Earnings Release • Oct 30, 2017
Earnings Release
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October 30, 2017 Investor Relations
| 1. | 3Q17 HIGHLIGHTS 3 | ||
|---|---|---|---|
| 2. | KEY FIGURES 4 | ||
| 3. | MARKET ENVIRONMENT 5 | ||
| 4. | EXPLORATION & PRODUCTION 6 | ||
| 5. | REFINING & MARKETING 8 | ||
| 6. | GAS & POWER 10 | ||
| 7. | FINANCIAL DATA 12 | ||
| 7.1. | Income statement 12 | ||
| 7.2. | Capital expenditure 14 | ||
| 7.3. | Cash flow 15 | ||
| 7.4. | Financial position and debt 17 | ||
| 7.5. | RCA turnover by segment 18 | ||
| 7.6. | Reconciliation of IFRS and replacement cost adjusted figures 19 | ||
| 7.7. | IFRS consolidated income statement 21 | ||
| 7.8. | Consolidated financial position 22 | ||
| 8. | SUBSEQUENT EVENTS 23 | ||
| 9. | BASIS OF PRESENTATION 24 | ||
| 10. | DEFINITIONS 25 |
| Quarter | Nine Months | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| 3Q16 | 2Q17 | 3Q17 | Var. YoY | % Var. YoY |
2016 | 2017 | Var. YoY | % Var. YoY |
||
| 384 | 473 | 487 | 103 | 27% | Ebitda RCA | 1,015 | 1,379 | 364 | 36% | |
| 127 | 188 | 215 | 88 | 69% | Exploration & Production | 262 | 606 | 345 | n.m. | |
| 180 | 233 | 218 | 38 | 21% | Refining & Marketing | 471 | 639 | 167 | 36% | |
| 73 | 46 | 45 | (27) | (37%) | Gas & Power | 260 | 113 | (146) | (56%) | |
| 211 | 253 | 302 | 91 | 43% | Ebit RCA | 534 | 775 | 242 | 45% | |
| 194 | 199 | 314 | 120 | 62% | Ebit IFRS | 322 799 |
477 | n.m. | ||
| 115 | 151 | 166 | 51 | 45% | Net income RCA | 361 | 416 | 55 | 15% | |
| (37) | (17) | (14) | (23) | (63%) | Non-recurring items | (215) | (48) | (167) | (77%) | |
| 14 | (35) | 11 | (2) | (17%) | Inventory effect | (47) | 30 | 77 | n.m. | |
| 91 | 99 | 163 | 72 | 80% | Net income IFRS | 99 | 397 | 298 | n.m. | |
| 244 | 184 | 227 | (17) | (7%) | Capex | 874 | 638 | (236) | (27%) | |
| (293) | 130 | (37) | 255 | 87% | Post-dividend free cash flow | (546) | 35 | 581 | n.m. | |
| 1,631 | 1,329 | 1,455 | (176) | (11%) | Net debt including loan to Sinopec1 | 1,631 | 1,455 | (176) | (11%) | |
| 1.4x | 0.9x | 0.9x | - | - | Net debt to Ebitda RCA2 | 1.4x | 0.9x | - | - |
1Considering loan to Sinopec as cash. 2As at 30 September 2017, ratio considers net debt including €512 m loan to Sinopec as cash, plus €159 m of Sinopec MLT shareholder loan to Petrogal Brasil and LTM Ebitda RCA of €1,776 m.
| Quarter | Nine Months | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| 3Q16 | 2Q17 | 3Q17 | Var. YoY | % Var. YoY |
2016 | 2017 | Var. YoY | % Var. YoY |
|
| 74.0 | 89.9 | 94.6 | 20.5 | 28% | Average working interest production (kboepd) |
61.7 | 90.8 | 29.1 | 47% |
| 71.5 | 88.1 | 92.4 | 20.9 | 29% | Average net entitlement production (kboepd) | 59.2 | 88.9 | 29.7 | 50% |
| 36.4 | 43.4 | 45.3 | 8.8 | 24% | Oil and gas average sale price (USD/boe) | 3 3.9 |
44.4 | 10.6 | 31% |
| 29.4 | 30.0 | 29.7 | 0.3 | 1% | Raw materials processed (mmboe) | 80.9 | 85.8 | 4.9 | 6% |
| 3.4 | 5.7 | 7.4 | 4.0 | n.m. | Galp refining margin (USD/boe) | 4.0 | 6.1 | 2.1 | 54% |
| 2.3 | 2.3 | 2.4 | 0.1 | 5% | Oil sales to direct clients (mton) | 6.7 | 6.7 | 0.1 | 1% |
| 950 | 1,052 | 1,065 | 115 | 12% | NG sales to direct clients (mm3 ) |
2,732 | 3,265 | 533 | 20% |
| 800 | 675 | 652 | (147) | (18%) | NG/LNG trading sales (mm3 ) |
2,471 | 2,184 | (287) | (12%) |
| Quarter | Nine Months | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| 3Q16 | 2Q17 | 3Q17 | Var. YoY | % Var. YoY |
2016 | 2017 | Var. YoY | % Var. YoY |
|
| 1.12 | 1.10 | 1.17 | 0.06 | 5% | Average exchange rate (EUR:USD) | 1.12 | 1.11 | (0.00) | (0%) |
| 3.62 | 3.55 | 3.71 | 0.09 | 2% | Average exchange rate (EUR:BRL) | 3.96 | 3.54 | (0.42) | (11%) |
| 45.9 | 49.6 | 52.1 | 6.2 | 14% | Dated Brent price1 (USD/bbl) |
41.9 | 51.8 10.0 |
24% | |
| (2.1) | (1.2) | (1.3) | (0.8) | (37%) | Heavy-light crude price spread1 (USD/bbl) |
(2.2) | (1.4) | (0.8) | (35%) |
| 4.4 | 4.8 | 5.4 | 1.0 | 23% | U.K. NBP gas price1 (USD/mmbtu) |
4.3 | 5.4 | 1.1 | 24% |
| 2.8 | 3.1 | 3.0 | 0.2 | 6% | U.S. Henry Hub gas price2 (USD/mmbtu) |
2.3 | 3.1 | 0.7 | 30% |
| 5.6 | 5.5 | 6.3 | 0.7 | 12% | LNG Japan and Korea price1 (USD/mmbtu) |
5.1 | 6.3 | 1.2 | 23% |
| 2.3 | 4.3 | 5.5 | 3.3 | n.m. | Benchmark refining margin3 (USD/bbl) |
2.8 | 4.5 | 1.6 | 58% |
| 16.0 | 15.7 | 16.4 | 0.3 | 2.1% | Iberian oil market4 (mton) | 46.5 | 47.3 | 0.8 | 1.6% |
| 7,135 7,634 8,387 1,252 17.5% |
Iberian natural gas market5 (mm3 ) |
22,809 | 25,754 | 2,946 | 12.9% |
1Source: Platts. Urals NWE dated for heavy crude; dated Brent for light crude. 2 Source: Nymex.
3For a complete description of the method of calculating the benchmark refining margin see "Definitions".
4Source: APETRO for Portugal; CORES for Spain. 5 Source: Galp and Enagás.
During the third quarter of 2017, the average price of dated Brent increased \$6.2/bbl YoY to \$52.1/bbl. This resulted from declining global inventories, driven mainly by a positive performance by the world economy and the compliance with the OPEC production limitation agreement.
During the first nine months of 2017, dated Brent averaged \$51.8/bbl, up \$10.0/bbl YoY.
During the third quarter of 2017, the average price spread between Urals and dated Brent narrowed from -\$2.1/bbl in the previous year, to -\$1.3/bbl. The relative valuation of the Urals crude was due to the lower availability of this Russian crude, and similar quality crudes produced by members of OPEC, due to the agreed production limits.
During the first nine months of 2017, the price spread narrowed, from -\$2.2/bbl YoY to -\$1.4/bbl.
The natural gas price in Europe (NBP) increased YoY from \$4.4/mmbtu to \$5.4/mmbtu during the third quarter of 2017, as a result of reduced inventories, as well as the definitive closure of the largest natural gas storage facility in the United Kingdom.
During the first nine months of 2017, NBP averaged \$5.4/mmbtu, an increase of \$1.1/mmbtu YoY.
The natural gas reference price in the USA (Henry Hub) remained stable YoY at \$3.0/mmbtu, with increased production in the USA compensated by the development of new liquefied natural gas (LNG) export projects.
During the first nine months of 2017, Henry Hub increased \$0.7/mmbtu YoY to \$3.1/mmbtu.
Benchmark refining margin went up YoY from \$2.3/bbl to \$5.5/bbl, as a result of stronger distillate margins, namely diesel and gasoline.
During the third quarter of 2017, the diesel crack stood at \$14.3/bbl, up \$4.2/bbl YoY, supported by demand and impacted by the stoppage of a large refinery in Europe.
The gasoline crack was \$13.7/bbl, up \$4.6/bbl YoY, supported by demand and by outages in several refineries in the Gulf of Mexico, due to hurricane Harvey.
During the first nine months of 2017, the benchmark refining margin was \$4.5/bbl, up \$1.6/bbl YoY, due to higher diesel and gasoline crack spreads, which increased \$2.6/bbl and \$1.6/bbl, respectively.
During the third quarter of 2017, the Iberian market for oil products totalled 16.4 million tonnes (mton), compared to 16.0 mton the previous year, impacted by higher demand for jet.
During the first nine months, the Iberian oil market rose from 46.5 mton YoY to 47.3 mton.
During the third quarter, the Iberian natural gas market increased 17.5% YoY to 8,387 mm³, supported by the 53.7% increase in the electrical segment consumption, due to lower hydroelectric power generation.
During the first nine months, the Iberian natural gas market increased 12.9% YoY to 25,754 mm³.
€m (RCA, except otherwise stated; unit figures based on net entitlement production)
| Quarter | Nine Months | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| 3Q16 | 2Q17 | 3Q17 | Var. YoY | % Var. YoY |
2016 | 2017 | Var. YoY | % Var. YoY |
|
| 74.0 | 89.9 | 94.6 | 20.5 | 28% | Average working interest production1 (kboepd) |
61.7 | 90.8 | 29.1 | 47% |
| 68.8 | 78.0 | 82.8 | 14.0 | 20% | Oil production (kbpd) | 57.8 | 79.2 | 21.4 | 37% |
| 71.5 | 88.1 | 92.4 | 20.9 | 29% | Average net entitlement production1 (kboepd) |
59.2 | 88.9 | 29.7 | 50% |
| 7.3 | 6.2 | 5.6 | (1.7) | (23%) | Angola | 7.5 | 6.2 | (1.2) | (16%) |
| 64.2 | 81.8 | 86.8 | 22.6 | 35% | Brazil | 51.7 | 82.7 | 31.0 | 60% |
| 36.4 | 43.4 | 45.3 | 8.8 | 24% | Oil and gas average sale price 33.9 (USD/boe) |
44.4 | 10.6 | 31% | |
| 3.7 | 4.3 | 4.5 | 0.7 | 20% | Royalties2 (USD/boe) |
3.5 | 4.4 | 1.0 | 27% |
| 7.6 | 9.2 | 7.5 | (0.1) | (1%) | Production costs (USD/boe) | 8.6 | 8.2 | (0.4) | (5%) |
| 13.8 | 14.2 | 12.4 | (1.4) | (10%) | Depreciation & Amortisation3 (USD/boe) |
14.7 | 13.3 | (1.4) | (10%) |
| 127 | 188 | 215 | 88 | 69% | Ebitda RCA | 262 | 606 | 345 | n.m. |
| 82 | 103 | 90 | 8 | 10% | Depreciation, Amortisation and Impairments3 | 215 | 290 | 76 | 35% |
| - | 22 | 0 | 0 | n.m. | Exploration expenditures written-off4 | - | 22 | 22 | n.m. |
| (0) | - | - | 0 | n.m. | Provisions | (0) | - | 0 | n.m. |
| 46 | 63 | 125 | 80 | n.m. | Ebit RCA | 48 | 295 | 247 | n.m. |
| 18 | 59 | 125 | 107 | n.m. | Ebit IFRS | (75) | 293 | 368 | n.m. |
| 8 2 | 13 | 10 | n.m. | Net Income from E&P Associates | 13 | 29 | 16 | n.m. |
1 Includes natural gas exported; excludes natural gas used or reinjected.
2 Based on production in Brazil.
3 Includes abandonment provisions and excludes exploration expenditures written-off.
4Effective from 1 January 2017, exploration expenses written-off are considered as recurring items.
During the third quarter of 2017, the average working interest production of oil and natural gas was 94.6 kboepd, of which 88% was oil production.
Production increased 28% YoY due to the continuous development of the Lula and Iracema projects.
During the quarter, there were maintenance works in some units in Brazil, particularly planned outages in FPSO #4 and #5, in the Iracema North and Lula Alto areas, respectively, as well as the end of maintenance works in FPSO #1 in the Lula Pilot area.
Currently, a fleet of seven FPSOs is operating in Lula and Iracema, with six units producing close to full capacity and the seventh unit, which started operations in May, ramping-up.
Regarding the next unit to be allocated to Lula (FPSO #8), in the Lula North area, the topsides' integration works proceed in COOEC's shipyard, in China. Regarding the unit to develop the Lula Extreme South area (FPSO #9), integration works are ongoing in the Brasfels shipyard, in Brazil.
In Angola, WI production was 7.8 kbpd, down 21% YoY, due to the natural decline of the fields in block 14. In turn, net entitlement production decreased 23%, impacted by the cost recovery mechanism under the production sharing agreement.
In block 32, the two FPSO units to be allocated to the Kaombo area are being converted in Singapore, with the remaining development works ongoing.
The Group's total net entitlement production
increased 29% YoY to 92.4 kboepd, following the growth of production coming from Brazil.
During the first nine months of 2017, working interest production was 90.8 kboepd, a 47%
Ebitda RCA amounted to €215 m, up €88 m YoY, mainly on the back of increased production and higher sale prices of oil and natural gas, and despite the Dollar depreciation against the Euro. The Group's average sale price was \$45.3/boe in the period, up \$8.8/boe from the previous year.
Production costs increased €10 m YoY to €54 m, mainly due to the start of production of FPSO #7 in May 2017. In unit terms and on a net entitlement basis, production costs remained stable at \$7.5/boe.
Amortisation and depreciation charges (including abandonment provisions) increased €8 m YoY to €90 m, with the depreciation of the Brazilian Real partially offsetting the increased producing asset base in Brazil. On a net entitlement basis, depreciation charges decreased from \$13.8/boe to \$12.4/boe, supported by higher production dilution.
RCA Ebit was €125 m during the third quarter, up €80 m YoY. IFRS Ebit was also €125 m in the period.
Results of associated companies related to the E&P business were €13 m.
increase YoY, on the back of the ramp-up of Brazilian FPSOs #5 and #6, and the start of production of FPSO #7.
Net entitlement production increased 50% YoY to 88.9 kboepd.
During the first nine months of 2017, Ebitda on a RCA basis amounted to €606 m, up €345 m YoY, benefiting from increased production and average sale price, which reached \$44.4/boe compared to \$33.9/boe the year before.
Production costs increased €54 m YoY to €179 m, due to the higher number of operating units in Brazil. In unit terms and on a net entitlement basis, production costs were \$8.2/boe.
Amortisation, depreciation charges and abandonment provisions amounted to €290 m, up €76 m YoY, reflecting production growth. On a net entitlement basis, unit depreciation charges were \$13.3/boe in the period, compared to \$14.7/boe the previous year.
The first nine months of 2017 were also impacted by the impairment during the second quarter of the year, related to an exploration write-off in Portugal, which amounted to €22 m.
RCA Ebit was €295 m, while IFRS Ebit totalled €293 m.
The contribution of associated companies related to the E&P activities was €29 m during the first nine months of 2017, following the contribution of the activities related with the Brazilian projects.
5. Refining & Marketing
€m (RCA, except otherwise stated)
| Quarter | Nine Months | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| 3Q16 | 2Q17 | 3Q17 | Var. YoY | % Var. YoY |
2016 | 2017 | Var. YoY | % Var. YoY |
|
| 3.4 | 5.7 | 7.4 | 4.0 | n.m. | Galp refining margin (USD/boe) | 4.0 | 6.1 | 2.1 | 54% |
| 1.5 | 1.6 | 1.6 | 0.1 | 8% | Refining cash cost1 (USD/boe) |
1.7 | 1.6 | (0.1) | (5%) |
| 0.2 | (0.2) | (0.7) | (0.9) | n.m. | Impact of refining margin hedging2 (USD/boe) |
0.1 (0.3) |
(0.4) | n.m. | |
| 29.4 | 30.0 | 29.7 | 0.3 | 1% | Raw materials processed (mmboe) | 80.9 | 85.8 | 4.9 | 6% |
| 26.4 | 26.7 | 27.5 | 1.0 | 4% | Crude processed (mmbbl) | 73.6 | 77.1 | 3.5 | 5% |
| 4.6 | 4.7 | 4.9 | 0.2 | 5% | Total refined product sales (mton) | 13.2 | 14.0 | 0.8 | 6% |
| 2.3 | 2.3 | 2.4 | 0.1 | 5% | Sales to direct clients (mton) | 6.7 | 6.7 | 0.1 | 1% |
| 180 | 233 | 218 | 38 | 21% | Ebitda RCA | 471 | 639 | 167 | 36% |
| 70 | 89 | 82 | 12 | 17% | Depreciation, Amortisation and Impairments | 200 | 262 | 62 | 31% |
| 3 | (1) | 2 | (1) | (26%) | Provisions | 16 | 4 | (11) | (73%) |
| 107 | 145 | 134 | 27 | 25% | Ebit RCA 256 373 |
117 | 46% | ||
| 116 | 96 | 148 | 32 | 28% | Ebit IFRS | 171 394 222 |
n.m. | ||
| (2) | 8 | 2 | 5 | n.m. | Net Income from R&M Associates | (2) | 8 | 10 | n.m. |
1Excluding impact of refining margin hedging operations.
2Impact on Ebitda.
During the third quarter of 2017, 29.7 million barrels of raw materials (mmboe) were processed, in line with the same period of 2016, benefiting from the high availability of the refining system. Crude oil accounted for 93% of raw materials processed, of which 83% corresponded to medium and heavy crudes.
Middle distillates (diesel and jet) accounted for 47% of production, whereas gasoline corresponded to 22%. Consumption and losses accounted for 7% of raw materials processed.
Volumes sold to direct clients stood at 2.4 mton, 5% higher than in the previous year, benefiting from the economic recovery in Iberia. Volumes sold in Africa increased 10% YoY and accounted for 9% of total volumes sold to direct clients.
Raw materials processed during the first nine months increased 6% YoY to 85.8 mmboe, as a result of planned outages at the Sines and Matosinhos units in 2016. Crude oil accounted for 90% of raw materials processed, of which 83% corresponded to medium and heavy crudes.
Middle distillates accounted for 47% of production, whereas gasoline corresponded to 22%. Consumption and losses accounted for 8% of raw materials processed.
Volumes sold to direct clients reached 6.7 mton, up 1% YoY, despite the lower exposure to low margin activities within Iberia. Volumes sold in Africa increased 15% and accounted for 9% of total volumes sold to direct clients.
Ebitda RCA for the R&M business increased €38 m to €218 m, due to higher refining margins.
Galp's refining margin stood at \$7.4/boe, compared to \$3.4/boe during the previous year. The spread to benchmark margin was \$1.8/boe, as the Company benefited from gasoline exports to the United States, and high utilisation of the conversion units.
Refining cash costs stood at €41 m, or \$1.6/boe.
During the period, refining margin hedging operations had a negative impact on Ebitda of €17 m.
The oil products marketing business benefited from the economic environment in Iberia, mainly in the retail segment. On the other hand, the results were impacted by the increase in commodities prices during the period and the time lag in the pricing formulas applied to clients.
Depreciation charges and provisions totalled €85 m.
RCA Ebit went up to €134 m, while IFRS Ebit totalled €148 m. The inventory effect was €15 m.
Nine months
Ebitda RCA for the R&M business increased €167 m to €639 m, supported by the market environment and by the refineries' operational availability.
Galp's refining margin stood at \$6.1/boe, compared to \$4.0/boe during the previous year. The spread to benchmark margin was \$1.7/boe.
Refining cash costs stood at €127 m, in line YoY. In unit terms, cash costs were \$1.6/boe.
The oil products marketing business benefited from the economic upturn in Iberia, with an emphasis on the increased demand in the retail segment and in some wholesale sub-segments such as aviation.
Depreciation charges and provisions totalled €266 m, up €51 m YoY, based on a revision of the useful life of certain refining assets at the end of 2016.
RCA Ebit was €373 m, while IFRS Ebit increased to €394 m. The inventory effect was €28 m.
€m (RCA except otherwise stated)
| Quarter | Nine Months | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| 3Q16 | 2Q17 | 3Q17 | Var. YoY | % Var. YoY |
2016 | 2017 | Var. YoY | % Var. YoY |
|
| 1,750 | 1,726 | 1,717 | (33) | (2%) | NG/LNG total sales volumes (mm3 ) |
5,203 | 5,450 | 246 | 5% |
| 950 | 1,052 | 1,065 | 115 | 12% | Sales to direct clients (mm3 ) |
2,732 | 3,265 | 533 | 20% |
| 800 | 675 | 652 | (147) | (18%) | Trading (mm3 ) |
2,471 | 2,184 | (287) | (12%) |
| 1,297 | 1,170 | 1,292 | (5) | (0%) | Sales of electricity (GWh) | 3,718 | 3,812 | 94 | 3% |
| 409 | 348 | 348 | (61) | (15%) | Sales of electricity to the grid (GWh) | 1,145 | 1,192 | 47 | 4% |
| 73 | 46 | 45 | (27) | (37%) | Ebitda RCA | 260 | 113 | (146) | (56%) |
| 39 | 39 | 36 | (3) | (7%) | Natural Gas | 159 | 87 | (72) | (45%) |
| 26 | - | - | (26) | n.m. | Infrastructure1 | 91 | - | (91) | n.m. |
| 7 8 | 10 | 2 | 19% | Power | 9 | 26 | 17 | n.m. | |
| 15 | 5 | 5 | (10) | (69%) | Depreciation, Amortisation and Impairments | 44 | 14 | (31) | (69%) |
| 2 3 | 5 | 3 | 93% | Provisions | 4 | 10 | 5 | n.m. | |
| 55 | 40 | 36 | (19) | (35%) | Ebit RCA 211 90 |
(121) | (57%) | ||
| 57 | 39 | 34 | (24) | (41%) | Ebit IFRS | 208 | 95 | (113) | (54%) |
| 16 | 25 | 25 | 10 | 63% | Net Income from G&P Associates1 | 50 | 75 | 26 | 52% |
1The regulated gas infrastructure business ceased to be fully consolidated as of the end of October 2016.
Volumes sold in the natural gas segment were 1,717 mm³ during the third quarter of 2017, down 2% YoY.
Trading volumes decreased 18% YoY to 652 mm3 , following lower volumes sold under structured LNG contracts.
This decrease was partially offset by a 12% increase in volumes sold to direct clients, mainly due to the performance in the industrial segment in Iberia.
Sales of electricity were 1,292 GWh, in line with the previous year.
Sales of natural gas were 5,450 mm³, up 246 mm³ compared to the previous year, as a result of higher volumes sold to direct clients.
Volumes sold in the conventional segment (including industrial and retail) went up 14%, due to the industrial segment. Volumes sold in the electrical segment increased 266 mm3 to 1,069 mm3 .
Volumes sold in the trading segment decreased 12% to 2,184 mm³.
Sales of electricity were 3,812 GWh, a 94 GWh increase YoY, which had been impacted by an outage of the Matosinhos cogeneration last year.
Ebitda RCA for the G&P business was down €27 m YoY to €45 m, mostly as a result of the full deconsolidation of the gas regulated infrastructure business, which had accounted for €26 m during the third quarter of 2016. Excluding this impact, G&P Ebitda RCA would have been stable.
Ebitda for the natural gas segment was €36 m, down €3 m YoY, following the lower contribution from the LNG trading activities.
Ebitda for the power business rose €2 m YoY to €10 m.
RCA Ebit was €36 m, while IFRS Ebit was €34 m.
Results from associated companies reached €25 m, up €10 m YoY, reflecting the inclusion of results from the 77.5% stake in Galp Gás Natural Distribuição (GGND) in this caption.
RCA Ebitda was €113 m during the period, down €146 YoY, affected by lower results from the natural gas activity and also by the deconsolidation of GGND.
Ebitda for the natural gas segment decreased €72 m YoY to €87 m, due to the lower results in the LNG trading activities, and considering the negative sourcing impact during the first quarter of 2017.
Ebitda for the power business was €26 m, compared to €9 m during the same period of 2016, which had been impacted by the outage of the Matosinhos cogeneration and by the unfavourable lag of the natural gas purchase price and the sale price of energy produced.
RCA Ebit decreased €121 m YoY to €90 m. IFRS Ebit was €95 m, compared to €208 m the previous year.
Results from associated companies related to the G&P business reached €75 m, up €26 m YoY.
€m (RCA, except otherwise stated)
| Quarter | Nine Months | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| 3Q16 | 2Q17 | 3Q17 | Var. YoY | % Var. YoY |
2016 | 2017 | Var. YoY | % Var. YoY |
|
| 3,499 | 3,779 | 3,892 | 393 | 11% | Turnover | 9,572 | 11,515 | 1,943 | 20% |
| (2,715) | (2,865) | (2,966) | 251 | 9% | Cost of goods sold | (7,424) | (8,806) | 1,382 | 19% |
| (325) | (383) | (367) | 42 | 13% | Supply & Services | (926) | (1,126) | 200 | 22% |
| (83) | (70) (83) 0 1% |
Personnel costs | (231) | (233) | 2 | 1% | |||
| 13 8 | 11 | 3 | 41% | Other operating revenues (expenses) | 24 | 29 | 5 | 22% | |
| 384 | 473 | 487 | 103 | 27% | Ebitda RCA | 1,015 | 1,379 | 364 | 36% |
| 392 | 422 | 500 | 107 | 27% | Ebitda IFRS | 922 | 1,407 | 485 | 53% |
| (168) | (219) | (178) | 10 | 6% | Depreciation, Amortisation and Impairments | (462) | (590) | 128 | 28% |
| (6) | (1) | (8) | 2 | 29% | Provisions | (19) | (14) | (6) | (29%) |
| 211 | 253 | 302 | 91 | 43% | Ebit RCA | 534 | 775 | 242 | 45% |
| 194 | 199 | 314 | 120 | 62% | Ebit IFRS | 322 | 799 | 477 | n.m. |
| 16 | 41 | 40 | 25 | n.m. | Net income from associated companies | 61 | 113 | 52 | 85% |
| (16) | (10) | (15) | (0) | (3%) | Financial results | 3 | (37) | (40) | n.m. |
| (23) | (19) | (19) | (5) | (20%) | Net interests | (79) | (59) | (20) | (25%) |
| 26 | 27 | 21 | (5) | (19%) | Capitalised interest | 72 | 72 | 0 | 1% |
| (1) | (10) | 5 | 5 | n.m. | Exchange gain (loss) | (7) | (9) | (1) | (17%) |
| (13) | (4) | (18) | (5) | (35%) | Mark-to-market of hedging derivatives | 31 | (25) | (56) | n.m. |
| (5) | (4) | (5) | (0) | (2%) | Other financial costs/income | (14) | (17) | (3) | (19%) |
| 211 | 283 | 327 | 116 | 55% | Net income RCA before taxes and non controlling interests |
597 | 851 | 254 | 43% |
| (83) | (120) | (135) | 53 | 63% | Taxes¹ | (201) | (378) | 177 | 88% |
| (13) | (12) | (25) | 12 | 92% | Non-controlling interests | (34) | (56) | 22 | 64% |
| 115 | 151 | 166 | 51 | 45% | Net income RCA | 361 | 416 | 55 | 15% |
| (37) | (17) | (14) | (23) | (63%) | Non-recurring items | (215) | (48) | (167) | (77%) |
| 77 | 135 | 152 | 75 | 97% | Net income RC | 146 | 368 | 222 | n.m. |
| 14 | (35) | 11 | (2) | (17%) | Inventory effect | (47) | 30 | 77 | n.m. |
| 91 | 99 | 163 | 72 | 80% | Net income IFRS | 99 | 397 | 298 | n.m. |
1Includes corporate income taxes and taxes payable on oil and gas production.
RCA Ebitda went up 27% YoY to €487 m, following a higher contribution from E&P and R&M, which more than offset the effect of the gas infrastructure business deconsolidation. IFRS Ebitda reached €500 m.
Considering the increase in amortisations and depreciation charges, RCA Ebit stood at €302 m. IFRS Ebit reached €314 m.
Results from associated companies increased to €40 m, following the deconsolidation of the regulated infrastructure business and a higher contribution from Tupi B.V., related to the E&P business.
Financial results were negative €15 m, in line with the previous year.
RCA taxes increased to €135 m, considering the growth of the Group's operating results.
Non-controlling interests increased €12 m to €25 m, due to the higher results attributable to Sinopec's stake in Galp's Brazilian subsidiary.
RCA net income totalled €166 m, while IFRS net income was €163 m. The inventory effect was €11 m and non-recurring €14 m, mainly related to the tax on the energy sector in Portugal.
Results third quarter 2017 October 30, 2017
RCA Ebitda was €1,379 m, a 36% increase YoY, supported by the performance of E&P and R&M. IFRS Ebitda was €1,407 m.
RCA Ebit increased €242 m to €775 m and IFRS Ebit reached €799 m.
Results from associated companies increased €52 m to €113 m, on the back of the E&P and G&P associated vehicles contribution.
Financial results were negative €37 m, down €40 m YoY, mainly due to a €56 m change in the mark-to-market of refining hedging derivatives.
RCA taxes increased €177 m to €378 m, with taxes on oil and gas production reaching €170 m.
Non-controlling interests, mainly attributable to Sinopec's stake in Petrogal Brasil, reached €56 m.
RCA net income was €416 m, while IFRS net income was €397 m. The inventory effect was €30 m and non-recurring items accounted for €48 m.
CESE in Portugal had a negative impact on IFRS results of around €43 m, including €17 m related to CESE I, which annual impact is fully accounted for in the first quarter of the year. These provisions related to CESE result from the strict applicability of accounting standards. However, in Galp's opinion, based on the opinion of renowned national legal experts, the laws regarding CESE have no legal grounds and, accordingly, such amounts are not due.
| €m | |
|---|---|
| Quarter | Nine Months | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| 3Q16 | 2Q17 | 3Q17 | Var. YoY | % Var. YoY |
2016 | 2017 | Var. YoY | % Var. YoY |
|
| 208 | 157 | 194 | (14) | (7%) | Exploration & Production | 770 | 560 | (209) | (27%) |
| 15 | 9 | 9 | (5) | (37%) | Exploration and appraisal activities | 36 | 35 | (1) | (3%) |
| 194 | 148 | 185 | (9) | (4%) | Development and production activities | 734 | 525 | (208) | (28%) |
| 26 | 24 | 30 | 4 | 17% | Refining & Marketing | 84 | 70 | (14) | (17%) |
| 10 | 2 | 2 | (7) | (76%) | Gas & Power | 19 | 6 | (13) | (66%) |
| 1 1 | 0 | (0) | (45%) | Others | 1 | 1 | (0) | (12%) | |
| 244 | 184 | 227 | (17) | (7%) | Capex | 874 | 638 | (236) | (27%) |
During the quarter, capital expenditure totalled €227 m, 86% of which was allocated to the E&P business, mainly to development and production activities. In the period it should be noted the start of investment in the Coral South project, in Mozambique's Area 4.
Investment in downstream activities (R&M and G&P) amounted to €32 m and was mainly allocated to refining maintenance and energy efficiency projects, as well as to the renewal of some oil retail stations.
During the first nine months of 2017, capital expenditure reached €638 m, down 27% YoY, mainly as a result of the advanced execution stage of the Lula and Iracema projects and supported by the stronger EUR:USD.
E&P activities accounted for 88% of the total, with development activities in Brazil accounting for c.70% of the investment in E&P. Regarding exploration and appraisal activities, it is of note the 3D seismic acquisition campaign in São Tomé and Príncipe, which lasted until August.
The capital expenditure of €77 m in downstream activities was mainly aimed at refining maintenance activities, downstream network development and customer relationship management (CRM) programmes.
€m (IFRS figures) 3Q16 2Q17 3Q17 2016 2017 199 194 314 Ebit 799 322 86 19 13 Dividends from associates 99 44 221 193 178 Depreciation, Depletion and Amortisation (DD&A) 593 575 (164) 159 18 Change in Working Capital (30) (53) 665 242 523 Cash flow from operations 1,439 911 (242) (185) (228) Net capex1 (854) (618) (23) (19) (19) Net financial expenses (79) (59) (63) (116) (106) Corporate income taxes and oil and gas production taxes (142) (304) (207) (215) (208) Dividends paid (382) (423) (293) 130 (37) Post-dividend free cash flow (546) 35 (29) (92) (73) Others2 (132) 163 (39) 111 322 Change in net debt 96 383 Quarter Nine Months
1The nine months of 2017 includes the proceeds of €22 m from the sale of the 25% indirect stake in Âncora project. 2
Includes CTAs (Cumulative Translation Adjustment) and partial reimbursement of the loan granted to Sinopec.
Post-dividend free cash flow was negative by €37 m, considering the capital expenditure in the period and the payment of the interim dividend related to the 2017 financial year.
Cash flow from operating activities benefited from improved business performance in E&P and R&M.
Post-dividend free cash flow generated during the first nine months of 2017 was positive by €35 m, despite the €423 m payment in dividends.
| €m | |||||
|---|---|---|---|---|---|
| Quarter | Nine Months | ||||
| 3Q16 | 2Q17 | 3Q17 | 2016 | 2017 | |
| 856 | 858 | 902 | Cash and equivalents at the beginning of the period1 | 1,045 | 923 |
| 3,887 | 4,348 | 4,282 | Received from customers | 10,914 | 12,993 |
| (2,432) | (2,543) | (2,662) | Paid to suppliers | (6,494) | (8,218) |
| (74) | (98) | (71) | Staff related costs | (256) | (240) |
| 19 | 86 | 13 | Dividends from associated companies | 44 | 99 |
| (762) | (739) | (658) | Taxes on oil products (ISP) | (2,015) | (2,009) |
| (407) | (433) | (411) | VAT, Royalties, PIS, Cofins, Others | (1,197) | (1,219) |
| 231 | 620 | 494 | Total operating flows | 996 | 1,406 |
| (261) | (150) | (264) | Net capex2 | (913) | (631) |
| (16) | (23) | (9) | Net Financial Expenses | (99) | (81) |
| (207) | (215) | (208) | Dividends paid | (382) | (423) |
| (63) | (116) | (106) | Corporate income taxes and oil and gas production taxes | (142) | (304) |
| 549 | 8 | (50) | Net new loans | 420 | (82) |
| 0 | - | - | Sinopec loan reimbursement | 134 | 42 |
| (6) | (79) | (13) | FX changes on cash and equivalents | 27 | (104) |
| 1,084 | 902 | 746 | Cash and equivalents at the end of the period1 | 1,084 | 746 |
1 Cash and equivalents differ from the Balance Sheet amounts due to IAS 7 classification rules. The difference refers to overdrafts which are considered as debt in the Balance Sheet and as a deduction to cash in the Cash Flow Statement.
2The nine months of 2017 includes the proceeds of €22 m from the sale of the 25% indirect stake in Âncora project.
| €m (IFRS figures) | |
|---|---|
| 31 Dec, 2016 |
30 Jun, 2017 |
30 Sep, 2017 |
Var. vs 31 Dec, 2016 |
Var. vs 30 Jun, 2017 |
|
|---|---|---|---|---|---|
| Net fixed assets | 7,721 | 7,458 | 7,505 | (216) | 47 |
| Working capital | 512 | 583 | 565 | 53 | (18) |
| Loan to Sinopec | 610 | 527 | 512 | (98) | (16) |
| Other assets (liabilities) | (428) | (595) | (648) | (220) | (53) |
| Non-current assets/liabilities held for sale | (1) | - | - | 1 | - |
| Capital employed | 8,414 | 7,974 | 7,934 | (480) | (40) |
| Short term debt | 325 | 808 | 709 | 383 | (99) |
| Medium-Long term debt | 2,578 | 2,068 | 2,038 | (540) | (30) |
| Total debt | 2,903 | 2,876 | 2,746 | (156) | (129) |
| Cash and equivalents | 1,032 | 1,020 | 780 | (253) | (240) |
| Net debt | 1,870 | 1,856 | 1,967 | 96 | 111 |
| Total equity | 6,543 | 6,118 | 5,968 | (576) | (150) |
| Total equity and net debt | 8,414 | 7,974 | 7,934 | (480) | (40) |
On September 30, 2017, net fixed assets stood at €7,505 m, up €47 m compared to the end of June, as capital expenditure more than offset depreciation charges and exchange rate effects in the period.
Work-in-progress, mainly related to the E&P business, totalled €2,463 m at the end of September.
€m (except otherwise stated)
| 31 Dec, 2016 |
30 Jun, 2017 |
30 Sep, 2017 |
Var. vs 31 Dec, 2016 |
Var. vs 30 Jun, 2017 |
|
|---|---|---|---|---|---|
| Bonds | 1,683 | 1,663 | 1,665 | 18 | 1 |
| Bank loans and other debt | 1,220 | 1,212 | 1,082 | 138 | (130) |
| Cash and equivalents | (1,032) | (1,020) | (780) | (253) | 240 |
| Net debt | 1,870 | 1,856 | 1,967 | (96) | 111 |
| Net debt including loan to Sinopec1 | 1,260 | 1,329 | 1,455 | (195) | 126 |
| Average life (years) | 2.6 | 2.3 | 2.1 | 0.5 | (0.2) |
| Average funding cost | 3.52% | 3.48% | 3.45% | (0.07 p.p.) | (0.03 p.p.) |
| Net debt to Ebitda RCA2 | 1.0x | 0.9x | 0.9x | - | - |
1Net debt of €1,455 m adjusted for the €512 m loan to Sinopec. 2As at 30 September 2017, ratio considers net debt including loan to Sinopec as cash, plus €159 m corresponding Sinopec MLT Shareholder Loan to Petrogal Brasil, and LTM RCA Ebitda of €1,776 m.
On September 30, 2017, net debt stood at €1,967 m, up €111 m compared to the end June.
Considering the €512 m balance of the Sinopec loan as cash, net debt at the end of the period totalled €1,455 m, resulting in a net debt to Ebitda ratio of 0.9x. This ratio also considers Sinopec's €159 m shareholder loan to Petrogal Brasil as of the end of the period.
The average funding cost stood at 3.45% during the period.
At the end of September, c.48% of total debt was on a fixed-rate basis. Debt had an average Results third quarter 2017 October 30, 2017
maturity of 2.1 years, and medium and longterm debt accounted for 74% of total debt.
At the end of September, Galp had unused credit lines of approximately €1.3 bn. Of this
€m
| Quarter | Nine Months | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| 3Q16 | 2Q17 | 3Q17 | Var. YoY | % Var. YoY |
2016 | 2017 | Var. YoY | % Var. YoY |
||
| 3,499 | 3,779 | 3,892 | 393 | 11% | RCA Turnover | 9,572 | 11,515 | 1,943 | 20% | |
| 215 | 307 | 345 | 130 | 60% | Exploration & Production1 | 491 | 960 | 468 | 95% | |
| 2,878 | 2,899 | 2,976 | 98 | 3% | Refining & Marketing | 7,679 | 8,744 | 1,065 | 14% | |
| 586 | 614 | 609 | 22 | 4% | Gas & Power | 1,807 | 1,936 | 128 | 7% | |
| 29 | 33 | 34 | 4 | 14% | Other | 89 | 96 | 7 | 8% | |
| (210) | (74) | (71) | 139 | 66% | Consolidation adjustments | (494) | (220) | 274 | 55% |
guaranteed.
1Does not include change in production. RCA turnover in the E&P segment, including change in production, amounted to €346 m during the third quarter and €999 m during the first nine months of 2017.
amount, around 70% was contractually
| € m | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Third Quarter | Nine Months | |||||||||
| Ebitda IFRS |
Inventory effect |
Ebitda RC |
Non-recurring items |
Ebitda RCA |
Ebitda IFRS |
Inventory effect |
Ebitda RC |
Non-recurring items |
Ebitda RCA |
|
| 500 | (13) | 487 | 0 | 487 | Galp | 1,407 | (31) | 1,376 | 3 | 1,379 |
| 215 | - | 215 | 0 | 215 | E&P | 606 | - | 606 | 0 | 606 |
| 233 | (15) | 218 | 0 | 218 | R&M | 663 | (28) | 636 | 3 | 639 |
| 43 | 2 | 45 | - | 45 | G&P | 117 | (4) | 113 | - | 113 |
| 8 | - | 8 | - | 8 | Others | 21 | - | 21 | (0) | 21 |
€m
| Third Quarter | 2016 | Nine Months | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| Ebitda IFRS |
Inventory effect |
Ebitda RC |
Non-recurring items |
Ebitda RCA |
Ebitda IFRS |
Inventory effect |
Ebitda RC |
Non-recurring items |
Ebitda RCA |
||
| 392 | (17) | 375 | 9 | 384 | Galp | 922 | 62 | 984 | 31 | 1,015 | |
| 125 | - | 125 | 2 | 127 | E&P | 249 | - | 249 | 13 | 262 | |
| 189 | (15) | 174 | 7 | 180 | R&M | 396 | 56 | 452 | 19 | 471 | |
| 74 | (2) | 72 | 0 | 73 | G&P | 256 | 6 | 262 | (2) | 260 | |
| 4 | - | 4 | (0) | 4 | Others | 22 | - | 22 | 1 | 22 |
€m
| Third Quarter | Nine Months | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Ebit IFRS |
Inventory effect |
Ebit RC |
Non-recurring items |
Ebit RCA |
Ebit IFRS |
Inventory effect |
Ebit RC |
Non-recurring items |
Ebit RCA |
|
| 314 | (13) | 301 | 1 | 302 | Galp | 799 | (31) | 768 | 7 | 775 |
| 125 | - | 125 | 0 | 125 | E&P | 293 | - | 293 | 2 | 295 |
| 148 | (15) | 133 | 1 | 134 | R&M | 394 | (28) | 366 | 7 | 373 |
| 34 | 2 | 36 | (0) | 36 | G&P | 95 | (4) | 92 | (1) | 90 |
| 7 | - | 7 | - | 7 | Others | 18 | - | 18 | (0) | 18 |
€m
| Third Quarter | Nine Months | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Ebit IFRS |
Inventory effect |
Ebit RC |
Non-recurring items |
Ebit RCA |
Ebit IFRS |
Inventory effect |
Ebit RC |
Non-recurring items |
Ebit RCA |
|
| 194 | (17) | 177 | 34 | 211 | Galp | 322 | 62 | 384 | 150 | 534 |
| 18 | - | 18 | 28 | 46 | E&P | (75) | - | (75) | 123 | 48 |
| 116 | (15) | 101 | 6 | 107 | R&M | 171 | 56 | 227 | 29 | 256 |
| 57 | (2) | 55 | 0 | 55 | G&P | 208 | 6 | 214 | (3) | 211 |
| 3 | - | 3 | (0) | 3 | Others | 18 | - | 18 | 1 | 19 |
Results third quarter 2017 October 30, 2017
| €m | |||||
|---|---|---|---|---|---|
| Quarter | Nine Months | ||||
| 3Q16 | 2Q17 | 3Q17 | 2016 | 2017 | |
| 9.1 | 1.2 | 0.5 | Non-recurring items impacting Ebitda | 31.1 | 3.0 |
| 0.0 | 0.0 | 0.0 | Accidents caused by natural events and insurance compensation | (2.1) | 0.1 |
| (0.3) | (0.6) | 0.0 | Gains/losses on disposal of assets | (1.0) | (0.7) |
| 0.4 | (0.1) | (0.0) | Asset write-offs | 1.0 | (0.0) |
| 5.0 | - | - | Employee restructuring charges | 14.7 | - |
| 0.2 | - | - | Advisory fees and others | 0.2 | - |
| 2.0 | - | - | Compensation early termination agreement for service and equipment |
11.9 | - |
| 1.8 | 1.9 | 0.4 | Litigation costs | 6.3 | 3.6 |
| 25.0 | 3.2 | 0.5 | Non-recurring items impacting non-cash costs | 118.7 | 4.1 |
| 0.0 | 1.1 | 0.1 | Provisions for environmental charges and others | 5.5 | 1.2 |
| 25.0 | 2.1 | 0.4 | Asset impairments | 113.1 | 2.9 |
| 8.9 | 3.8 | 3.1 | Non-recurring items impacting financial results | 28.3 | (11.1) |
| (6.1) | 3.8 | 3.1 | Gains/losses on financial investments | 13.3 | (11.1) |
| 15.0 | - | - | Provision for financial investments | 15.0 | - |
| (0.8) | 8.2 | 9.8 | Non-recurring items impacting taxes | 42.4 | 52.2 |
| (10.2) | (0.6) | (0.3) | Income taxes on non-recurring items | (18.0) | (1.8) |
| 9.4 | 8.8 | 10.0 | Energy sector contribution taxes | 60.4 | 54.0 |
| (5.0) | 0.1 | 0.1 | Non-controlling interests | (5.2) | 0.3 |
| 37.2 | 16.5 | 13.9 | Total non-recurring items | 215.4 | 48.5 |
| € m | |||||
|---|---|---|---|---|---|
| Quarter | Nine Months | ||||
| 3Q16 | 2Q17 | 3Q17 | 2016 | 2017 | |
| 3,342 | 3,630 | 3,745 | Sales | 9,086 | 11,059 |
| 157 | 149 | 147 | Services rendered | 487 | 456 |
| 37 | 28 | 28 | Other operating income | 89 | 84 |
| 3,536 | 3,807 | 3,920 | Total operating income | 9,661 | 11,599 |
| (2,698) | (2,914) | (2,953) | Inventories consumed and sold | (7,486) | (8,775) |
| (332) | (385) | (367) | Materials and services consumed | (948) | (1,129) |
| (87) | (70) | (83) | Personnel costs | (245) | (233) |
| (26) | (15) | (17) | Other operating costs | (60) | (54) |
| (3,144) | (3,385) | (3,420) | Total operating costs | (8,739) (10,191) | |
| 392 | 422 | 500 | Ebitda | 922 | 1,407 |
| (193) | (221) | (178) | Amortisation, depreciation and impairments | (575) | (593) |
| (6) | (2) | (8) | Provision and impairment of receivables | (25) | (15) |
| 194 | 199 | 314 | Ebit | 322 | 799 |
| 7 | 37 | 37 | Net income from associated companies | 32 | 124 |
| (16) | (10) | (15) | Financial results | 3 | (37) |
| 11 | 7 | 7 | Interest income | 23 | 22 |
| (35) | (26) | (25) | Interest expenses | (102) | (81) |
| 26 | 27 | 21 | Capitalised interest | 72 | 72 |
| (1) | (10) | 5 | Exchange gain (loss) | (7) | (9) |
| (13) | (4) | (18) | Mark-to-market of hedging derivatives | 31 | (25) |
| (5) | (4) | (5) | Other financial costs/income | (14) | (17) |
| 185 | 226 | 336 | Income before taxes | 357 | 886 |
| (76) | (105) | (137) | Taxes1 | (169) | (378) |
| (9) | (9) | (10) | Energy sector contribution taxes2 | (60) | (54) |
| 99 | 112 | 189 | Income before non-controlling interests | 128 | 454 |
| (8) | (12) | (26) | Profit attributable to non-controlling interests | (29) | (57) |
| 91 | 99 | 163 | Net income | 99 | 397 |
1Includes corporate income taxes and taxes payable on oil and gas production, namely Special Participation Tax (Brazil) and IRP (Angola). 2Includes €16.9 m, €26.5 m and €10.6 m related to the CESE I, CESE II and Fondo Eficiencia Energética, respectively, in the first nine months of 2017.
| €m | |||
|---|---|---|---|
| 31 Dec,. | 30 Jun,. | 30 Sep,. | |
| 2016 | 2017 | 2017 | |
| Assets | |||
| Non-current assets | |||
| Tangible fixed assets | 5,910 | 5,693 | 5,658 |
| Goodwill | 87 | 85 | 84 |
| Other intangible fixed assets | 268 | 258 | 256 |
| Investments in associates | 1,432 | 1,391 | 1,474 |
| Investments in other participated companies | 3 | 3 | 3 |
| Receivables | 247 | 246 | 242 |
| Deferred tax assets | 335 | 339 | 310 |
| Financial investments | 26 | 31 | 32 |
| Total non-current assets | 8,307 | 8,046 | 8,060 |
| Current assets | |||
| Inventories1 | 869 | 894 | 915 |
| Trade receivables | 1,041 | 959 | 1,014 |
| Other receivables | 556 | 457 | 573 |
| Loan to Sinopec | 610 | 527 | 512 |
| Financial investments | 19 | 12 | 28 |
| Current Income tax recoverable | - | - | 11 |
| Cash and equivalents | 1,033 | 1,020 | 780 |
| Sub-total current assets | 4,128 | 3,869 | 3,833 |
| Non-current assets held for sale | 4 | - | - |
| Total current assets | 4,132 | 3,869 | 3,833 |
| Total assets | 12,439 | 11,915 | 11,893 |
| Equity and liabilities | |||
| Equity | |||
| Share capital | 829 | 829 | 829 |
| Share premium | 82 | 82 | 82 |
| Translation reserve | 404 | 41 | (61) |
| Other reserves | 2,687 | 2,687 | 2,687 |
| Hedging reserves | 4 | 5 | 7 |
| Retained earnings | 795 | 776 | 569 |
| Profit attributable to equity holders of the parent | 179 | 234 | 397 |
| Equity attributable to equity holders of the parent | 4,980 | 4,654 | 4,511 |
| Non-controlling interests | 1,563 | 1,464 | 1,457 |
| Total equity | 6,543 | 6,118 | 5,967 |
| Liabilities Non-current liabilities |
|||
| Bank loans and overdrafts | 912 | 971 | 940 |
| Bonds | 1,666 | 1,097 | 1,098 |
| Other payables2 | 305 | 297 | 290 |
| Retirement and other benefit obligations | 359 | 348 | 348 |
| Liabilities from financial leases | 0 | 0 | 0 |
| Deferred tax liabilities | 66 | 99 | 130 |
| Other financial instruments | 1 | 10 | 18 |
| Provisions | 429 | 558 | 576 |
| Total non-current liabilities | 3,738 | 3,380 | 3,401 |
| Current liabilities | |||
| Bank loans and overdrafts | 308 | 242 | 142 |
| Bonds | 17 | 566 | 567 |
| Trade payables | 850 | 726 | 799 |
| Other payables3 | 884 | 811 | 934 |
| Other financial instruments | 17 | 18 | 27 |
| Income tax payable | 75 | 55 | 56 |
| Sub-total current liabilities | 2,152 | 2,418 | 2,525 |
| Non-current liabilities associated with non-current assets held for sale | 5 | - | - |
| Total current liabilities | 2,157 | 2,418 | 2,525 |
| Total liabilities | 5,896 | 5,797 | 5,925 |
| Total equity and liabilities | 12,439 | 11,915 | 11,893 |
1Includes €31 m in inventories from third parties on 30 September 2017.
2 Includes €159 m long-term loan from Sinopec to subsidiary Petrogal Brasil on 30 September 2017.
3 Includes €12 m in advance payments related to inventory from third parties on 30 September 2017.
On October 27, Galp, through Petrogal Brasil, acquired a 20% interest the Carcará North area pursuant to the 2nd Production Sharing Bidding Round in Brazil. The consortium also comprises Statoil (operator) and ExxonMobil, with a stake of 40% each.
The consortium offered a profit oil share of 67.12%. Additional commitments include the payment of a signature bonus of c.\$930 m (gross), or c.\$186 m net to Petrogal Brasil, and the drilling of an exploration well.
In this context, Petrogal Brasil has agreed with Statoil the acquisition of an additional 3% stake in BM-S-8, for a total consideration of c.\$114 m, comprising an upfront cash payment of c.\$71 m and a cash payment contingent on certain conditions being met, which include the unitisation process between Carcará and Carcará North areas.
Pursuant to the two above-mentioned transactions, Petrogal Brasil's total exposure to the Carcará reservoir will consist of a 20% interest in Carcará North and a 17% interest in the BM-S-8 concession.
It was also agreed that Statoil will be the operator of the unitised areas, subject to the relevant authorities' approval.
These acquisitions reflect Galp's strategic interest in expanding its presence in core areas, such as the Brazilian pre-salt, from selected high-quality assets to be developed through strong partnerships.
Galp's consolidated financial statements have been prepared in accordance with IFRS. The financial information in the consolidated income statement is reported for the quarters ended on 30 September 2017 and 2016 and 30 June 2017. The consolidated financial position is reported on 30 September and 30 June 2017, and on 31 December 2016.
Galp's financial statements are prepared in accordance with IFRS, and the cost of goods sold is valued at weighted-average cost. When goods and commodity prices fluctuate, the use of this valuation method may cause volatility in results through gains or losses in inventories, which do not reflect the Company's operating performance. This is called the inventory effect.
Another factor that may affect the Company's results, without being an indicator of its true performance, is the set of non-recurring items, namely gains or losses on the disposal of assets, impairments or reinstatements of fixed assets, and environmental or restructuring charges.
For the purpose of evaluating Galp's operating performance, RCA profit measures exclude nonrecurring items and the inventory effect, the latter because the cost of goods sold and materials consumed has been calculated according to the Replacement Cost (RC) valuation method.
Effective on 1 January 2017, exploration expenses written-off in the E&P business are considered as recurring items.
Effective on 1 October 2016, the contribution of the trading activity of oil produced, which was previously accounted for in the R&M business, started to be accounted for in the E&P business.
During the fourth quarter of 2016, the useful life of certain refining assets was revised, contributing to an increase in depreciation and amortisation charges starting from the second half of 2016.
The benchmark refining margin is calculated with the following weighting: 45% hydrocracking margin + 42.5% cracking margin + 7% base oils + 5.5% Aromatics.
45% Rotterdam Hydrocraking margin: -100% Brent dated, +2.2% LPG FOB Seagoing (50% Butane + 50% Propane), +19.1% EuroBob NWE FOB Bg, +8.7% Naphtha NWE FOB Bg, +8.5% Jet NWE CIF, +45.1% ULSD 10 ppm NWE CIF, +9.0% LSFO 1% FOB Cg; C&L: 7.4%; Terminal rate: \$1/ton; Ocean loss: 0.15% over Brent; Freight 2017: WS Aframax (80 kts) Route Sullom Voe / Rotterdam – Flat \$7.66/ton. Yields in % of weight.
42.5% Rotterdam cracking margin: -100% Brent dated, +2.3% LPG FOB Seagoing (50% Butane + 50% Propane), +25.4% EuroBob NWE FOB Bg, +7.5% Naphtha NWE FOB Bg, +8.5% Jet NWE CIF, +33.3% ULSD 10 ppm NWE CIF, +15.3% LSFO 1% FOB Cg; C&L: 7.7%; Terminal rate: \$1/ton; Ocean loss: 0.15% over Brent; Freight 2017: WS Aframax (80 kts) Route Sullom Voe / Rotterdam – Flat \$7.66/ton. Yields in % of weight.
7% Rotterdam Base Oil margin: -100% Arabian Light, +3.5% LGP FOB Seagoing (50% Butane + 50% Propane), +13% Naphtha NWE FOB Bg, +4.4% Jet NWE CIF, 34% ULSD 10 ppm NWE CIF, +4.5% VGO 1.6% NWE FOB Cg,+ 14% Base Oils FOB, +26% HSFO 3.5% NWE Bg; Consumptions: -6.8% LSFO 1% CIF NWE Cg; C&L: 7.4%; Terminal rate: \$1/ton; Ocean loss: 0.15% over Arabian Light; Freight 2017: WS Aframax (80 kts) Route Sullom Voe / Rotterdam – Flat \$7.66/ton. Yields in % of weight.
5.5% Rotterdam aromatics margin: -60% EuroBob NWE FOB Bg, -40% Naphtha NWE FOB Bg, +37% Naphtha NWE FOB Bg, +16.5% EuroBob NWE FOB Bg, +6.5% Benzene Rotterdam FOB Bg, +18.5% Toluene Rotterdam FOB Bg, +16.6% Paraxylene Rotterdam FOB Bg, +4.9% Ortoxylene Rotterdam FOB Bg; Consumption: -18% LSFO 1% CIF NEW. Yields in % of weight.
According to this method of valuing inventories, the cost of goods sold is valued at the cost of replacement, i.e. at the average cost of raw materials on the month when sales materialise irrespective of inventories at the start or end of the period. The Replacement Cost Method is not accepted by the Portuguese IFRS and is consequently not adopted for valuing inventories. This method does not reflect the cost of replacing other assets.
In addition to using the replacement cost method, RCA items exclude non-recurrent events such as capital gains or losses on the disposal of assets, impairment or reinstatement of fixed assets and environmental or restructuring charges which may affect the analysis of the Company's profit and do not reflect its operational performance.
APETRO: Associação Portuguesa de Empresas Petrolíferas (Portuguese association of oil companies) bbl: barrel of oil Bg: Barges bn: billion boe: barrels of oil equivalent Capex: capital expenditure CESE: Contribuição Extraordinária sobre o Sector Energético (Portuguese Extraordinary Energy Sector Contribution) Cg: Cargoes CIF: Costs, Insurance and Freights CORES: Corporación de Reservas Estratégicas de Produtos Petrolíferos COOEC: Offshore Oil Engineering Co. Ltd. CTA: Cumulative Translation Adjustment E&P: Exploration & Production Ebit Earnings before interest and taxes Ebitda: Earnings before interest, taxes, depreciation, amortization and provisions EUA: United States of America EUR/€: Euro FCF: free cash flow FPSO: Floating, production, storage and offloading unit Galp, Company or Group: Galp Energia, SGPS, S.A., subsidiaries and participated companies G&P: Gas & Power GGND: Galp Gás Natural Distribuição, S.A. GWh Gigawatt per hour
IAS: International Accounting Standards IFRS: International Financial Reporting Standards IRP: Oil income tax (Oil tax payable in Angola) IRC: portuguese corporate income tax ISP: Tax on oil products (Portugal) k: thousand kboepd: thousands of barrels of oil equivalent per day kbpd: thousands of barrels of oil per day LNG: liquified natural gas LSFO: low sulphur fuel oil m: million mmboe: millions of barrels of oil equivalent mmbtu: million British thermal units mm³: million cubic metres mton: millions of tonnes MW: megawatt NBP: National Balancing Point NG: natural gas NWE: Northwestern Europe OPEC: Organisation of Petroleum Exporting Countries R&M: Refining & Marketing RC: Replacement Cost RCA: Replacement Cost Adjusted t: tonnes USA: United States of America USD/\$: Dollar of the United States of America VAT: value-added tax VGO: vacuum gas oil WI: working interest YoY: year-on-year
This report has been prepared by Galp Energia SGPS, S.A. ("Galp" or the "Company") and may be amended and supplemented.
This report 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 report 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 report may include 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 report 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 report by such forward-looking statements.
Real future income, both financial and operating; an increase in demand and change to the energy mix; an increase in production and changes to Galp's portfolio; the amount and various costs of capital, future distributions; increased resources and recoveries; project plans, timing, costs and capacities; efficiency gains; cost reductions; integration benefits; ranges and sale of products; production rates; and the impact of technology can differ substantially due to a number of factors. These factors may 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 report speak only as at the date of this report, 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 report to reflect any change in events, conditions or circumstances.
Pedro Dias, Head Otelo Ruivo, IRO Cátia Lopes João G. Pereira João P. Pereira Teresa Rodrigues
Tel: +351 21 724 08 66 Fax: +351 21 724 29 65
Address: Rua Tomás da Fonseca, Torre A, 1600-209 Lisboa, Portugal Website: www.galp.com Email:[email protected]
Reuters: GALP.LS Bloomberg: GALP PL
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