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Brazil continues to outperform

  • 06 Mar 16

The group reported its Q4 15 figures which slightly better than expected. Adjusted net income was in profit at €149m, higher than the expected €120m. EBITDA came down 22.5% to €309m for Q4 15 and up 19% for the full year at €1.56bn. By division: 1) In the E&P division, EBITDA came down 48% yoy to €53m. Production costs (in unit terms) decreased by around $1/bbl to $10.5/bbl. Working production reached 52.1kbpd, up 43% thanks to the FPSO 3 reaching plateau production (after the connection of the fifth producer well) and production continuing to rise for FPSO4. The development of the Lula/Iracema project is the key driver. 94% of production was oil, and production in Brazil accounted for 84%. Solid Track Record in Brazil Source: Galp 2) In the Refining & Marketing division, EBITDA came down 13% yoy to €166m. Raw material processed was up 4.2%, with crude accounting for 89% of the raw material, of which 78% corresponded to medium and heavy crudes. Consumption and losses accounted for 8% of raw materials processed, in line yoy. The refining margin was $4.1/bbl, while the marketing of oil products maintained its contribution to results despite lower volumes. During Q4 15, the Iberian market for oil products reached 15.1mt, or a 0.3% increase. Road diesel consumption experienced the largest increase, benefiting from lower retail prices and some economic recovery in the region. 3) In the Gas & power division, EBITDA came down 13% yoy to €88m, mainly due to lower activity in power because of sub-optimal utilisation of the cogeneration in the Matosinhos refinery. Natural gas sales decreased to 1,692cm mainly due to lower volumes in the trading segment. The spread between the Asian LNG (JKM) and natural gas in Europe (NBP) tightened from $2.9mmbtu during Q4 15 and $1.4/mmbtu in Q4 14. JKM decreased more due to the increased use of nuclear energy in the region and higher LNG supply from the start of production of the new gas liquefaction plant in Australia. In Q4 15, the Iberian natural gas market increased by 4.8%. The electrical segment consumption was up 28% given low hydroelectric generation which led to a greater use of natural gas. Cash flow Cash flow from operations came in at €272m in Q4 15, and capex at €431m, of which 75% for the E&P division. Net debt at the end 2015 was €1.7bn considering the balance of the loan to Sinopec as cash & equivalents. Excluding Sinopec, debt stood at €2.4bn, stable yoy. Indeed, for the full year, cash flow from operations (€1.7bn) covered both the capex (e1.2bn) and the dividend (€0.3bn). Outlook Regarding the outlook, the key driver remains Upstream. Upstream as a driver Source: Galp

Refining 60% of EBITDA, guidance maintained. What about Q4 15?

  • 27 Oct 15

The company published its Q3 15 report with better net results at €180m vs. €153m expected. EBITDA was in line with the consensus at €411m. By division: 1) E&P EBITDA came in at €89m, down from €132m a year ago and down from €120m in Q2 15. Production was up by 44% and reached 45.7kbpd with Brazil up 77% accounting for 86%. The start-up of production of FPSO 3 and 4 increased production costs by €12m to €35m. 2) R&M EBITDA came in at €245m, up 70% yoy and up from €224m in Q3 15. The refining margin came in slightly lower than in Q2 15 but the raw material was also a bit higher. Production of middle distillates accounted for 47% of production. Consumption and losses during the quarter accounted for 7% of the raw material. The international market still supported the margin despite a decrease due to lower arbitrage in gasoline between the US and Europe. 3) Gas&Power EBITDA came down 27% to €72m despite volumes increasing by 14% (in the trading segment) which offset volumes sold to direct clients in the Iberian Peninsula (industrial segment). Few opportunities in the LNG international market and lower natural gas hit the EBITDA which came down from 30% yoy to €37m (half of the division's EBITDA). Capex in Q3 15 was €256m mainly linked to Brazil's E&P. Cash flow from operations before working capital was €255m. The interim dividend paid was €172m. Thanks to positive working capital (+€275m), debt was stable at €2.4bn. Year to date the group has generated enough cash to cover its dividend.

Brazil is stronger than refining

  • 27 Jul 15

Galp reported it Q2 15 results 30% above expectations at the bottom line. The beat is driven by all divisions. Refining has been strong as expected, while E&P production growth (close to 100% yoy) supported the increase in E&P. The company revised its estimates for average 2015 working interest production to c.43 kboepd. Galp expects a new offshore oil production platform on the Iracema North field to start pumping crude in the coming days, a quarter ahead of schedule. All in all, this means group EBITDA is 15% higher than the previous guidance. By division, in Q2 15: E&P EBITDA rose 12.5% yoy to €120m (despite an oil price at $53/bbl. in Q2 15 vs. $108.5/bbl. in Q2 14 for Galp), thanks to lower production costs (-60%, driven by Angola) and higher production (+86% at 41kbpd). Production from Brazil accounted for 82% of the total production vs. 70% a year earlier. R&M EBITDA came at €184m, vs. €41m in Q2 14, with high volumes refined (+14.7% and the refining margin at $7.3/bbl, while refining's cash costs increased to $2.6/bbl. vs. $2.4/bbl. The production of middle distillates accounted for 46% of total production. G&P EBITDA came in 24% lower yoy to €92m, on the back of fewer LNG volumes traded and lower natural gas prices in different markets. Volumes sold in the industrial segment decreased 5% due to client portfolio optimisation in Portugal. Volumes sold in the retail segment fell 16% as a result of increased competition in the Iberian market. Taxes came in higher than last year as they include the special participation tax payable in Brazil and IRP payable in Angola of €35m in Q2 15. Cash flow from operations was €511m (vs. €374m in Q1), capex at €313m and dividend of €145m. Net debt is stable at €2.3bn with an average interest rate of 3.9% and 3.3 years maturity.