Galp Energia

Earnings Release • Oct 28, 2016

October 28, 2016

Results Third quarter 2016

Cautionary Statement

By attending or reading this presentation, you acknowledge and agree to be bound by the following limitations and restrictions. This presentation has been prepared by Galp Energia, SGPS, S.A. ("Galp" or the "Company") and may be amended and supplemented, but may not be relied upon for the purposes of entering into any transaction. This presentation is strictly confidential, is being distributed to a limited range of persons solely for their own information and may not (i) be distributed to the media or disclosed to any other person in any jurisdiction, nor (ii) be reproduced in any form, in whole or in part, without the prior written consent of the Company.

Although the Company has taken reasonable care in preparing the information contained herein, no representation, warranty or undertaking, express or implied, is made as to, and no reliance should be placed on, the fairness, accuracy, completeness or correctness of the information or the opinions contained herein or any other material discussed at the presentation. Neither the Company nor any of its affiliates, subsidiaries, shareholders, representatives, agents, employees or advisors shall have any liability whatsoever (including in negligence or otherwise) for any loss or liability howsoever arising from any use of this presentation or its contents or any other material discussed at the presentation or otherwise arising in connection with this presentation.

This presentation does not constitute or form part of and should not be construed as, an offer to sell or issue or the solicitation of an offer to buy or otherwise acquire securities of the Company or any of its subsidiaries or affiliates in any jurisdiction or an inducement to enter into investment activity in any jurisdiction. Neither this presentation nor any part thereof, nor the fact of its distribution, shall form the basis of, or be relied on in connection with, any contract or commitment or investment decision whatsoever in any jurisdiction.

This presentation is made to and directed only at persons (i) who are outside the United Kingdom, (ii) having professional experience in matters relating to investments falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotions) Order 2005 (the "Order") or (iii) high net worth entities, and other persons to whom it may lawfully be communicated, falling within Article 49(2)(a) to (d) of the Order (all such persons together being referred to as "Relevant Persons"). This presentation must not be acted or relied on by persons who are not Relevant Persons.

Neither this presentation nor any copy of it, nor the information contained herein, in whole or in part, may be taken or transmitted into, or distributed, directly or indirectly in or to the United States. Any failure to comply with this restriction may constitute a violation of U.S. securities laws. No securities of the Company have been registered under the United States Securities Act of 1933 or the securities laws of any state of the United States, and unless so registered may not be offered or sold except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and applicable state securities laws.

Matters discussed in this presentation may constitute forward-looking statements. Forward-looking statements are statements other than in respect of historical facts. The words "believe", "expect", "anticipate", "intends", "estimate", "will", "may", "continue", "should" and similar expressions usually identify forward-looking statements. Forward-looking statements may include statements regarding: objectives, goals, strategies, outlook and growth prospects; future plans, events or performance and potential for future growth; liquidity, capital resources and capital expenditures; economic outlook and industry trends; energy demand and supply; developments of Galp's markets; the impact of regulatory initiatives; and the strength of Galp's competitors. The forward-looking statements in this presentation are based upon various assumptions, many of which are based, in turn, upon further assumptions, including without limitation, management's examination of historical operating trends, data contained in the Company's records and other data available from third parties. Although Galp believes that these assumptions were reasonable when made, these assumptions are inherently subject to significant known and unknown risks, uncertainties, contingencies and other important factors which are difficult or impossible to predict and are beyond its control. No assurance, however, can be given that such expectations will prove to have been correct. Important factors that may lead to significant differences between the actual results and the statements of expectations about future events or results include the Company's business strategy, industry developments, financial market conditions, uncertainty of the results of future projects and operations, plans, objectives, expectations and intentions, among others. Such risks, uncertainties, contingencies and other important factors could cause the actual results of Galp or the industry to differ materially from those results expressed or implied in this presentation by such forward-looking statements.

Actual future results, including financial and operating performance; demand growth and energy mix; Galp's production growth and mix; the amount and mix of capital expenditures; future distributions; resource additions and recoveries; project plans, timing, costs, and capacities; efficiency gains; cost savings; integration benefits; product sales and mix; production rates; and the impact of technology could differ materially due to a number of factors. These include changes in oil or gas prices or other market conditions affecting the oil, gas, and petrochemical industries; reservoir performance; timely completion of development projects; war and other political or security disturbances; changes in law or government regulation, including environmental regulations and political sanctions; the outcome of commercial negotiations; the actions of competitors and customers; unexpected technological developments; general economic conditions, including the occurrence and duration of economic recessions; unforeseen technical difficulties; and other factors.

The information, opinions and forward-looking statements contained in this presentation speak only as at the date of this presentation, and are subject to change without notice. Galp and its respective representatives, agents, employees or advisors do not intend to, and expressly disclaim any duty, undertaking or obligation to, make or disseminate any supplement, amendment, update or revision to any of the information, opinions or forward-looking statements contained in this presentation to reflect any change in events, conditions or circumstances.

2

Third quarter 2016 results

Share performance¹ Total shareholder return¹

Peers²: -31%

SXXP: -3%

SXEP: -27%

vs. vs.

Peers²

+14%

3Q16 highlights

• 3Q16 Ebitda of €384 m, up 14% QoQ on higher upstream production and oil marketing seasonality, although down 6% YoY due to lower Oil & Gas prices and refining margins
• Maintaining a strong upstream development execution, with WI production increase driven by units' ramp-up and start-up of FPSO #6 in Brazil, now expecting 2016 exit production at 82-85 kboepd
• R&M benefitted from high availability of the refining system and strong marketing performance
• G&P solid contribution despite adverse market conditions
• GGND debt issuance and shareholder loan repayment to Galp during 3Q16, with sale of the 22.5% stake of this holding concluded on October 27

4

Third quarter 2016 results

Agenda

Execution Update

Financial Overview

Appendix

3Q16: Higher volumes but lower margins

Brent price vs. Refining margin (\$/bbl) Iberian market evolution (kton, mm³

• Crude prices remained within the \$40-50/bbl range
• Refining margins decreased YoY, with main products under pressure due to ample stocks

)

• Iberian oil market increased 4% YoY, supported by growth in tourism activity
• Lower demand in Spain for electric production negatively impacted the Iberian gas market

Maintaining strong execution pace

WI production growth QoQ

kboepd

• FPSO #4 at plateau since August with full ramp-up achieved in 13 months
• FPSO #5 continues to ramp-up with five producers expected to be online by YE2016
• FPSO #6 started production in July, with three producer wells connected by October
• 2016 exit production expected at c.82-85 kboepd

7

¹Normalisation of production following maintenance activities during 2Q16.

²Considers net additional production from the ramp-up of units #4 and #5 vs. 2Q16 and the contribution of FPSO #6.

Africa: Progressing with development projects

• Coral South: Finalising commercial agreements, with LNG offtake agreement signed with BP
• Mamba: Analysing EPC proposals for the first stage of development onshore

Mozambique: Area 4 Angola: blocks 14/14k and block 32

• Block 14/14k contributing steadily to production
• Block 32: Drilling & Completion campaign and FPSO conversion works ongoing

R&M: Robust contribution from downstream activities

• Benefitting from the high availability of the refining system, despite much lower benchmark margins
• Planned maintenance during 4Q16, namely at Sines Visbreaker and FCC units

Refining Marketing

• Solid marketing performance, benefitting from continued optimisation in Iberia
• Ongoing strategy to minimise exposure to low margin wholesale activities within Iberia

G&P: Challenging NG/LNG macro environment

Supply & Trading

• LNG trading impacted by fewer arbitrage opportunities, although supported by structured contracts
• Sales to direct clients benefitted from higher gas fired electricity generation in Portugal

NG Infrastructure Power

• Regulated infrastructure business impacted by RoR revision from 7.9% to 6.2%

• GGND ceases to be consolidated following transaction closing for €141 m, with total proceeds to Galp of €709 m¹

• Power benefitting from increased electricity sales to the grid

• Improving sales in the Portuguese market through gas and power integrated offering

Agenda

Execution Update

Financial Overview

Appendix

Q3 Ebitda of €384 m, up 14% QoQ and down 6% YoY

Profit & Loss RCA (€m)

	2Q16	3Q15	3Q16	QoQ	YoY	9M16	YoY
Turnover	3,267	3,904	3,499	+7%	(10%)	9,595	(21%)
Ebitda	337	407	384	+14%	(6%)	1,015	(17%)
E&P	86	89	127	+47%	+43%	262	(13%)
R&M	143	241	180	+26%	(25%)	471	(23%)
G&P	97	72	73	(25%)	+0%	260	(11%)
Others	10	5	4	(57%)	(14%)	22	+2%
Ebit	185	259	211	+14%	(19%)	534	(33%)
Associates	24	17	16	(35%)	(8%)	61	+2%
Financial results	15	(8)	(16)	n.m.	n.m.	3	n.m.
Taxes1	(79)	(68)	(83)	+5%	+21%	(201)	(18%)
Non-controlling interests	(12)	(20)	(13)	+8%	(34%)	(34)	(25%)
Net Income	133	180	115	(14%)	(36%)	361	(26%)
Net Income (IFRS)	66	46	91	+39%	+97%	99	(15%)

• Higher E&P Ebitda driven by strong production growth YoY and QoQ
• Downstream impacted by lower benchmark refining margins YoY and QoQ, although supported by a strong marketing performance
• Increase in taxes given higher contribution from E&P results
• RCA net income down 36% YoY, with IFRS net income of €91 m, impacted by non-recurring items of -€37 m and inventory effect of €14 m

¹Includes the Special Participation tax payable in Brazil and IRP payable in Angola. Notes:

Effective on 1 January 2016, exchange rate differences from operating activities are allocated to operating results. Until the end of 2015, these exchange rate differences were accounted for under financial results.

Third quarter 2016 results

The accounting method for Extraordinary Energy Sector Contribution in Iberia has changed and the annual cost is now accounted for in Q1. Both of these changes were applied to 2015 in order to make periods comparable. Please see additional detail on section 9. of the quarterly report.

Group capex of €244 m mostly related to upstream

Capital Expenditure (€m)

• 85% of overall investment allocated to E&P, of which 93% to development activities, mainly in block BM-S-11 (Brazil) and block 32 (Angola)
• Downstream and gas capex of c.€35 m, in line YoY, including maintenance activities, IT systems and retail and gas network upgrade

Third quarter 2016 results

Notes: E&A: Exploration & Appraisal. D&P: Development & Production. D&G: Downstream & Gas.

Strengthening financial position

Balance Sheet (€m)¹

	Dec.2015	Jun.2016 (prior to GGND reclassification)2	Sep.2016 (prior to GGND reclassification)2	Sep.2016	Δ Sep-Dec	Δ Sep-Jun
Net fixed assets	7,892	8,439	8,486	7,357	(535)	(1 082) ,
Work in progress	2 077 ,	2 347 ,	2 455 ,	2 455 ,	378	108
Working capital	510	377	541	529	19	153
Loan to Sinopec	723	576	575	575	(148)	(2)
Other assets (liabilities)	(515)	(624)	(654)	(383)	133	241
Non-current assets/liabilities held for sale				270	270	270
Capital employed	8,610	8,768	8,947	8,348	(262)	(420)
Net debt3	2,422	2,483	2,805	2,205	(216)	(278)
Equity	6,188	6,285	6,143	6,143	(45)	(142)
Net Debt + Equity	8,610	8,768	8,947	8,348	(262)	(420)

• Net fixed assets of €8.5 bn, or €7.4 bn considering infrastructure assets accounted as held for sale
• Net debt of €1.6 bn considering loan to Sinopec as cash and equivalents, with implicit net debt to Ebitda of 1.4x⁴

¹IFRS figures.

² Figures do not consider non-current assets/liabilities held for sale, in order to make periods comparable.

³Not considering loan to Sinopec as cash. Net Debt at 30 September 2016 excludes net debt of GGND (€599 m), which is considered under assets/liabilities held for sale.

⁴Ratio considers net debt including loan to Sinopec (€575 m) as cash, plus Sinopec MLT Shareholder Loan to Petrogal Brasil (€169 m) and LTM Ebitda RCA of €1,297 m.

GGND deal enhancing financial flexibility

Net debt evolution¹ (€bn)

³ Considers the deconsolidation of GGND's net debt as of 30 Set. 2016 plus the €141 m equity price to be paid to Galp for the 22.5% stake sale.

Agenda

Execution Update

Financial Overview

Appendix

E&P: Working interest production up 62% YoY

Main E&P data

		2Q16	3Q15	3Q16	QoQ	YoY	9M16	YoY
Working interest production1	kboepd	54.7	45.7	74.0	+35%	+62%	61.7	+41%
Oil production	kbpd	51.7	42.2	68.8	+33%	+63%	57.8	+43%
Net entitlement production1	kboepd	52.2	43.9	71.5	+37%	+63%	59.2	+44%
Angola	kbpd	7.1	6.1	7.3	+2%	+19%	7.5	+5%
Brazil	kboepd	45.0	37.8	64.2	+43%	+70%	51.7	+52%
Realised sale price2	USD/boe	38.3	43.8	36.4	(5%)	(17%)	33.9	(31%)
Production cost	USD/boe	9.8	9.5	7.6	(23%)	(21%)	8.6	(10%)
DD&A3	USD/boe	14.8	15.5	13.8	(7%)	(11%)	14.7	(13%)
Ebitda RCA	€ m	86	89	127	+47%	+43%	262	(13%)
Ebit RCA	€ m	24	33	46	+90%	+39%	48	(64%)
Net Income from E&P Associates	€ m	8	2	2	(69%)	+8%	13	+19%
CAPEX	€ m	245	223	208	(15%)	(7%)	770	(2%)

• Brazilian production increased YoY, supported by the ramp-up of FPSO #4, FPSO #5 and start of new unit
• FPSO #6 contributed with an average 2.7 kbpd in the quarter
• Production cost down YoY on unit basis, driven by higher production dilution, but also by a one-off adjustment in Brazil
• Ebitda increased 43% YoY as production growth more than offset decline in sale price

Note: Unit figures based on net entitlement production.

¹Includes natural gas exported, excludes natural gas used or reinjected.

²Galp average oil and gas realised sale price, including change in production effects.

³Includes abandonment provisions.

R&M: Ebitda impacted by lower refining margins

Main R&M data

		2Q16	3Q15	3Q16	QoQ	YoY	9M16	YoY
Galp refining margin	USD/boe	4.6	6.7	3.4	(26%)	(50%)	4.0	(40%)
Refining cash cost1	USD/boe	1.7	1.6	1.5	(13%)	(4%)	1.7	+10%
Impact of refining margin hedging2	USD/boe	(0.0)	(1.3)	0.2	n.m.	n.m.	0.1	n.m.
Raw materials processed	mmboe	26.3	29.8	29.4	+12%	(1%)	80.9	(6%)
Total refined product sales	mton	4.6	4.8	4.7	+4%	(2%)	13.4	(4%)
Sales to direct clients	mton	2.3	2.4	2.3	0%	(5%)	6.7	(4%)
Ebitda RCA	€ m	143	241	180	+26%	(25%)	471	(23%)
Ebit RCA	€ m	71	168	107	+51%	(36%)	256	(36%)
Net Income from R&M Associates	€ m	(0)	(2)	(2)	n.m.	(39%)	(2)	+25%
CAPEX	€ m	35	24	26	(27%)	+6%	84	+68%

• Spread to benchmark of \$1.1/boe, continuing to leverage arbitrage opportunities between Europe and the USA
• Robust marketing contribution, despite client portfolio optimisation impact on direct sales volumes
• Refining margin hedging contracts contributing with €5 m to Ebitda

G&P: Ebitda flat YoY supported by structured trading

Main G&P data

		2Q16	3Q15	3Q16	QoQ	YoY	9M16	YoY
NG/LNG total sales volumes	mm3	1,593	1,909	1,750	+10%	(8%)	5,203	(13%)
Sales to direct clients	mm3	881	933	950	+8%	+2%	2,732	(4%)
Trading	mm3	712	976	800	+12%	(18%)	2,471	(21%)
Ebitda RCA	€ m	97	72	73	(25%)	+0%	260	(11%)
Ebit RCA	€ m	81	54	55	(32%)	+1%	211	(12%)
Net Income from G&P Associates	€ m	17	16	16	(7%)	(5%)	50	(1%)
CAPEX	€ m	7	8	10	+48%	+20%	19	+14%

• NG/LNG volumes down 8% YoY given fewer trading opportunities
• Sales to direct clients up 2% YoY due to higher volumes sold to the electrical segment
• Lower contribution from regulated infrastructure due to the RoR, offset by normalisation of Power Ebitda

Investor Relations team

Pedro Dias, Head Otelo Ruivo, IRO Cátia Lopes João G. Pereira João P. Pereira Teresa Rodrigues

+351 21 724 08 66

investor.relations@galpenergia.com

Results & presentation weblink :

www.galpenergia.com/en/investidor/Relatorios-eresultados/resultados-trimestrais

For further information on Galp, please go to: www.galp.com