Galp Energia

Earnings Release • Oct 29, 2018

RESULTS THIRD QUARTER 2018

OCTOBER 29, 2018 INVESTOR RELATIONS

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.

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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 reflect the information available as at the date of this presentation and Galp's view on the matters referred herein, 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.

Key Highlights

Operational Performance

Financial Performance

Appendix

3

Key highlights

• Solid financial performance supporting business plan targets
• 9M18 FCF of €514 m, more than covering a €0.55/sh dividend
• CFFO in 3Q18 of €343 m supported by a solid upstream and downstream performance, despite working capital effect of €186 m related to inventory build
• Ebitda up 38% YoY to €642 m, driven by a higher contribution from upstream, and up 2% QoQ despite planned maintenance effects in Brazil and in refining
• FPSO #8 (P-69) started production in Lula Extreme South on October 23
• FY2018 Ebitda expected at c.€2.3 bn and Capex at c.€1.0 bn

Key Highlights

Operational Performance

Financial Performance

Appendix

Q3 upstream performance impacted by planned maintenance

3Q overview Outlook

• Planned maintenance in 3 FPSOs and gas export line in Brazil, with units/infrastructure now fully operational
• Completed Sururu West EWT in August with results to support ongoing development in the area

• Kaombo North ramp-up on track

• P-69 started production in Lula Ext. South on October 23

• Lula North sail away to final location until the year end
• FY2018 production expected to be up 15% YoY

6

7 Solid downstream performance despite start of maintenance

3Q overview Outlook

• Solid performance from the marketing of oil products and gas and power activities

• Refining margin of \$5.8/boe, despite start of maintenance in the Matosinhos refinery and preparation for the Sines FCC unit

• Expecting weaker refining environment in Q4, despite a supportive demand for oil products in Iberia

• Planned refining maintenance, including implementation of +\$1/boe initiatives and solutions for IMO specs
• End of LNG structured contracts, with activity based on opportunistic trading going forward

Key Highlights

Operational Performance

Financial Performance

Appendix

Profit & Loss RCA (€m)

	3Q17	2Q18	3Q18
Turnover	3 891 ,	4 546 ,	4 540 ,
Ebitda	466	628	642
E&P	204	411	396
R&M	215	174	195
G&P	40	34	44
Ebit	289	457	470
Associates	40	35	39
Financial results	(17)	36	(34)
Taxes1	(132)	(229)	(221)
Non-controlling interests	(24)	(48)	(43)
Net Income	156	251	212
Net Income (IFRS)	154	330	235

• Upstream Ebitda supported by higher realisation prices and production. QoQ impacted by maintenance and positive Q2 underlifting adjustments
• Downstream Ebitda impacted by a lower YoY contribution from refining
• Negative financial results, driven by mark-to-market adjustments
• RCA net income of €212 m and IFRS net income of €235 m, considering inventory effect of €34 m and non-recurring items of -€10 m

Cash flow impacted by working capital build

Cash flow IFRS (€m)

	3Q17	2Q18	3Q18
Ebit DD&A +	479	741	686
paid Taxes	(107)	(163)	(163)
Dividends from Associates	13	67	7
Change Working Capital in	13	(41)	(186)
CFFO	398	604	343
financial Net expenses	(19)	(7)	(10)
1 Net capex	(216)	(199)	(246)
FCF	164	398	87
Dividends paid	(208)	(252)	(239)
Post-dividends FCF	(44)	146	(153)
Others2	(65)	2	(9)
Change in debt net	110	(148)	162

• CFFO of €343 m supported by solid upstream and downstream performance
• Inventory build driving working capital investment of €186 m, mainly driven by refining maintenance preparation and in transit Brazilian cargoes
• 81% of capex allocated to upstream, and including €103 m in signature bonuses for Uirapuru and block C-M-791
• FCF pre-dividend of €87 m with dividend payment of €239 m

Maintaining strong financial position

Balance Sheet (€m)

	31 Dec , 2017	30 Jun , 2018	30 Sep , 2018
Net fixed assets	7 231 ,	7 095 ,	7 157 ,
Working capital	584	785	971
Loan Sinopec to	459	451	172
Other (liabilities) assets	(613)	(601)	(595)
Capital employed	661 7 ,	730 7 ,	705 7 ,
debt Net	885 1 ,	737 1 ,	899 1 ,
Equity	776 5 ,	993 5 ,	806 5 ,
Debt Equity Net +	661 7 ,	730 7 ,	705 7 ,

• Net fixed assets slightly higher QoQ, with net capex more than offsetting DD&A and the BRL depreciation
• Loan to Sinopec reduced against capital reduction in Galp/Sinopec JV
• Net debt increased to €1.9 bn, given dividend and bid round payments, with implicit net debt to Ebitda RCA stable at 0.9x

11

Key Highlights

Operational Performance

Financial Performance

Appendix

E&P: Supported by higher realised price and production

Main E&P data¹

		3Q17	2Q18	3Q18
Working interest production	kboepd	94 6	108 1	103 8
Oil production	kbpd	82 8	94 6	93 1
entitlement production Net	kboepd	92 4	106 7	102 3
Angola	kbpd	6 5	3 5	7 4
Brazil	kboepd	86 8	101 4	94 9
Oil and sale price gas average	USD/boe	45 3	64 3	65 3
Production costs	USD/boe	7 5	7 7	9 0
DD&A2	USD/boe	12 3	10 2	10 5
RCA3 Ebitda	€ m	204	411	396
Ebit RCA	€ m	115	328	311
from Net Income E&P Associates	€ m	13	10	15
Capex	€ m	184	176	188

• Projects ramp-up driving YoY production increase, with QoQ variation reflecting higher concentration of planned maintenance in Brazil
• Ebitda higher YoY due to higher realised price and production, despite increased opex due to maintenance activities
• DD&A decreased mainly due to BRL depreciation effects

¹ Unit figures based on net entitlement production. ² Includes abandonment provisions and excludes exploration expenditures written-off. ³ Effective from 1 January 2018, G&G and G&A costs, mainly related to the exploration activity, started to be accounted as operating costs of the period in which they occur, and ceased to be capitalised. The Successful Efforts Method (SEM) was applied retrospectively and the 2017 figures were restated for comparison purposes.

R&M: Impacted by weaker refining environment

Main R&M data¹

		3Q17	2Q18	3Q18
Galp refining margin	USD/boe	7 4	6 1	8 5
Refining cost	USD/boe	1 6	2 3	2 0
margin2 of hedging refining Impact on	USD/boe	(0 7)	0 2	0 0
materials processed Raw	mmboe	29 7	28 5	27 7
Total oil product sales	mton	9 4	4 7	4 5
Sales direct clients to	mton	2 4	2 2	2 4
Ebitda RCA	€ m	215	174	195
Ebit RCA	€ m	132	93	115
from R&M Associates Net Income	€ m	2	(0)	1
Capex	€ m	30	36	44

• Raw materials processed down 7% YoY to 27.7 mmboe due to start of planned maintenance in Matosinhos refinery
• Refining margin of \$5.8/boe, down 21% YoY following international refining environment
• Robust marketing performance, benefiting from sales to direct clients
• Ebitda down YoY following lower refining contribution

G&P: Stable contribution to results

Main G&P data

		3Q17	2Q18	3Q18
NG/LNG total sales volumes	mm3	1 716 ,	1 892 ,	2 024 ,
Sales direct clients to	mm3	1 064 ,	1 133 ,	1 201 ,
Trading	mm3	652	759	823
Ebitda RCA	€ m	40	34	44
Ebit RCA	€ m	36	29	39
from G&P Associates Net Income	€ m	25	25	24
Capex	€ m	2	5	0

• NG/LNG volumes up 18% YoY, on higher network trading activity and sales to industrial clients
• Ebitda up YoY, benefitting from stable Supply & Trading and increased contribution from Power