	—		(5	)	(31	)

Cash and equivalents at the end of years	434		864		574

For supplemental information on cash and equivalents, see Note 3.a.

(1)	Includes (4,736), (223) and (203) corresponding to income tax payments, and (124), (223) and (452) corresponding to interest payments, for the years ended December 31, 2004, 2003 and 2002, respectively.

Notes 1 to 13 and the accompanying exhibits A, C, E, F, G and H and Schedule I

are an integral part of these statements.

ENRIQUE LOCUTURA RUPEREZ

Vicepresident

NOTES TO FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002

(amounts expressed in millions of Argentine pesos, except where otherwise indicated - Note 1)

1. SIGNIFICANT ACCOUNTING POLICIES

The financial statements of YPF Sociedad Anónima have been prepared in accordance with generally accepted accounting principles in Buenos Aires City, Argentina, considering the regulations of the CNV. They also include certain reclassifications and additional disclosures that allow the financial statements to conform more closely to the form and content required by the Securities and Exchange Commission of the United States of America (“SEC”).

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 the method for restatement in constant Argentine pesos set forth in Technical Resolution No. 6 of the F.A.C.P.C.E. 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.

Cash and equivalents

In the statements of cash flows, the Company considers cash and all highly liquid investments purchased with an original maturity of less than three months to be cash and equivalents.

Derivative instruments

Although YPF does not use derivative instruments to hedge the effects of fluctuations in market prices, the Company has entered into certain hedging contracts related to forward crude oil sale agreements, which are described in Note 2.j.

Recognition of revenue criteria

Revenue is recognized on sales of crude oil, refined products and natural gas, in each case, when title and risks of loss pass to the customer.

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 and electric power generation, 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 concessions and exploration permits

According to Argentine Law No. 24,145 issued in November 1992, YPF’s producing fields and undeveloped properties were converted into production concessions and exploration permits under Law No. 17,319. 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.

Fair value of financial instruments and concentration of credit risk

The carrying value of cash, current investments and trade receivables approximates its fair value due to the short maturity of these instruments. Furthermore, the fair value of borrowed and granted loans, which has been estimated based on market prices or current interest rates offered to the Company at the end of each year, for investments or debt with the same remaining maturity, approximates its carrying value.

Financial instruments that potentially expose the Company to concentration of credit risk consist primarily of cash, current investments, accounts receivable and other receivables. The Company invests cash excess primarily in high liquid investments in financial institutions both in Argentina and abroad with strong credit rating and providing credit to foreign related parties. 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. Credit risk on trade receivables is limited, as a result of the Company’s large customer base.

Since counterparties to the Company’s derivative transactions are major financial institutions with strong credit rating, exposure to credit losses in the event of nonperformance by such counterparties is minimal.

Use of estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires Management to make estimates and assumptions that affect reported assets and liabilities, revenues and expenses and disclosure of contingencies. Future results could differ from the estimations made by Management.

Earnings per share

Earnings per share have been calculated based on the 393,312,793 shares outstanding and the net income for the years ended as of December 31, 2004, 2003 and 2002.

2. VALUATION CRITERIA

The principal valuation criteria used in the preparation of the financial statements are as follows:

Cash:

•

Amounts in Argentine pesos have been valued at face value.

•

Amounts in foreign currencies have been valued at the relevant exchange rates as of the end of each year. Exchange differences have been credited (charged) to current income. Additional information on assets denominated in foreign currency is presented in Exhibit G.

b)	Current investments, trade and other receivables and payables:

•

Amounts in Argentine pesos have been valued at face value, which includes accrued interest through the end of each year, if applicable. Mutual funds have been valued at market value at the end of each year. When required by generally accepted accounting principles, discounted value does not differ significantly from their face value as of the end of each year.

•

Amounts in foreign currency have been valued at face value at the relevant exchange rates in effect as of the end of each year, including accrued interest, if applicable. Exchange differences have been credited (charged) to current income. Investments in government securities have been valued at its market value as of the end of each year. Additional information on assets and liabilities denominated in foreign currency is disclosed in Exhibit G.

If applicable, allowances have been made to reduce receivables to their estimated realizable value.

c)	Inventories:

•

Refined products for sale, products in process of refining and crude oil have been valued at replacement cost as of the end of each year.

•

Raw materials and packaging materials have been valued at cost restated as mentioned in Note 1, which does not differ significantly from its replacement cost as of the end of each year.

Inventories valuation does not exceed their estimated recoverable value.

d)	Other assets:

These include the Company’s interest in PBBPolisur S.A. and Petroken Petroquímica Ensenada S.A. (“Petroken”), which have been valued using the equity method, that do not exceed their estimated recoverable value (Note 11).

e)	Noncurrent investments:

These include the Company’s investments in companies under control, joint control or significant influence and holdings in other companies. These investments are detailed in Exhibit C and have been valued using the equity method, except for holdings in other companies, which have been valued at its acquisition cost restated as detailed in Note 1.

Investments in Gasoducto del Pacífico (Argentina) S.A., Gasoducto del Pacífico (Cayman) Ltd., Oleoducto Trasandino (Argentina) S.A., A&C Pipeline Holding Company and Petróleos Trasandinos YPF S.A., where less than 20% direct or indirect interest is held, are accounted by the equity method since YPF 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, certain events of debt default and the de-dollarization of natural gas sale prices and utility rates (Exhibit E).

Foreign subsidiaries in which YPF participates have been defined as non-integrated companies as they collect cash and other monetary items, incur expenses, generate income and arrange borrowing abroad. Corresponding assets and liabilities have been translated into Argentine pesos at the exchange rate prevailing as of the end of each year. Income statements have been translated using the relevant exchange rate at the date of each transaction. Exchange differences arising from the translation process have been included in the “Temporary differences—Foreign companies’ translation” account of the balance sheet, which will be maintained until the sale or complete or partial reimbursement of capital of the related investment occur.

Holdings in preferred shares have been valued as defined in the respective bylaws.

Investments in companies with negative shareholders’ equity were 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 conform the accounting principles used by controlled, jointly controlled or under significant influence companies to those of the Company. Main adjustments are related to the application of the general accepted accounting principles in Buenos Aires City, Argentina, to foreign related companies’ financial statements and the elimination of the appraisal revaluation of fixed assets from investees.

The investments in companies under control, joint control or significant influence, have been valued based upon the last available financial statements of these companies as of the end of each year, taking into consideration, if applicable, significant subsequent events and transactions, available management information and transactions between YPF and the related company which have produced changes on the latter’s shareholders’ equity (Exhibit C).

The Company includes supplemental consolidated financial statements as part of the primary financial statements (Schedule I).

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. YPF has not recorded any charge for this tax since it has estimated that dividends from earnings recorded by the equity method would not be subject to such tax.

f)	Fixed assets:

Fixed assets have been valued at acquisition cost restated as detailed in Note 1, less related accumulated depreciation. Depreciation rates, representative of the useful life assigned, applicable to each class of asset, are disclosed in Exhibit A.

Oil and gas producing activities

•

The Company follows the “successful effort” method of accounting for its 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 justify commercial development. If such reserves were not found, the mentioned costs are charged to expense. Occasionally, however, 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 is not met and the reserves determination process exceeds one year following drilling completion, cost of drilling exploratory wells are charged to expense. As of December 31, 2004, the Company has not capitalized any exploratory well capitalized whose drilling has been completed for more than a year.

•

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.

•

Discounted 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 estimated value of the discounted amounts payable.

Other fixed assets

•

The Company’s other fixed assets have been depreciated using the straight-line method, with depreciation rates based on the estimated useful life of each class of property.

Maintenance and major repairs to the fixed assets have been charged to expense as incurred.

Renewals and betterments that materially extend the useful life 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 4 to the consolidated financial statements, does not exceed their estimated recoverable value.

g)	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 actual statutory rate of 35%. The Company has recorded the previously mentioned deferred tax assets and liabilities at face value. The effect of measuring such deferred tax assets and liabilities on a discounted basis is not material.

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. 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.

Income tax for the years ended December 31, 2004, 2003 and 2002, was charged to “Income tax” account in the statement of income, since the annual income tax liability is higher than the tax on minimum presumed income.

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 natural gas volumes commercialized. The estimated value is calculated based upon the approximate sale price of the crude oil and gas produced, less the costs of transportation and storage. 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 new duties for hydrocarbon exports for five years. Outstanding rates as of December 31, 2004 are 20% for natural gas and liquefied petroleum gas, 5% for gasoline, diesel and other refined products and between 25% and 45% for crude oil according to the West Texas Intermediate price.

h)	Allowances and reserves:

•

Allowances: amounts have been provided in order to reduce the valuation of trade receivables, other receivables, noncurrent investments and fixed assets based on analysis of doubtful accounts and on the estimated recoverable value of these assets.

•

Reserves for losses: amounts have been provided for various contingencies involving the Company. The estimated probable amounts are recorded taking into consideration the probability and period of occurrence, based on Management’s expectations and in consultation with legal counsel. If required by generally accepted accounting principles, their discounted value does not differ significantly from the recorded face value.

The activity in the allowances and reserves accounts is set forth in Exhibit E.

i)	Environmental liabilities:

Environmental liabilities are recorded when environmental assessments and/or remediation are probable, material and can be reasonably estimated. Such estimates are based on either detailed feasibility studies of remediation approach and cost for individual sites or on 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.

j)	Derivative instruments:

As of December 31, 2004, the Company hedged the crude oil price of future committed deliveries through price swap agreements originally covering approximately 23.9 and 24.1 million crude oil barrels to be delivered during the term of ten and seven years, respectively, under the forward crude oil sale agreements mentioned in Note 9.b (“hedged item”). Under these price swap agreements the Company will receive variable selling prices, which will depend upon market prices and will pay fixed prices. As of December 31, 2004, approximately 22 million of barrels of crude oil are hedged under these agreements.

These fair value hedges are carried at fair value and are disclosed in the “Net advances from crude oil purchasers” account in the balance sheet. Changes in fair value are recognized in earnings together with the offsetting loss or gain from changes in the fair value of the risk being hedged of the hedged item. As hedge is effective, changes in the fair value of these derivative instruments and of the hedged item do not have effect on net income.

k)	Shareholders’ equity accounts:

These accounts have been stated in Argentine pesos as detailed in Note 1, except for “Subscribed Capital” and “Irrevocable Contributions” accounts, which are stated at their historical value. The adjustment required to state this account in constant Argentine pesos is disclosed in the “Adjustment to Capital and Contributions” account.

l)	Statements of income accounts:

The amounts included in the income statement accounts have been recorded by applying the following criteria, restated as detailed in Note 1:

•

Accounts which accumulate monetary transactions at its face value.

•

Cost of sales has been calculated by computing units sold in each month at the replacement cost of that month.

•

Depreciation and amortization of nonmonetary assets, valued at acquisition cost, have been recorded based on the restated cost of such assets.

•

Holding gains (losses) on inventories valued at replacement cost have been included in the “Holding gains on inventories” account.

•

Income (loss) on long-term investments in which control, joint control or significant influence is held, has been calculated on the basis of the income (loss) of those companies and was included in the “Income on long-term investments” account.

•

Financial income (expenses) for the years ended December 31, 2003 and 2002, are disclosed net of the effect of the general inflation on the related assets and liabilities. The effect of inflation on the remaining monetary assets and liabilities has been disclosed in the account “Gains (Losses) on exposure to inflation”.

3. ANALYSIS OF THE MAIN ACCOUNTS OF THE FINANCIAL STATEMENTS

Details regarding significant accounts included in the accompanying financial statements are as follows:

Balance Sheet Accounts

Assets

a)	Investments:


	2004				2003				2002
	Current		Noncurrent		Current		Noncurrent		Current		Noncurrent
Short-term investments and government securities	180	⁽¹⁾⁽²⁾	—		673	⁽¹⁾	—		374	⁽¹⁾	8
Long-term investments (Exhibit C)	—		2,669		—		2,826		—		2,445
Allowance for reduction in value of holdings in long-term investments (Exhibit E)	—		(325	)	—		(293	)	—		(191	)

	180		2,344		673		2,533		374		2,262

(1)	Includes 167, 631 and 358 as of December 31, 2004, 2003 and 2002, respectively, with an original maturity of less than three months.

(2)	Accrue interests at annual rates from 4.10% to 4.50%.

b)	Trade receivables:


	2004			2003			2002
	Current		Noncurrent	Current		Noncurrent	Current		Noncurrent
Accounts receivable	1,779		71	1,554		80	1,766		81
Related parties (Note 7)	510		—	491		—	575		—

	2,289	⁽¹⁾	71	2,045		80	2,341		81
Allowance for doubtful trade receivables (Exhibit E)	(347	)	—	(358	)	—	(433	)	—

	1,942		71	1,687		80	1,908		81

(1)	Includes 288 in litigation, 94 one to three months past due, 155 in excess of three months past due, 1,727 due within three months and 25 due after three months.

c)	Other receivables:


	2004				2003				2002
	Current		Noncurrent		Current		Noncurrent		Current		Noncurrent
Deferred income tax (Note 3.l)	—		405		—		166		—		417
Tax credits and export rebates	299		17		254		18		257		70
Trade	20		—		39		—		26		—
Prepaid expenses	42		128		35		156		56		201
Concessions charges	19		105		18		125		17		144
Related parties (Note 7)	2,516	⁽³⁾	617	⁽³⁾	5,235		603		3,083		458
Loans to clients	10		87		9		87		11		92
From the renegotiation of long-term contracts	—		21		—		25		—		27
From joint ventures and other agreements	6		—		29		—		38		—
Miscellaneous	286		103		130		84		149		112

	3,198	⁽¹⁾	1,483	⁽²⁾	5,749		1,264		3,637		1,521
Allowance for other doubtful accounts (Exhibit E)	(122	)	—		(122	)	—		(105	)	—
Allowance for valuation of other receivables to their estimated realizable value (Exhibit E)	—		(70	)	—		(80	)	—		(97	)

	3,076		1,413		5,627		1,184		3,532		1,424

(1)	Includes 21 one to three months past due, 111 in excess of three months past due and 3,066 due as follows: 1,642 from one to three months, 32 from three to six months, 9 from six to nine months and 1,383 from nine to twelve months.

(2)	Includes 960 due from one to two years, 348 due from two to three years and 175 due after three years.

(3)	Accrues interest at annual rates from 2.51% to 6.67%.

d)	Inventories:


	2004	2003	2002
Refined products for sale	558	352	307
Crude oil	346	262	218
Products in process of refining	9	14	10
Raw materials and packaging materials	92	47	59

	1,005	675	594

e)	Fixed assets:


	2004		2003		2002
Net book value of fixed assets (Exhibit A)	19,141		18,788		19,037
Allowance for unproductive exploratory drilling (Exhibit E)	(16	)	(39	)	(44	)
Allowance for obsolescence of materials (Exhibit E)	(25	)	(26	)	(26	)
Allowance for fixed assets to be disposed of (Exhibit E)	(22	)	(21	)	(57	)

	19,078		18,702		18,910

Liabilities

f)	Accounts payable:


	2004				2003		2002
	Current		Noncurrent		Current	Noncurrent	Current	Noncurrent
Trade	1,417		22		1,237	27	1,238	4
Hydrocarbon wells abandonment obligations	—		648		—	347	—	199
Related parties (Note 7)	330		—		240	—	208	—
Investment in controlled company – YPF Holdings Inc.	102		—		—	—	—	—
From joint ventures and other agreements	136		—		104	—	113	—
Miscellaneous	50		98		37	62	44	70

	2,035	⁽¹⁾	768	⁽²⁾	1,618	436	1,603	273

(1)	Includes 2,001 due within three months, 11 due from three to six months and 23 due after six months.

(2)	Includes 159 due from one to two years and 609 due after two years.

g)	Loans:


				2004		2003		2002
	Interest Rates⁽¹⁾		Principal Maturity	Current	Noncurrent	Current	Noncurrent	Current	Noncurrent
Negotiable Obligations⁽²⁾	7.75-10.00	%	2007-2028	29	1,078	574	1,075	983	2,406
Subordinated liability with shareholders (Note 4)	5.00%		2005	13	—	—	—	—	—
Other bank loans and other creditors	3.53%		2005-2007	85	154	76	220	91	340

				127	1,232	650	1,295	1,074	2,746

(1)	Annual interest rates as of December 31, 2004.

(2)	Disclosed net of 784, 1,253 and 1,200 corresponding to YPF outstanding negotiable obligations repurchased through open market transactions as of December 31, 2004, 2003 and 2002, respectively.

The maturities of the Company’s current and noncurrent loans, as of December 31, 2004, are as follows:


	From 1 to 3 months	From 3 to 6 months	From 6 to 9 months	From 9 to 12 months	Total
Current loans	68	18	39	2	127


	From 1 to 2 years	From 2 to 3 years	From 4 to 5 years	Over 5 years	Total
Noncurrent loans	79	593	366	194	1,232

Details regarding the Negotiable Obligations of the Company are as follows:


M.T.N. Program	Issuance			Fixed Interest Rates		Principal Maturity	Book Value
(in millions)							2004		2003		2002
	Year	Principal Value					Current	Noncurrent	Current	Noncurrent	Current	Noncurrent
US$ 1,000	1997	US$	300	7.75	%	2007	14	518	15	517	20	717
US$ 1,000	1998	US$	100	10.00	%	2028	3	194	3	190	4	221
US$ 1,000	1999	US$	225	9.13	%	2009	12	366	12	368	14	442
US$ 1,000	1998	US$	350	—		—	—	—	—	—	914	—
—	1994	US$	350	—		—	—	—	544	—	31	1,026

							29	1,078	574	1,075	983	2,406

In connection with the issuance of the Negotiable Obligations, the Company 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 the Company does not comply with any covenant, the trustee or the holders of not less than 25% in aggregate principal amount of each 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 total outstanding debt is subject to cross-default provisions, which may be triggered if an event of default occurs with respect to the payment of principal or interest on indebtedness equal to or exceeding US$ 20 million.

h)	Net advances from crude oil purchasers:


	2004				2003				2002
	Current		Noncurrent		Current		Noncurrent		Current		Noncurrent
Advances from crude oil purchasers	644		1,466		432		1,276		625		1,560
Derivative instruments - Crude oil price swaps	(380	)	(832	)	(172	)	(395	)	(224	)	(233	)

	264		634	⁽¹⁾	260		881		401		1,327

(1)	Includes 264 due from one to two years, 264 due from two to three years and 106 due after three years.

Temporary differences

i)	Foreign companies’ translation:


	2004		2003		2002
Balance at the beginning of years	(115	)	—		—
Increases (decreases)	8		(115	)	—

Balance at the end of years	(107	)	(115	)	—

Statements of Income Accounts

j)	Net sales:


	Income (Expense)
	2004		2003		2002
Sales	19,350		17,242		16,044
Turnover tax	(286	)	(245	)	(173	)
Hydrocarbon export withholdings	(616	)	(541	)	(443	)

	18,448		16,456		15,428

k)	Other expenses, net:


	2004		2003		2002
Reserve for pending lawsuits and other claims	(534	)	(140	)	(115	)
Environmental remediation	(69	)	(34	)	—
Miscellaneous	(62	)	13		(73	)

	(665	)	(161	)	(188	)

l)	Income tax:


	2004		2003		2002
Current income tax	(3,091	)	(2,993	)	(375	)
Deferred income tax	239		(248	)	332

	(2,852	)	(3,241	)	(43	)

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, 2004, 2003 and 2002, is as follows:


	2004		2003		2002
Net income before income tax	7,728		7,869		3,659
Statutory tax rate	35	%	35	%	35	%

Statutory tax rate applied to net income before income tax	(2,705	)	(2,754	)	(1,281	)

Permanent differences:
Effect of the restatement into constant Argentine pesos	(353	)	(485	)	132
Income (Loss) on long-term investments and amortization of goodwill	71		136		(255	)
Exchange difference from translation of long-term investments	—		—		1,051
Not taxable (not deductible)exchange differences	5		(18	)	219
Miscellaneous	130		(120	)	91

	(2,852	)	(3,241	)	(43	)

The breakdown of the net deferred tax asset as of December 31, 2004, 2003 and 2002, is as follows:


	2004		2003		2002
Deferred tax assets
Exchange differences from devaluation of Argentine peso – Law No. 25,561	99		151		202
Not deductible allowances and reserves	425		250		275
Specific tax loss carryforwards	174		—		—
Miscellaneous	84		51		101

Total deferred tax assets	782		452		578

Deferred tax liabilities
Fixed assets	(258	)	(235	)	(115	)
Miscellaneous	(119	)	(51	)	(46	)

Total deferred tax liabilities	(377	)	(286	)	(161	)

Net deferred tax asset	405		166		417	⁽¹⁾

(1)	Includes 3 corresponding to the restatement into Argentine pesos as of December 31, 2002 (Note 1).

4. CAPITAL STOCK

The Company’s subscribed capital, as of December 31, 2004, is 3,933 and is 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, 2004, Repsol YPF, S.A. (“Repsol YPF”) controls the Company, directly and indirectly, through a 99.04% shareholding. 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, 2004, the Argentine Government holds 1,000 Class A shares. So long as any Class A share remains outstanding, the affirmative vote of such shares is required for: 1) mergers, 2) acquisitions of more than 50% of the Company’s shares in an agreed or hostile bid, 3) transfers of all the Company’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.

Pursuant to General Resolution N° 466/04 from the CNV, the Company has converted the irrevocable contributions of 13 into a subordinated liability, which is disclosed in the “Loans” account of the balance sheet as of December 31, 2004. This liability will be paid to all of the shareholders in proportion to their stockholdings.

5. RESTRICTED ASSETS AND GUARANTEES GIVEN

As of December 31, 2004, 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$ 54 million and US$ 65 million, respectively. The corresponding loans have final maturity in 2011.

YPF has pledged all of its shares of capital stock in Profertil S.A. due to requirements of the financial agreement and has committed, among other things, to maintain its interests in this company upon December 31, 2010.

6. PARTICIPATION IN JOINT VENTURES AND OTHER AGREEMENTS

As of December 31, 2004, the exploration and production joint ventures and the main other agreements in which the Company participates are the following:


Name and Location	Ownership Interest	Operator	Activity
Acambuco	22.50%	Pan American Energy LLC	Exploration and production
Salta

Aguada Pichana	27.28%	Total Austral S.A.	Production
Neuquén

Aguaragüe	30.00%	Tecpetrol S.A.	Exploration and production
Salta

Bandurria	27.30%	YPF S.A.	Exploration
Neuquén

CAM-1	50.00%	Sipetrol S.A.	Exploration and production
Tierra del Fuego and Santa Cruz

CAM-2 / A SUR	50.00%	Sipetrol S.A.	Exploration and production
Tierra del Fuego and Santa Cruz

CAM-3	50.00%	Sipetrol S.A.	Exploration and production
Santa Cruz

Campamento Central / Cañadón Perdido	50.00%	YPF S.A.	Production
Chubut

CCA-1 GAN GAN	50.00%	Wintershall Energía S.A.	Exploration
Chubut

CGSJ -V/A	50.00%	Wintershall Energía S.A.	Exploration
Chubut

Corralera	40.00%	Chevron San Jorge S.R.L.	Exploration
Neuquén

El Tordillo	12.20%	Tecpetrol S.A.	Production
Chubut

Filo Morado	50.00%	YPF S.A.	Generation of power electricity
Neuquén


Name and Location	Ownership Interest		Operator	Activity
La Tapera y Puesto Quiroga	12.20%		Tecpetrol S.A.	Exploration
Chubut

Llancanelo	51.00%		YPF S.A.	Exploration and production
Mendoza

Magallanes “A”	50.00%		Sipetrol S.A.	Production
Santa Cruz

Palmar Largo	30.00%		Pluspetrol S.A.	Production
Formosa

Puesto Hernández	61.55%		Pecom Energía S.A.	Production
Neuquén and Mendoza

Ramos	15.00%	⁽¹⁾	Pluspetrol Energy S.A.	Production
Salta

San Roque	34.11%		Total Austral S.A.	Exploration and production
Neuquén

Tierra del Fuego	30.00%		Pan American	Production
Tierra del Fuego			Fueguina S.R.L.

(1)	Additionally, YPF has a 27% indirect ownership interest through Pluspetrol Energy S.A.

As of December 31, 2004, the Company has been awarded the bids on its own or with other partners and received exploration permits for acreage in several areas, having an interest between 30% and 100%.

The assets and liabilities and production costs of the joint ventures and other agreements as of December 31, 2004, 2003 and 2002 included in the financial statements are as follows:


	2004	2003	2002
Current assets	84	79	110
Noncurrent assets	1,912	1,792	1,658

Total assets	1,996	1,871	1,768

Current liabilities	197	152	192
Noncurrent liabilities	137	133	44

Total liabilities	334	285	236

Production costs	775	665	663

Participation in joint ventures and other agreements have been calculated based upon the last available financial statements as of the end of each year, taking into account significant subsequent events and transactions as well as available management information.

7. BALANCES AND TRANSACTIONS WITH RELATED PARTIES

The principal outstanding balances as of December 31, 2004, 2003 and 2002, from transactions with controlled companies, jointly controlled companies, companies under significant influence, the parent company and other related parties under common control are as follows:


	2004				2003				2002
	Trade receivables	Other receivables		Accounts payable	Trade receivables	Other receivables		Accounts payable	Trade receivables	Other receivables		Accounts payable
	Current	Current	Noncurrent	Current	Current	Current	Noncurrent	Current	Current	Current	Noncurrent	Current
Controlled Companies:
Operadora de Estaciones de Servicios S.A.	16	—	—	10	9	—	—	5	6	2	—	6
A - Evangelista S.A.	—	7	—	41	—	1	—	18	—	1	—	28
Others	—	—	—	44	—	—	—	44	—	—	—	44

	16	7	—	95	9	1	—	67	6	3	—	78

Jointly Controlled Companies:
Petroken	38	—	—	1	35	—	—	—	26	—	—	—
Profertil S.A.	6	1	—	34	11	37	—	14	8	109	—	7
Mega	157	2	—	—	112	30	—	21	228	1	30	—
Refinería del Norte S.A. (“Refinor”)	72	—	—	26	57	—	—	43	89	2	—	22

	273	3	—	61	215	67	—	78	351	112	30	29

Companies under Significant Influence:	114	1	—	46	73	22	—	28	31	45	—	64

Parent Company and Other Related Parties under Common Control:
Repsol YPF	—	1,305	—	26	—	1,385	—	33	—	1,394	—	26
Repsol YPF Transporte y Trading S.A.	30	—	—	28	132	—	—	—	146	—	—	—
Repsol YPF Gas S.A.	16	21	32	—	10	22	48	2	10	30	63	—
Repsol YPF Gas Chile Ltda.	—	4	323	—	—	8	299	—	—	—	365	—
Repsol YPF Brasil S.A.	11	18	262	18	21	25	256	14	18	313	—	—
Repsol International Finance B.V.	—	1,137	—	—	—	3,699	—	—	—	1,172	—	—
Others	50	20	—	56	31	6	—	18	13	14	—	11

	107	2,505	617	128	194	5,145	603	67	187	2,923	428	37

	510	2,516	617	330	491	5,235	603	240	575	3,083	458	208

The Company maintains purchase, sale and financing transactions with related parties. The prices and rates of these transactions approximate the amounts charged to unrelated third parties. The principal purchase, sale and financing transactions with these companies for the years ended December 31, 2004, 2003 and 2002, include the following:


	2004				2003				2002
	Sales	Purchases and services	Loan operations (debit) credit	Interest gains (losses)	Sales	Purchases and services	Loan operations (debit) credit	Interest gains (losses)	Sales	Purchases and services	Loan operations (debit) credit	Interest gains (losses)
Controlled Companies:
Operadora de Estaciones de Servicios S.A.	15	96	—	—	9	80	—	—	8	85	—	—
A - Evangelista S.A.	—	131	—	—	1	117	—	—	—	258	2	1

	15	227	—	—	10	197	—	—	8	343	2	1