Fitch Affirms International Ratings of YPF at 'BB'.

CHICAGO -- Fitch Ratings has affirmed the senior unsecured local and foreign currency ratings of YPF S.A. (YPF) at 'BB' and the Argentina national scale rating at 'AAA(arg)'. The Rating Outlook is Stable.

The assigned ratings incorporate the benefits of YPF's ownership structure, solid operating performance and credit protection measures, and proven hard currency-generating ability. Credit indicators through September 2004 are again at record levels, with EBITDA/interest coverage of 46.9 times (x), EBITDA-CAPEX/interest coverage of 35.0x, total debt/EBITDA of 0.2x and a total debt to capitalization ratio of 8.8%. Although the company's credit indicators suggest rating levels higher than those assigned, the Argentine sovereign's credit profile continues to constrain YPF's standalone credit ratings. Nonetheless, strong credit fundamentals, coupled with the company's cash flow and export capabilities, mitigate exposure to transfer and convertibility risk, allowing YPF to be rated multiple notches above the Argentine country ceiling of 'B-'.

Importantly, the company remains exposed to the risks of intervention by the sovereign. The Argentine government's decision earlier this year to raise export taxes on crude oil to 25% from 20% and on liquefied petroleum gas to 20%, and to introduce a 5% export tax rate on gasoline underlines the Argentine government's readiness to use its discretion to interfere in the energy sector. YPF may be subject to additional government interference, such as further changes in retention rates and taxes or imposing transferability or exchange controls on hard currency, which could reduce the amount of U.S. dollar cash flow that is available to meet financial obligations.

As further example, the government is directing the expansion Transportadora Gas del Norte (TGN) and Transportadora Gas del Sur (TGS) pipelines by 4.7 million per day from July 2005 onwards. The investment in the expansion of TGN's pipeline is estimated at US$169 million, and will be financed by Repsol YPF (US$100 million), BNDES (US$31 million), Banco Nacion (US$27 million), and TGN (US$11 million). The actions by the Argentine government illustrate its willingness to pressure private sector companies to make investment decisions regardless of commercial considerations.

At this time, the likelihood or level of further interference is uncertain, although these risks could ease if the Argentine government reaches an agreement with creditors and the International Monetary Fund (IMF).

Despite the underlying sovereign turbulence, YPF's credit profile not only remains strong, but has actually improved substantially. The strong international oil price environment, coupled with cost reduction initiatives, benefits from the ARP's devaluation and improved value-added downstream export flows, contributed to a 5% rise in third quarter 2004 (3Q'04) EBITDA to ARP7.5 billion from ARP7.2 billion. Net income during this period totaled ARP3.9 billion, compared to an ARP3.3 billion though 3Q'03. The strong cash generation was accompanied by a US$277 million reduction in total debt, further strengthening credit protection measures.

Even though YPF's debt is technically non-recourse to Repsol YPF, the assigned ratings assume a strong level of support by the parent company, reflecting YPF's importance in the overall group strategy. The acquisition of YPF resulted in a more balanced integrated business mix for Repsol YPF, correcting the historical bias towards downstream operations. Through September 2004, YPF accounted for just under half of Repsol YPF's EBITDA but only 8% of the group's consolidated leverage. Repsol YPF has recently changed the terms of its medium term note program, under which YPF no longer qualifies as a principal subsidiary in connection with the cross-default clause. Although existing bonds remain subject to cross-default, this is no longer expected to be the case going forward, limiting required support from Repsol YPF.

YPF S.A. is an integrated oil and gas company engaged in exploration, development and production of hydrocarbons as well as the refining, marketing, transportation and distribution of oil and a wide range of petroleum products, oil derivatives, petrochemicals and liquid petroleum gas. The company is a subsidiary of Spain's Repsol YPF (rated 'BBB', Outlook Stable by Fitch).