Galp Energia

Earnings Release • Apr 27, 2018

RESULTS FIRST QUARTER 2018

April 27, 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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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

1Q18 highlights

• Cash flow from operations of €245 m driven by upstream production growth, despite weaker downstream and USD depreciation
• Upstream performance benefiting from higher oil prices and production ramp-up in Brazil
• Downstream impacted by weaker refining margins and maintenance, despite a supportive contribution from marketing activity and G&P business
• Free cash flow of €29 m supported by robust operational performance and lower capex levels
• Reinforcing strategic position in core areas through strong partnerships with the acquisition of block C-M-791 in the Campos basin, in Brazil

Key Highlights

Operational Performance

Financial Performance

Appendix

Brazilian developments driving production growth

• Production up QoQ, benefiting from Lula ramp-up with FPSO #7 now at plateau
• Two additional units to come onstream during 2H18

Lula and Iracema Other pre-salt projects

• Iara: Start of an EWT in Sururu SW to optimise the development plan of the area
• Carcará: Ongoing appraisal with DST in Carcará NW
• Acquisition of acreage in Campos basin (C-M-791) with pre-salt potential

First quarter 2018 results

Kaombo project on track for first oil this year

Angola

• FPSO to develop Kaombo North sailed away from Singapore during 1Q18 and is currently on location
• Drilling campaign proceeding at good pace, with 26 out of 59 wells already drilled
• Production from block 14/14K declining as expected

Downstream impacted by lower refining margins

Refining & Marketing Gas & Power

• Benchmark margins and Sines hydrocracker planned maintenance driving lower refining results

• Iberian oil demand supporting marketing performance

• Natural gas activity benefited from increased sales to industrial clients and European hubs gas prices

• LNG trading volumes based on structured contracts

Key Highlights

Operational Performance

Financial Performance

Appendix

Profit & Loss RCA (€m)

	1Q17	4Q17	1Q18
Turnover	3,843	3,689	3,891
Ebitda	388	476	455
E&P	179	296	293
R&M	183	144	122
G&P	19	27	34
Ebit	196	313	278
Associates	32	37	39
Financial results	(13)	7	(9)
Taxes1	(120)	(107)	(143)
Non-controlling interests	(17)	(35)	(29)
Net Income	77	215	135
Net Income (IFRS)	113	255	130

• Upstream Ebitda driven by production growth and higher realisation prices, despite USD depreciation
• Downstream impacted by lower refining results and USD depreciation, despite hedging strategy and supportive marketing and natural gas contribution
• RCA net income up 74% YoY. IFRS net income of €130 m considering an inventory effect of €33 m and non-recurring items of €38 m

Capex of €146 m in the quarter

Capital Expenditure (€m)

Note: Starting in 2018, change in accounting of G&G and G&A costs related with the E&P business (Successful Efforts Method). Figures of 2017 were restated for comparison purposes.

Positive FCF during 1Q18 despite working capital build

Change in net debt (€m)

	1Q17	4Q17	1Q18
Ebit + DD&A	455	538	496
Taxes paid	(81)	(70)	(92)
Dividends received from Associates	-	35	-
Change in Working Capital	(230)	(12)	(159)
CFFO	144	491	245
Net financial expenses	(21)	(16)	(47)
Net capex1	(179)	(358)	(169)
FCF	(57)	117	29
Dividends paid	-	-	-
FCF post-dividends	(57)	117	29
Others2	33	(36)	(28)
Change in net debt	24	(81)	(1)

• Working capital investment of €159 m, mainly driven by the increase in commodity prices
• CFFO up YoY driven by upstream performance, while down QoQ mainly due to lower downstream contribution
• Group FCF reflecting a resilient operational contribution and lower investment realised in the beginning of the year

Note: IFRS figures. Starting in 2018, change in accounting of G&G and G&A costs related with the E&P business (Successful Efforts Method). Ebit and net capex of 2017 were restated for comparison purposes.

¹ 2017 figures include the payment of Carcará North signature bonus of c.€150 m and the proceeds of €22 m from the sale of the 25% indirect stake in Âncora project. ² Includes mainly Sinopec loan partial reimbursement and CTAs (Cumulative Translation Adjustment).

Strong financial position

Balance Sheet (€m)¹

	31 Dec., 2017 (reported)	31 Dec., 2017 (restated - SEM)	31 Mar., 2018	Var 31 . vs Dec ., 2017 (restated)
Net fixed assets	7.565	7.231	7.099	(132)
Work in progress	2 616	2 280	2 120	(160)
Working capital	584	584	743	159
Loan to Sinopec	459	459	449	(10)
Other assets (liabilities)	(645)	(612)	(637)	(25)
Capital employed	7.963	7.662	7.654	(8)
Net debt	1.886	1.886	1.885	(1)
Equity	6.078	5.776	5.770	(7)
Net Debt + Equity	7.963	7.662	7.654	(8)

• Net fixed assets down QoQ driven by US dollar and Brazilian real depreciation against the Euro
• Net debt stable at €1.9 bn, with implicit net debt to Ebitda of 1.0x

Note: IFRS figures. Starting in 2018, change in accounting of G&G and G&A costs related with the E&P business (Successful Efforts Method). Figures of 2017 were restated for comparison purposes.

Key Highlights

Operational Performance

Financial Performance

Appendix

E&P: Higher realisations partially offset by FX effects

Main E&P data¹

		1Q17	4Q17	1Q18
Working interest production2	kboepd	88.0	101.2	104.1
Oil production	kbpd	76.9	88.6	91.6
Net entitlement production2	kboepd	86.2	99.1	102.6
Angola	kbpd	6.9	5.2	5.6
Brazil	kboepd	79.3	93.9	97.1
Oil and gas average sale price	USD/boe	45.4	53.6	58.2
Production costs	USD/boe	8.0	8.0	9.2
DD&A3	USD/boe	13.2	7.4	11.0
Ebitda RCA	€ m	179	296	293
Ebit RCA	€ m	83	239	210
Net Income from E&P Associates	€ m	9	13	13
CAPEX	€ m	183	281	117

• Average daily production up 3% QoQ on the back of unit #7 ramp-up and fewer maintenance activities
• Ebitda flat QoQ, with higher oil price partially offset by USD depreciation

Note: Starting in 2018, change in accounting of G&G and G&A costs related with the E&P business (Successful Efforts Method). Figures of 2017 were restated for comparison purposes. Ebitda impact of €16 m in 1Q18, €12 m in 4Q17 and €24 m in 1Q17.

¹Unit figures based on net entitlement production. ² Includes natural gas exported, excludes natural gas used or reinjected. ³Non-cash costs related to operating activities, includes abandonment provisions and excludes exploration expenses written-off.

R&M: Impacted by macro conditions and maintenance

Main R&M data

		1Q17	4Q17	1Q18
Galp refining margin	USD/boe	5.1	4.9	3.3
Spread benchmark margin over	USD/boe	6 1	1 4	1 5
Refining cash cost	USD/boe	1.7	1.9	2.3
Impact of hedging on refining margin1	USD/boe	(0.0)	0.1	0.6
Raw materials processed	mmboe	26.1	28.4	25.0
Total oil product sales	mton	4.4	4.5	4.1
Sales to direct clients	mton	2.1	2.2	2.1
Ebitda RCA	€ m	183	144	122
Ebit RCA	€ m	93	44	33
Net Income from R&M Associates	€ m	(2)	2	1
CAPEX	€ m	16	75	28

• Planned maintenance of Sines HC impacting raw materials processed and cash costs
• Robust spread over benchmark, benefiting from gasoline exports to the U.S. and raw materials pricing formulas
• Marketing performance supported by Iberian oil demand
• R&M Ebitda impacted by lower refining margins and USD depreciation, although partly mitigated by hedging strategy

17 G&P: Benefiting from higher volumes and European hub prices

Main G&P data

		1Q17	4Q17	1Q18
NG/LNG total sales volumes	mm3	2,006	1,899	1,975
Sales to direct clients	mm3	1,149	1,109	1,225
Trading	mm3	857	790	750
Ebitda RCA	€ m	19	27	34
Ebit RCA	€ m	15	22	28
Net Income from G&P Associates	€ m	25	22	24
CAPEX	€ m	2	1	1

• Volumes in line YoY but up QoQ, with higher sales to industrial clients offsetting lower traded volumes
• European hub prices supporting network trading contribution
• Ebitda up YoY as 1Q17 was impacted by sourcing restrictions from Algeria