Galp Energia

Earnings Release • Jul 30, 2018

RESULTS SECOND QUARTER 2018

JULY 30, 2018 INVESTOR RELATIONS

Cautionary Statement

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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

Key highlights

• CFFO of €604 m, supported by higher oil and gas prices, production growth and refining performance
• Free Cash Flow of €398 m, and €146 m net of the €252 m dividend payment
• Ebitda up 38% YoY to €628 m, driven by upstream contribution and favourable macro environment
• FY2018 Ebitda expected above €2.1 bn and Capex guidance kept at €1.0 €1.1 bn, now including recent Brazilian bid rounds signature bonuses
• Key milestones:
• Kaombo first oil in Block 32 in Angola
• Submission of the PoD for the 1st phase of Rovuma LNG project, in Mozambique
• Acquisition of Uirapuru exploration block and reinforcing position in BM-S-8
• 20-year LNG SPA from the Calcasieu Pass LNG export facility, in the U.S.

Key Highlights

Operational Performance

Financial Performance

Appendix

Strong upstream execution

2Q overview Outlook

• WI production of 108.1 kboepd. Brazil output above 100 kboepd, after FPSO #7 reached plateau

• EWT ongoing in the Sururu area (Iara)

• 3 new FPSOs starting production during 2H18

• Keeping FY2018 production guidance

Solid contribution from downstream

• Favourable refining market and sourcing & energy optimisation
• Delivering \$0.3/boe from conversion and energy efficiency initiatives
• Solid oil marketing operational performance
• Natural gas activities supported by higher sales to industrial clients in Iberia

Reinforcing Galp's strategic position

Grow a competitive and resilient upstream portfolio

• Securing a 20% stake in Carcará and acquisition of new exploration licenses in Santos and Campos (Uirapuru and C-M-791)
• Spud of Guanxuma well, with exploration activities ongoing
• 2x 7.6 mtpa trains development plan submitted for Phase 1 of Rovuma LNG project

Adapt R&M to market changes | Adapt NG/LNG supply basket

• Progressing on refining efficiency and conversion initiatives
• Preparing for IMO global cap
• Securing 1 mtpa long-term LNG sourcing from the U.S.

Key Highlights

Operational Performance

Financial Performance

Appendix

2Q18 Ebitda of €628 m, up 38% YoY

Profit & Loss RCA (€m)

	2Q17	1Q18	2Q18
Turnover	3,779	3,891	4,546
Ebitda	456	455	628
E&P	171	293	411
R&M	231	121	174
G&P	45	34	34
Ebit	262	278	457
Associates	41	39	35
Financial results	(13)	(8)	36
Taxes1	(123)	(144)	(227)
Non-controlling interests	(11)	(29)	(48)
Net Income	154	136	251
Net Income (IFRS)	102	132	330

• Upstream Ebitda supported by production growth and higher realisation prices, despite USD depreciation
• Downstream Ebitda impacted by lag in marketing pricing formulas and by refining FX
• Positive financial results, driven by mark-tomarket of refining hedges
• RCA net income of €251 m and IFRS net income of €330 m, considering inventory effect of €68 m and non-recurring items of €11 m

Positive FCF in 1H18 after dividend payment in 2Q

1H18 Cash flow (€m)

• CFFO 26% up YoY, supported by robust performance, despite weaker USD and working capital build-up
• 80% of capex allocated to E&P, including additional 3% stake acquisition in BM-S-8
• FCF up 50% YoY to €427 m

Update 2018 guidance

	FY2018 CMD guidance	1H18	FY2018 updated guidance
Ebitda	€1.8 - €1.9 bn	€1.1 bn	>€2.1 bn
Capex	€1.0 - €1.1 bn	€0.4 bn	€1.0 - €1.1 bn1
Brent	\$60/bbl	\$71/bbl	\$70/bbl - \$75/bbl
Benchmark refining margin	\$3 5/bbl	\$2 1/bbl	-
Galp refining margin	-	\$4 8/boe	\$4 5/boe - \$5 5/boe

Second quarter 2018 results

¹ Now includes signature bonuses related to the acquisition of stakes under Brazil bid rounds (C-M-791 and Uirapuru licenses).

Key Highlights

Operational Performance

Financial Performance

Appendix

E&P: Strong results on higher production and realised price

Main E&P data¹

		2Q17	1Q18	2Q18
Working interest production	kboepd	89.9	104.1	108.1
Oil production	kbpd	78.0	91.6	94.6
Net entitlement production	kboepd	88.1	102.6	106.7
Angola	kbpd	6.2	5.6	5.3
Brazil	kboepd	81.8	97.1	101.4
Oil and gas average sale price	USD/boe	43.4	58.2	63.8
Production costs	USD/boe	9.2	9.2	7.7
DD&A2	USD/boe	13.7	11.0	10.2
Ebitda RCA3	€ m	171	293	411
Ebit RCA	€ m	71	210	328
Net Income from E&P Associates	€ m	8	13	10
CAPEX	€ m	144	117	176

• Production increased 20% YoY and 4% QoQ, supported by the ramp up of FPSO #7
• Opex and DD&A benefiting from a weaker BRL during the quarter
• Results up QoQ on the back of higher production and unit margin, positively impacted by underlifting adjustments

R&M: Supportive refining performance

Main R&M data

		2Q17	1Q18	2Q18
Galp refining margin	USD/boe	5.7	3.3	6.1
Refining cost	USD/boe	1.6	2.3	2.3
Impact of hedging on refining margin1	USD/boe	(0.3)	0.6	0.2
Raw materials processed	mmboe	30.0	25.0	28.5
Total oil product sales	mton	4.7	4.1	4.7
Sales to direct clients	mton	2.3	2.1	2.2
Ebitda RCA	€ m	231	121	174
Ebit RCA	€ m	143	33	93
Net Income from R&M Associates	€ m	8	1	0
CAPEX	€ m	24	28	36

• Refining margin of \$6.1/boe, benefiting from middle distillate cracks, raw materials and energy sources optimisation, as well as gasoline exports to the U.S.
• Robust operational marketing performance
• Ebitda down YoY impacted by lag in marketing pricing formulas and by FX

G&P: Resilient contributor to results

Main G&P data

		2Q17	1Q18	2Q18
NG/LNG total sales volumes	mm3	1,726	1,975	1,892
Sales to direct clients	mm3	1,052	1,225	1,133
Trading	mm3	675	750	759
Ebitda RCA	€ m	45	34	34
Ebit RCA	€ m	40	29	29
Net Income from G&P Associates	€ m	25	24	25
CAPEX	€ m	2	1	6

• NG/LNG volumes up 10% YoY, on higher sales to industrial clients
• Improved power contribution, benefiting from time lag between NG purchase and electricity sales price
• Ebitda down YoY, impacted by lower contribution from the LNG trading activity

Strong financial position

Balance Sheet (€m)

	31 Dec, 2017	31 Mar, 2018	30 Jun, 2018
Net fixed assets	7,231	7,099	7,095
Working capital	584	744	785
Loan to Sinopec	459	449	451
Other assets (liabilities)	(613)	(637)	(601)
Capital employed	7,661	7,655	7,730
Net debt	1,885	1,885	1,737
Equity	5,776	5,770	5,993
Net Debt + Equity	7,661	7,655	7,730

• Net fixed assets in line QoQ, with net capex mostly offset by DD&A
• Net debt down to €1.7 bn, with implicit net debt to Ebitda RCA of 0.9x