Earnings Release • Sep 30, 2019
Earnings Release
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| Third quarter and first nine months of |
|
|---|---|
| Exploration & Production | |
| 12 | |
| Financial data | 15 |
| 5.1. Income statement |
15 |
| 5.2. | |
| 5.3. Cash flow |
18 |
| 5.4. | 19 |
| 5.5. IFRS income statement |
|
| 5.6. | |
| Appendixes | |
| Definitions | 51 |
| 2019 highlights3 6 Refining & Marketing9 Gas & Power Capital expenditure17 Financial position and debt 23 Consolidated financial position24 Basis of reporting25 26 IFRS condensed consolidated financial statements26 |
Working interest production was up 21% YoY to 125.5 kboepd, supported by the ramp-up of the Lula project in Brazil, namely FPSO #9 and #8, and the contribution of block 32, in Angola, with the ramp-up of the Kaombo project.
€m (IFRS, except otherwise stated)
| Quarter | Nine Months | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| 3Q18 | 2Q19 | 3Q19 | Var. YoY | 2018 | 2019 | Var. YoY | |||
| 642 | 615 | 619 | (23) | (4%) | RCA Ebitda | 1,725 | 1,728 | 3 | 0% |
| 396 | 408 | 469 | 73 | 18% | Exploration & Production | 1,100 | 1,251 | 151 | 14% |
| 195 | 142 | 104 | (91) | (47%) | Refining & Marketing | 492 | 317 | (175) (36%) | |
| 44 | 57 | 37 | (7) | (16%) | Gas & Power | 112 | 141 | 30 | 27% |
| 470 | 386 | 370 | (100) | (21%) | RCA Ebit | 1,205 | 1,033 | (172) (14%) | |
| 311 | 278 | 324 | 13 | 4% | Exploration & Production | 849 | 857 | 8 | 1% |
| 115 | 48 | 7 | (108) (94%) | Refining & Marketing | 242 | 34 | (208) (86%) | ||
| 39 | 53 | 32 | (7) | (17%) | Gas & Power | 96 | 127 | 31 | 32% |
| 212 | 200 | 101 | (111) (52%) | RCA Net income | 598 | 403 | (195) (33%) | ||
| 235 | 231 | 60 | (175) (74%) | IFRS Net income | 697 | 283 | (413) (59%) | ||
| (10) | 14 | (17) | 6 | 62% | Non-recurring items | (38) | (128) | 90 | n.m. |
| 34 | 17 | (24) | (58) | n.m. | Inventory effect | 137 | 8 | (129) (94%) | |
| 343 | 613 | 435 | 92 | 27% | Cash flow from operations | 1,192 | 1,445 | 253 | 21% |
| 234 | 236 | 188 | (45) | (19%) | Capex | 597 | 573 | (24) | (4%) |
| 87 | 342 | 192 | 106 | n.m. | Free cash flow | 514 | 694 | 180 | 35% |
| (153) | 7 | (70) | (83) (54%) | Post-dividend free cash flow | 22 | 28 | 6 | 25% | |
| 1,899 | 1,598 | 1,645 | (254) | (13%) | Net debt | 1,899 | 1,645 | (254) (13%) | |
| 0.9x | 0.7x | 0.8x | - | - | Net debt to RCA Ebitda1 | 0.9x | 0.8x | - | - |
1 Ratio considers the LTM Ebitda RCA (€2,080 m on 30 September 2019), adjusted for the impact from the application of IFRS 16 (€140 m on 30 September 2019).
| Quarter | Nine Months | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 3Q18 | 2Q19 | 3Q19 | Var. YoY | 2018 | 2019 | Var. YoY | ||||||
| 103.8 | 111.8 | 125.5 | 21.8 | 21% | Average working interest production (kboepd) | 105.3 | 116.7 | 11.4 | 11% | |||
| 102.3 | 109.8 | 124.0 | 21.6 | 21% | Average net entitlement production (kboepd) | 103.9 | 114.9 | 11.0 | 11% | |||
| (9.8) | (7.8) | (7.3) | (2.5) | (26%) | Oil & gas realisations - Dif. to Brent (USD/boe) | (9.1) | (7.8) | (1.3) (14%) | ||||
| 28.0 | 26.1 | 20.6 | (7.4) | (26%) | Raw materials processed (mmboe) | 82.1 | 69.3 | (12.8) | (16%) | |||
| 5.8 | 3.0 | 3.9 | (1.9) | (33%) | Galp refining margin (USD/boe) | 5.1 | 3.0 | (2.0) (40%) | ||||
| 4.5 | 4.4 | 3.9 | (0.6) | (13%) | Total oil products sales (mton) | 13.2 | 12.0 | (1.2) | (9%) | |||
| 1,201 | 1,205 | 1,131 | (70) | (6%) | NG sales to direct clients (mm3 ) |
3,559 | 3,485 | (75) | (2%) | |||
| 823 | 682 | 673 | (150) | (18%) | NG/LNG trading sales (mm3 ) |
2,331 | 2,169 | (162) | (7%) |
| Quarter | Nine Months | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| 3Q18 | 2Q19 | 3Q19 | Var. YoY | 2018 | 2019 | Var. YoY | ||||
| 1.16 | 1.12 | 1.11 | (0.05) | (4%) | Average exchange rate EUR:USD | 1.19 | 1.12 | (0.07) | (6%) | |
| 4.59 | 4.40 | 4.41 | (0.18) | (4%) | Average exchange rate EUR:BRL | 4.29 | 4.37 | 0.07 | 2% | |
| 75.2 | 68.9 | 62.0 | (13.2) | (18%) | Dated Brent price (USD/bbl) | 72.1 | 64.6 | (7.5) (10%) | ||
| (1.2) | (1.2) | (1.2) | (0.0) | (0%) | Heavy-light crude price spread1 (USD/bbl) |
(1.6) | (0.9) | (0.8) (46%) | ||
| 26.9 | 14.9 | 12.7 | (14.2) | (53%) | Iberian MIBGAS natural gas price (EUR/MWh) | 22.2 | 16.7 | (5.5) (25%) | ||
| 24.6 | 13.0 | 11.5 | (13.1) | (53%) | Dutch TTF natural gas price (EUR/MWh) | 21.2 | 15.3 | (5.9) (28%) | ||
| 10.7 | 4.9 | 4.7 | (6.0) | (56%) | Japan/Korea Marker LNG price (USD/mmbtu) | 9.7 | 5.4 | (4.3) (44%) | ||
| 16.7 | 16.5 | 17.0 | 0.3 | 2% | Iberian oil market (mton) | 48.7 | 49.6 | 0.9 | 2% | |
| 7,793 | 9,296 | 10,042 | 2,249 | 29% | Iberian natural gas market (mm3 ) |
25,770 | 29,532 | 3,761 | 15% |
Source: Platts for commodities prices; MIBGAS for Iberian natural gas price; APETRO and CORES for Iberian oil market; Galp and Enagás for Iberian natural gas market.
1 Urals NWE dated for heavy crude; dated Brent for light crude.
Results Third Quarter 2019 October, 2019
| Quarter | Nine Months | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| 3Q18 | 2Q19 | 3Q19 | 3Q19 (w/o IFRS16) |
Var. YoY | 2018 | 2019 | 2019 (w/o IFRS16) |
Var. YoY | |||
| 103.8 | 111.8 | 125.5 | 21.8 | 21% | Average working interest production1 (kboepd) |
105.3 | 116.7 | 11.4 | 11% | ||
| 93.1 | 99.5 | 111.0 | 17.9 | 19% | Oil production (kbpd) | 93.1 | 103.3 | 10.2 | 11% | ||
| 102.3 | 109.8 | 124.0 | 21.6 | 21% | Average net entitlement production1 (kboepd) |
103.9 | 114.9 | 11.0 | 11% | ||
| 7.4 | 12.2 | 12.7 | 5.3 | 72% | Angola | 6.1 | 11.2 | 5.1 | 84% | ||
| 94.9 | 97.6 | 111.3 | 16.3 | 17% | Brazil | 97.8 | 103.7 | 5.9 | 6% | ||
| (9.8) | (7.8) | (7.3) | (2.5) | (26%) | Oil and gas realisations - Dif. to Brent (USD/boe) | (9.1) | (7.8) | (1.3) | (14%) | ||
| 6.1 | 5.4 | 4.8 | (1.4) | (22%) | Royalties (USD/boe) | 3.8 | 3.3 | (0.5) | (13%) | ||
| 9.0 | 4.6 | 3.3 | 6.7 | (5.8) (64%) | Production costs (USD/boe) | 8.6 | 3.9 | 7.5 | (4.7) | (55%) | |
| 10.5 | 14.5 | 14.2 | 12.0 | 3.7 | 35% | DD&A2 (USD/boe) |
10.6 | 14.1 | 11.7 | 3.5 | 33% |
| 396 | 408 | 469 | 434 | 73 | 18% | RCA Ebitda | 1,100 | 1,251 | 1,149 | 151 | 14% |
| 85 | 129 | 146 | 123 | 60 | 71% | Depreciation, Amortisation and Impairments2 | 251 | 394 | 326 | 142 | 57% |
| 311 | 278 | 324 | 311 | 13 | 4% | RCA Ebit | 849 | 857 | 823 | 8 | 1% |
| 311 | 281 | 324 | 312 | 13 | 4% | IFRS Ebit3 | 849 | 661 | 627 | (188) | (22%) |
| 15 | 17 | 3 | 3 | (12) | (78%) | Net Income from E&P Associates | 39 | 36 | 36 | (3) | (7%) |
1 Includes natural gas exported; excludes natural gas used or reinjected.
2 Includes abandonment provisions.
3 Includes unitisation impacts.
Working interest (WI) production increased 21% YoY to 125.5 kboepd, mainly driven by the continued development of the Lula project in Brazil and block 32 in Angola. Natural gas amounted to 12% of Galp's total production.
In Brazil, production was higher YoY, benefiting from the ramp-up of FPSO #9 and #8, with the latter unit reaching plateau production levels during the period, 10 months after the start of operations in the Lula Extreme South area. During the quarter, planned maintenance works were performed on FPSO #6.
It should also be highlighted that the FPSO to develop the Berbigão / Sururu areas, in the Iara project, is at its final location and production is expected to start before year-end.
In Angola, WI production increased 5.4 kbpd YoY to 14.2 kbpd, supported by block 32, namely with the rampup as planned of the Kaombo South FPSO, which started operations in April.
Group's net entitlement production increased YoY to 124.0 kboepd.
Average WI production during the first nine months of 2019 was 116.7 kboepd, 11% higher YoY, supported by the ramp-up of the Lula project and block 32.
Net entitlement production increased 11% YoY, to 114.9 kboepd.
RCA Ebitda was €469 m, higher YoY, supported by the higher production and U.S. Dollar appreciation against the Euro, which more than offset the lower oil prices environment in the period.
Production costs were €34 m, excluding costs related with operating leases of €35 m due to the application of IFRS 16. In unit terms, and on a net entitlement basis, production costs were \$3.3/boe. Excluding the impacts from accounting changes, production costs decreased YoY to \$6.7/boe, reflecting a higher production dilution from the projects' ramp-up.
Amortisation and depreciation charges (including abandonment provisions) increased €60 m YoY to €146 m, reflecting the higher operating asset base, both in Brazil and Angola, as well as a €23 m impact from IFRS 16. On a net entitlement basis, DD&A was \$14.2/boe, or \$12.0/boe on a comparable YoY basis.
RCA Ebit was €324 m, a 4% increase YoY.
RCA Ebitda was €1,251 m, up 14% YoY, on the back of the higher production in the period, stronger U.S. Dollar against the Euro and the application of IFRS 16, and despite the weaker oil prices.
Production costs were €109 m, excluding costs related with operating leases of €102 m. In unit terms, and on a net entitlement basis, production costs were \$3.9/boe or \$7.5/boe on a comparable YoY basis.
Amortisation and depreciation charges (including abandonment provisions) amounted to €394 m, an increase of €142 m YoY, impacted by the higher operating asset base and IFRS 16 effects of €68 m. On a net entitlement basis, DD&A was \$14.1/boe, (or \$11.7/boe on a comparable YoY basis, not considering IFRS 16).
RCA Ebit was €857 m, slightly higher YoY.
ANP approved the unitisation agreements related with the Atapu and Sépia accumulations, which became effective as of September 1, 2019. These had been submitted by the BM-S-11A and BM-S-24 consortia, respectively, along with Petrobras for the Transfer of Rights area (ToR) and Pré-Sal Petróleo S.A. (PPSA) for Atapu's open area. The agreements establish the tract participation each party will hold in the unitised areas, as well as the terms and conditions for the shared development of the projects.
The Atapu accumulation extends towards the BM-S-11A licence. The agreement establishes that the licence represents 17.03% of the unitised area (BM-S-11A + ToR + Open Area), with Galp now holding a 1.703% interest through its 10% stake in BM-S-11A. It should be highlighted that the BM-S-11A licence holds two additional accumulations, Berbigão and Sururu, which are still subject to unitisation processes. These agreements have been submitted to ANP in 2018 and are pending approval from the regulator.
The Sépia discovery extends towards the Sépia East area, within the BM-S-24 licence. The agreement establishes that the licence represents 12.07% of the unitised area (BM-S-24 + ToR), with Galp now holding a 2.414% interest through its 20% stake in BM-S-24. Block BM-S-24 also holds the large Júpiter discovery, which is a separate accumulation and therefore not included in this agreement.
Galp recognised in its financial statements the best estimate, as of September 30, 2019, for the impacts on its Brazilian subsidiary from the stake's adjustments related with Sépia. These include a negative €4 m nonrecurring item in net income and increased investments of €17 m, contributing to an estimated net equalisation payable position of €26 m.
Atapu's unitisation agreement impact has yet to be recognised on Galp's financial statements considering that this process is mostly concentrated in associated companies and therefore dependent on certain legal and regulatory procedures. Nevertheless, the amounts related with associated companies are estimated to originate a net equalisation receivable position of c.€150 m.
Considering the already approved unitisation agreements of Lula, Atapu and Sépia, as well as the remaining ongoing processes mentioned, Galp expects a to be in a net receivable position of c.€110 m.
Regarding the Greater Carcará project, the partners concluded the DST performed on the Carcará East well and are now analysing the data collected. During the quarter, the BM-S-8 partners also performed an additional DST on the Guanxuma well, concluded in early October, to further access the discovery.
In Mozambique, the Joint Venture developing Area 4 awarded the Midstream EPC contract for Phase I of the Rovuma LNG onshore facilities to the JFT consortium, composed by JGC, Fluor and TechnipFMC. The government of Mozambique also approved the project's LNG sales and purchase agreements, with the Area 4 partners working on the remaining milestones for the project's FID, expected during 2020. LNG production is estimated to start in 2025.
Results Third Quarter 2019 October, 2019
€m (RCA, except otherwise stated)
| Quarter | Nine Months | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| 3Q18 | 2Q19 | 3Q19 | 3Q19 (w/o IFRS16) |
Var. YoY | 2018 | 2019 | 2019 (w/o IFRS16) |
Var. YoY | |||
| 5.8 | 3.0 | 3.9 | (1.9) | (33%) | Galp refining margin (USD/boe) | 5.1 | 3.0 | (2.0) (40%) | |||
| 1.9 | 2.3 | 3.0 | 1.1 | 57% | Refining cost (USD/boe) | 2.1 | 2.6 | 0.4 | 20% | ||
| 0.0 | 0.1 | (0.4) | (0.5) | n.m. | Refining margin hedging1 (USD/boe) | 0.2 | (0.0) | (0.3) | n.m. | ||
| 28.0 | 26.1 | 20.6 | (7.4) | (26%) | Raw materials processed (mmboe) | 82.1 | 69.3 | (12.8) | (16%) | ||
| 25.6 | 23.0 | 15.3 | (10.3) (40%) | Crude processed (mmbbl) | 75.4 | 58.3 | (17.1) | (23%) | |||
| 4.5 | 4.4 | 3.9 | (0.6) | (13%) | Total oil products sales (mton) | 13.2 | 12.0 | (1.2) | (9%) | ||
| 2.3 | 2.3 | 2.3 | (0.0) | (2%) | Sales to direct clients (mton) | 6.4 | 6.6 | 0.2 | 3% | ||
| 195 | 142 | 104 | 92 | (91) | (47%) | RCA Ebitda | 492 | 317 | 279 | (175) | (36%) |
| 80 | 94 | 97 | 87 | 17 | 21% | Depreciation, Amortisation and Impairments | 250 | 283 | 252 | 33 | 13% |
| 115 | 48 | 7 | 5 | (108) | (94%) | RCA Ebit | 242 | 34 | 27 | (208) (86%) | |
| 154 | 101 | (23) | (25) | (178) | n.m. | IFRS Ebit | 429 | 84 | 78 | (345) (80%) | |
| 1 | 6 | 3 | 3 | 2 | n.m. | Net Income from R&M Associates | 2 | 7 | 7 | 4 | n.m. |
1 Impact on Ebitda.
Raw materials processed in Galp's refining system were 20.6 mmboe during the quarter, 26% lower YoY, impacted by planned maintenance, mostly focused on Sines' atmospheric distillation unit, as well as by the implementation of energy efficiency projects in key units, part of the "+\$1/boe" initiatives. Additionally, operational restrictions in September resulted in lower utilisation of the conversion units in the Sines refinery.
Crude oil accounted for 74% of raw materials processed, of which 91% corresponded to medium and heavy crudes.
Middle distillates (diesel and jet) accounted for 42% of production, gasoline for 22% and fuel oil for 18%. Consumption and losses accounted for 9% of raw materials processed.
Total product sales decreased 13% YoY, with lower refining throughput impacting exports. Volumes sold to direct clients declined 2% YoY to 2.3 mton.
Raw materials processed were 69.3 mmboe during the period, 16% lower YoY due to the planned maintenance works and operational restrictions in the refining system. Crude oil accounted for 84% of raw materials processed, of which 86% corresponded to medium and heavy crudes.
Middle distillates (diesel and jet) accounted for 45% of production, gasoline for 23% and fuel oil for 16%. Consumption and losses accounted for 8% of raw materials processed.
Total product sales decreased 9% YoY, driven by fewer exports considering lower refining throughput. Volumes sold to direct clients increased 3% YoY to 6.6 mton following the positive demand evolution in Iberia.
RCA Ebitda for the R&M business was €104 m, considering the application of IFRS 16 (positive €12 m impact in Ebitda). Results reflected a lower YoY performance from the refining activity, following the operational constraints during the period, and despite a robust contribution from the marketing activity.
Galp's refining margin was down YoY to \$3.9/boe, as the more supportive international environment was more than offset by the suboptimal performance of the refining system.
Refining costs were €56 m, higher YoY due to the maintenance works, or \$3.0/boe in unit terms also reflecting the lower volumes processed. Refining margin hedging had a negative impact on Ebitda of €8 m during the quarter.
The marketing activity continued to deliver a strong performance despite slightly lower volumes sold to direct clients.
RCA Ebit was €7 m. IFRS Ebit was negative by €23 m, considering a negative inventory effect of €30 m.
RCA Ebitda for the R&M business was €317 m, considering the application of the IFRS 16 (positive €37 m impact on Ebitda), down YoY impacted by a lower contribution from the refining activity.
Galp's refining margin decreased YoY to \$3.0/boe, reflecting the higher operational restrictions in the refining system during the period.
Refining costs increased YoY to €158 m, or \$2.6/boe in unit terms.
The oil products marketing activity benefited from robust sales to direct clients.
RCA Ebit was €34 m, while IFRS Ebit was €84 m, with a positive inventory effect of €25 m and a positive non-recurring item of €25 m related to a gain from the sale of logistics asset in the second quarter of 2019.
Results Third Quarter 2019 October, 2019
| €m (RCA, except otherwise stated) | |||
|---|---|---|---|
| -- | -- | ----------------------------------- | -- |
| Quarter | Nine Months | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 3Q18 | 2Q19 | 3Q19 | 3Q19 (w/o IFRS16) |
Var. YoY | 2018 | 2019 | 2019 (w/o IFRS16) |
Var. YoY | ||||
| 2,024 | 1,887 | 1,803 | (221) | (11%) | NG/LNG total sales volumes (mm3 ) |
5,891 | 5,654 | (237) | (4%) | |||
| 1,201 | 1,205 | 1,131 | (70) | (6%) | Sales to direct clients (mm3 ) |
3,559 | 3,485 | (75) | (2%) | |||
| 823 | 682 | 673 | (150) | (18%) | Trading (mm3 ) |
2,331 | 2,169 | (162) | (7%) | |||
| 931 | 788 | 762 | (170) | (18%) | Sales of electricity to direct clients (GWh) | 2,986 | 2,391 | (595) (20%) | ||||
| 328 | 328 | 304 | (23) | (7%) | Sales of electricity to the grid (GWh) | 1,023 | 972 | (52) | (5%) | |||
| 44 | 57 | 37 | 37 | (7) | (16%) | RCA Ebitda | 112 | 141 | 141 | 30 | 27% | |
| 30 | 46 | 26 | 26 | (4) | (14%) | Supply & Trading | 74 | 108 | 108 | 34 | 46% | |
| 14 | 11 | 11 | 11 | (3) | (21%) | Power | 38 | 33 | 33 | (4) | (12%) | |
| 5 | 5 | 5 | 5 | (0) | (9%) | Depreciation, Amortisation and Impairments | 15 | 14 | 14 | (1) | (8%) | |
| 39 | 53 | 32 | 32 | (7) | (17%) | RCA Ebit | 96 | 127 | 127 | 31 | 32% | |
| 44 | 48 | 32 | 32 | (12) | (27%) | IFRS Ebit | 108 | 119 | 119 | 11 | 10% | |
| 24 | 24 | 24 | 24 | 1 | 4% | Net Income from G&P Associates | 73 | 72 | 72 | (1) | (1%) |
Total volumes of NG/LNG sold reached 1,803 mm³, down 11% YoY, mostly impacted by lower trading volumes after the end of long-term LNG structured contracts. Sales to direct clients decreased 70 mm³ YoY to 1,131 mm³, due to a decline in volumes sold to the electrical and industrial segments, as a result of less favourable spot gas prices and own consumptions from Sines after maintenance works, respectively.
Sales of electricity to direct clients were 762 GWh, down 18% YoY, driven by lower volumes sold in Portugal.
Sales of electricity to the grid were down, to 304 GWh, also following the above-mentioned operational restrictions in Sines, which impacted the cogeneration plant.
Sales of NG/LNG were 5,654 mm3, slightly down YoY. Trading volumes were down, to 2,169 mm3, with the stronger network trading volumes not offsetting the fewer LNG trading opportunities. Sales to direct clients were down to 3,485 mm3, mostly driven by lower volumes sold to the electrical segment, and despite the increased sales to conventional clients, mostly industrial.
Sales of electricity to direct clients were 2,391 GWh, down 20% YoY, on the back of lower volumes to industrial clients.
Electricity sales to the grid were 972 GWh, down 5% YoY.
During the third quarter of 2019, RCA Ebitda decreased €7 m YoY to €37 m, impacted by the lower contribution from the trading business and by fewer market sourcing opportunities.
Ebitda for the Power generation activity was €11 m.
RCA and IFRS Ebit stood at €32 m.
Results from associated companies were stable at €24 m, of which €6 m related to the equity interest in Galp Gás Natural Distribuição, S.A. (GGND).
RCA Ebitda increased €30 m YoY to €141 m, as a result of a higher contribution from the natural gas and electricity commercial activity in Iberia.
RCA Ebitda for the Power generation activity was slightly down YoY to €33 m, following operational restrictions in the refining system.
RCA Ebit was €127 m, up 32% YoY while IFRS Ebit was €119 m.
Results from associated companies stood at to €72 m, of which €18 m related to GGND.
Early in October, Galp announced it has strengthened its commercial portfolio to provide renewable power to its clients by means of a framework agreement set with X-Elio to enter into synthetic Power Purchase Agreements. These agreements are based on c.200 MW solar power generation projects in Spain, which are currently under development, covering a total notional amount of 358 GWh per year during a period of 12 years.
| €m (RCA, except otherwise stated) | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| Quarter | Nine Months | ||||||||||
| 3Q18 | 2Q19 | 3Q19 | 3Q19 (w/o IFRS16) |
Var. YoY | 2018 | 2019 | 2019 (w/o IFRS16) |
Var. YoY | |||
| 4,540 | 4,587 | 4,284 | 4,284 | (256) | (6%) | Turnover | 12,977 | 12,429 | 12,429 | (548) | (4%) |
| (3,382) | (3,516) | (3,138) | (3,138) | (245) | (7%) | Cost of goods sold | (9,726) | (9,352) | (9,352) | (374) | (4%) |
| (432) | (404) | (401) | (449) | (31) | (7%) | Supply & Services | (1,336) | (1,198) | (1,338) | (138) (10%) | |
| (87) | (73) | (90) | (90) | 2 | 3% | Personnel costs | (241) | (245) | (245) | 4 | 2% |
| 8 | 22 | (36) | (36) | (44) | n.m. | Other operating revenues (expenses) | 62 | 92 | 92 | 30 | 49% |
| (5) | (1) | (1) | (1) | (4) (88%) | Impairments on accounts receivable | (11) | 0 | 0 | 12 | n.m. | |
| 642 | 615 | 619 | 571 | (23) | (4%) | RCA Ebitda | 1,725 | 1,728 | 1,587 | 3 | 0% |
| 686 | 666 | 589 | 541 | (97) | (14%) | IFRS Ebitda | 1,924 | 1,569 | 1,428 | (355) | (18%) |
| (172) | (229) | (249) | (215) | 77 | 45% | Depreciation, Amortisation and Impairments | (519) | (695) | (595) | 175 | 34% |
| (0) | 0 | (0) | (0) | 0 | n.m. | Provisions | (0) | 0 | 0 | 0 | n.m. |
| 470 | 386 | 370 | 356 | (100) | (21%) | RCA Ebit | 1,205 | 1,033 | 992 | (172) (14%) | |
| 514 | 437 | 340 | 326 | (175) (34%) | IFRS Ebit | 1,404 | 879 | 838 | (526) (37%) | ||
| 39 | 47 | 31 | 31 | (8) | (21%) | Net income from associates | 113 | 114 | 114 | 1 | 1% |
| (34) | (10) | (89) | (13) | 55 | n.m. | Financial results | (6) | (97) | 21 | 92 | n.m. |
| (9) | (5) | (4) | (4) | (4) (49%) | Net interests | (33) | (11) | (11) | (22) (66%) | ||
| 4 | 5 | 7 | 7 | 3 | 84% | Capitalised interest | 30 | 18 | 18 | (12) | (41%) |
| (15) | 7 | (35) | 17 | 20 | n.m. | Exchange gain (loss) | (33) | (34) | 16 | 1 | 4% |
| (6) | 15 | (30) | (30) | 24 | n.m. | Mark-to-market of hedging derivatives | 43 | 16 | 16 | (28) (64%) | |
| - | (23) | (23) | 0 | (23) | n.m. | Operating leases interest (IFRS 16) | - | (68) | 0 | (68) | n.m. |
| (8) | (8) | (3) | (3) | (5) (62%) | Other financial costs/income | (13) | (18) | (18) | 5 | 36% | |
| 475 | 424 | 312 | 373 | (164) (34%) | RCA Net income before taxes and minority interests | 1,312 | 1,050 | 1,127 | (262) (20%) | ||
| (221) | (190) | (180) | (200) | (41) | (19%) | Taxes | (594) | (543) | (568) | (51) | (9%) |
| (117) | (125) | (124) | (124) | 7 | 6% | Taxes on oil and natural gas production1 | (329) | (359) | (359) | 30 | 9% |
| (43) | (34) | (31) | (43) | (12) | (27%) | Non-controlling interests | (120) | (104) | (118) | (16) | (14%) |
| 212 | 200 | 101 | 131 | (111) (52%) | RCA Net income | 598 | 403 | 441 | (194) (33%) | ||
| (10) | 14 | (17) | (17) | 6 | 62% | Non-recurring items | (38) | (128) | (128) | 90 | n.m. |
| 201 | 214 | 84 | 114 | (117) (58%) | RC Net income | 560 | 275 | 313 | (285) | (51%) | |
| 34 | 17 | (24) | (24) | (58) | n.m. | Inventory effect | 137 | 8 | 8 | (129) (94%) | |
| 235 | 231 | 60 | 90 | (175) (74%) | IFRS Net income | 697 | 283 | 321 | (413) (59%) |
1 Includes SPT payable in Brazil and IRP payable in Angola.
RCA Ebitda decreased 4% YoY to €619 m, already considering the application of the IFRS 16 standard, with a positive effect of €48 m. The higher E&P contribution YoY, driven by the production ramp-up, was offset by the weaker refining performance, as well as the lower commodity prices. IFRS Ebitda was €589 m, considering an inventory effect of €31 m and non-recurring items of €1 m.
RCA Ebit was down YoY to €370 m, considering a €34 m impact in depreciation charges from the application of IFRS 16 and higher DD&A, namely in the upstream segment. IFRS Ebit was €340 m.
During the quarter, financial results were negative €89 m, considering interest charges related to operating leases from the application of IFRS 16 standard of €23 m. Exchange losses amounted to €35 m, reflecting the effect of the Brazilian Real depreciation on the IFRS 16 lease liabilities, and the €30 m mark-to-market adjustment was mostly related with derivatives to cover natural gas price risks.
RCA taxes decreased from €221 m to €180 m, following the lower operating results, namely from the downstream activities.
Non-controlling interests of €31 m were mainly attributable to Sinopec's stake in Petrogal Brasil.
RCA net income was €101 m, while IFRS net income was €60 m, with non-recurring items of €17 m, which considers a €9 m impact from the unitisation agreements, and an inventory effect of €24 m.
RCA Ebitda was €1,728 m, flat YoY, considering the positive impact from the application of the IFRS 16 standard. Excluding such effect, RCA Ebitda would have been down reflecting the lower contribution from R&M, due to a weaker refining performance.
RCA Ebit was €1,033 m, down YoY, impacted by higher DD&A, given the increased asset base in the upstream, and impacted by depreciation charges from the application of IFRS 16. IFRS Ebit was €879 m.
Financial results were negative €97 m, impacted by the interests expenses related with operational leases under IFRS 16, as well as exchange losses in the amount of €34 m. It is worth highlighting the YoY decrease in net interests following the reduction in debt and in the average cost of funding.
RCA taxes decreased YoY to €543 m, reflecting the lower operating results, namely in the R&M business.
Non-controlling interests of €104 m were mainly attributable to Sinopec's 30% stake in Petrogal Brasil.
RCA net income was €403 m and IFRS net income reached €283 m in the first nine months of 2019. Nonrecurring items, which amounted to €128 m, include the impact from the unitisation of the Lula and Sépia fields, as well as c.€40 m related to CESE.
The provision related to CESE results from the strict applicability of accounting standards. However, in Galp's opinion, based on the opinion of renowned legal experts, the laws regarding CESE have no legal grounds and, accordingly, such amounts are not due.
| Quarter | Nine Months | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| 3Q18 | 2Q19 | 3Q19 | Var. YoY | 2018 | 2019 | Var. YoY | ||||
| 188 | 177 | 106 | (82) (43%) | Exploration & Production | 481 | 416 | (65) | (13%) | ||
| 117 | 91 | 12 | (105) (90%) | Exploration and appraisal activities | 192 | 119 | (73) (38%) | |||
| 71 | 87 | 95 | 24 | 33% | Development and production activities | 289 | 297 | 8 | 3% | |
| 44 | 54 | 80 | 35 | 80% | Refining & Marketing | 109 | 149 | 40 | 37% | |
| 0 | 2 | 1 | 1 | n.m. | Gas & Power | 7 | 4 | (2) (37%) | ||
| 1 | 2 | 1 | 0 | 54% | Others | 1 | 4 | 3 | n.m. | |
| 234 | 236 | 188 | (45) | (19%) | Capex1 | 597 | 573 | (24) | (4%) |
1 Capex figures based in change in assets during the period.
Capex totalled €188 m during the quarter, of which 57% allocated to the E&P business.
Investment in development and production activities reached €95 m and were mostly related with the execution of Lula in block BM-S-11, as well as Coral South FLNG in Mozambique.
Investments in downstream activities were mainly directed to energy efficiency improvements in the refining system, part of the "\$1/boe" initiatives, and maintenance works.
During the first nine months of 2019, capex reached €573 m. E&P accounted for 73% of capex, with development and production activities accounting for 71% of the total investments in the upstream. E&A capex was mainly related with works in the North of Carcará and BM-S-8 block and the acquisition of the final 3% stake in BM-S-8.
Investments in downstream were mainly focused on the improvement of refining energy efficiency as well as maintenance activities.
€m (IFRS figures)
| Quarter | Nine Months | ||||||
|---|---|---|---|---|---|---|---|
| 3Q18 | 2Q19 | 3Q19 | 3Q19 (w/o IFRS16) |
2018 | 2019 | 2019 (w/o IFRS16) |
|
| 514 | 410 | 339 | 325 | Ebit1 | 1,404 | 1,051 | 1,010 |
| 7 | 76 | 28 | 28 | Dividends from associates | 74 | 114 | 114 |
| 171 | 225 | 249 | 215 | Depreciation, Amortisation and Impairments | 519 | 690 | 591 |
| (186) | 29 | (55) | (55) | Change in Working Capital | (387) | (23) | (23) |
| (163) | (127) | (126) | (126) | Corporate income taxes and oil and gas production taxes | (418) | (389) | (389) |
| 343 | 613 | 435 | 387 | Cash flow from operations | 1,192 | 1,445 | 1,304 |
| (246) | (223) | (189) | (189) | Net capex | (614) | (564) | (564) |
| (10) | 0 | (5) | (5) | Net financial expenses | (64) | (46) | (46) |
| - | (49) | (48) | - | Operating leases payments (IFRS 16)2 | - | (141) | - |
| 87 | 342 | 192 | 192 | Free cash flow | 514 | 694 | 694 |
| (11) | (39) | (0) | (0) | Dividends paid to non-controlling interests3 | (15) | (107) | (107) |
| (228) | (296) | (262) | (262) | Dividends paid to shareholders | (477) | (559) | (559) |
| (153) | 7 | (70) | (70) | Post-dividend free cash flow | 22 | 28 | 28 |
| (8) | (1) | 22 | 22 | Others | (35) | 64 | 64 |
| 161 | (5) | 47 | 47 | Change in net debt | 12 | (92) | (92) |
1 Adjusted for the non-cash unitisation non-recurring item.
2 Includes both interest and capital payments, which in 3Q19 amounted to €23 m and €25 m, respectively.
3 Dividends paid to Sinopec.
CFFO was up YoY to €435 m, considering the €48 m positive effect from the IFRS 16, benefiting from the higher contribution from the upstream business, which offset the negative impact from the refining in the period.
FCF was €192 m, considering a net capex of €189 m. Cash flow after the payment of dividends to shareholders and to non-controlling interests was negative by €70 m.
CFFO of €1.4 bn impacted by the weaker performance from refining activities. The €253 m YoY positive change reflects a significant working capital build in 2018 and a higher upstream contribution during 2019.
During the first nine months of 2019, FCF reached €694 m. Post-dividends, the cash flow was €28 m, considering non-controlling interest payments of €107 m, mainly to Sinopec, and full year dividends to shareholders amounting to €559 m.
€m (IFRS figures)
| 31 Dec., 2018 | 30 Jun., 2019 | 30 Sep., 2019 | Var. vs 31 Dec., 2018 |
Var. vs 30 Jun., 2019 |
|
|---|---|---|---|---|---|
| Net fixed assets1 | 7,340 | 7,424 | 7,437 | 98 | 14 |
| Rights of use (IFRS 16) | - | 1,240 | 1,202 | 1,202 | (38) |
| Working capital | 814 | 782 | 837 | 23 | 55 |
| Loan to Sinopec | 176 | - | - | (176) | - |
| Other assets/liabilities1 | (546) | (779) | (879) | (333) | (100) |
| Capital employed | 7,784 | 8,666 | 8,597 | 814 | (69) |
| Short term debt | 559 | 671 | 566 | 6 | (106) |
| Medium-Long term debt | 2,686 | 2,337 | 2,326 | (360) | (11) |
| Total debt | 3,245 | 3,008 | 2,892 | (353) | (116) |
| Cash and equivalents | 1,508 | 1,410 | 1,246 | (261) | (164) |
| Net debt | 1,737 | 1,598 | 1,645 | (92) | 47 |
| Operating leases (IFRS 16) | - | 1,252 | 1,274 | 1,274 | 22 |
| Equity | 6,047 | 5,817 | 5,678 | (369) | (139) |
| Equity, net debt and operating leases | 7,784 | 8,666 | 8,597 | 814 | (69) |
1 For the periods ending in 30 June 2019 and 30 September 2019, net fixed assets and other assets/liabilities include the estimated impact from unitisations.
On September 30, 2019, net fixed assets were €7,437 m, up €14 m QoQ. Work-in-progress, mainly related to the E&P business, stood at €2,013 m.
Note that, as of January 1st, assets and liabilities were adjusted to incorporate impacts from IFRS 16, leading to an increase in capital employed.
€m (except otherwise stated)
| 31 Dec., 2018 | 30 Jun., 2019 | 30 Sep., 2019 | Var. vs 31 Dec., 2018 |
Var. vs 30 Jun., 2019 |
|
|---|---|---|---|---|---|
| Bonds | 2,142 | 1,819 | 1,827 | (315) | 8 |
| Bank loans and other debt | 1,103 | 1,189 | 1,065 | (38) | (125) |
| Cash and equivalents | (1,508) | (1,410) | (1,246) | 261 | 164 |
| Net debt | 1,737 | 1,598 | 1,645 | (92) | 47 |
| Operating leases (IFRS 16) | - | 1,252 | 1,274 | 1,274 | 22 |
| Average life (years)1 | 2.7 | 2.8 | 2.6 | (0.1) | (0.2) |
| Average funding cost1 | 2.5% | 1.8% | 1.8% | (0.7 p.p.) | 0.0 p.p. |
| Debt at floating rate1 | 48% | 59% | 60% | 13 p.p. | 1 p.p. |
| Net debt to Ebitda RCA2 | 0.8 | 0.7x | 0.8x | - | - |
1 Debt does not include operating leases.
2 Ratio considers the LTM Ebitda RCA (€2,080 m at 30 September 2019), adjusted for the impact from the application of IFRS 16 (€140 m at 30 September 2019).
On September 30, 2019 net debt was €1,645 m, up €47 m QoQ, as the cash generation during the period did not fully cover the dividends paid. Liabilities associated with operating leases were €1,274 m. Net debt to RCA Ebitda was 0.8x.
The average funding cost stood at 1.8% and the average life was 2.6 years, with medium and long term debt accounting for 80% of total debt.
At the end of the period, Galp had unused credit lines of approximately €1.4 bn, of which c.75% were contractually guaranteed.
| Third Quarter | 2019 | Nine Months | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| IFRS Ebitda |
Inventory effect |
RC Ebitda |
Non-recurring items |
RCA Ebitda |
IFRS Ebitda |
Inventory effect |
RC Ebitda |
Non-recurring items |
RCA Ebitda |
||
| 589 | 31 | 619 | (1) | 619 | Galp | 1,569 | (17) | 1,552 | 175 | 1,728 | |
| 470 | - | 470 | (1) | 469 | E&P | 1,050 | - | 1,050 | 201 | 1,251 | |
| 74 | 30 | 104 | - | 104 | R&M | 367 | (25) | 342 | (25) | 317 | |
| 37 | 0 | 37 | - | 37 | G&P | 133 | 9 | 141 | - | 141 | |
| 8 | - | 8 | - | 8 | Others | 19 | - | 19 | - | 19 |
€m
| Third Quarter | 2018 | Nine Months | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| IFRS Ebitda |
Inventory effect |
RC Ebitda |
Non-recurring items |
RCA Ebitda |
IFRS Ebitda |
Inventory effect |
RC Ebitda |
Non-recurring items |
RCA Ebitda |
|
| 686 | (45) | 641 | 0 | 642 | Galp | 1,924 | (169) | 1,754 | (30) | 1,725 |
| 396 | - | 396 | - | 396 | E&P | 1,100 | - | 1,100 | - | 1,100 |
| 235 | (40) | 195 | 0 | 195 | R&M | 679 | (158) | 521 | (30) | 491 |
| 49 | (5) | 44 | - | 44 | G&P | 123 | (12) | 112 | - | 112 |
| 6 | - | 6 | - | 6 | Others | 21 | - | 21 | - | 21 |
€m
| Third Quarter | 2019 | Nine Months | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| IFRS Ebit |
Inventory effect |
RC Ebit |
Non-recurring items |
RCA Ebit |
IFRS Ebit |
Inventory effect |
RC Ebit |
Non-recurring items |
RCA Ebit |
|
| 340 | 31 | 370 | (1) | 370 | Galp | 879 | (17) | 862 | 171 | 1,033 |
| 324 | - | 324 | (1) | 324 | E&P | 661 | - | 661 | 196 | 857 |
| (23) | 30 | 7 | - | 7 | R&M | 84 | (25) | 59 | (25) | 34 |
| 32 | 0 | 32 | - | 32 | G&P | 119 | 9 | 127 | - | 127 |
| 7 | - | 7 | - | 7 | Others | 15 | - | 15 | - | 15 |
€m 2018 IFRS Ebit Inventory effect RC Ebit Non-recurring items RCA Ebit IFRS Ebit Inventory effect RC Ebit Non-recurring items RCA Ebit 514 (45) 470 0 470 Galp 1,404 (169) 1,235 (30) 1,205 311 - 311 - 311 E&P 849 - 849 - 849 154 (40) 115 0 115 R&M 429 (158) 271 (30) 242 44 (5) 39 - 39 G&P 108 (12) 96 - 96 5 - 5 - 5 Others 18 - 18 - 18 Third Quarter Nine Months
€m
| Quarter | Nine Months | |||||
|---|---|---|---|---|---|---|
| 3Q18 | 2Q19 | 3Q19 | 2018 | 2019 | ||
| 0.4 | (28.5) | (0.6) | Non-recurring items impacting Ebitda | (29.7) | 175.3 | |
| - | (3.0) | (0.6) | Margin (Change in production) - Lula unitisation | - | 200.7 | |
| - | (25.4) | - | Gains/losses on disposal of assets | - | (25.4) | |
| 0.4 | - | - | Employee restructuring charges | 1.7 | - | |
| - | - | - | Litigation costs (revenues) | (31.4) | - | |
| - | 0.1 | 0.0 | Non-recurring items impacting non-cash costs | - | (4.4) | |
| - | 0.1 | 0.0 | Depreciations and Amortisations - Lula unitisation | - | (4.4) | |
| 0.3 | 0.3 | 13.1 | Non-recurring items impacting financial results | 7.5 | 32.6 | |
| 0.3 | 0.4 | 4.0 | Gains/losses on financial investments | 7.5 | 11.3 | |
| - | (0.2) | 9.1 | Financial costs - Lula and Sépia unitisation | - | 21.4 | |
| 9.6 | 13.1 | 5.7 | Non-recurring items impacting taxes | 60.2 | (32.5) | |
| (0.0) | 3.7 | (3.7) | Income taxes on non-recurring items | 9.5 | (72.1) | |
| 9.7 | 9.3 | 9.4 | Energy sector contribution taxes | 50.7 | 39.6 | |
| (0.0) | 0.6 | (1.5) | Non-controlling interests | (0.1) | (42.9) | |
| 10.3 | (14.5) | 16.7 | Total non-recurring items | 37.9 | 128.1 |
| €m | ||||||
|---|---|---|---|---|---|---|
| Quarter | Nine Months | |||||
| 3Q18 | 2Q19 | 3Q19 | 2018 | 2019 | ||
| 4,386 | 4,436 | 4,137 | Sales | 12,484 | 11,973 | |
| 154 | 151 | 147 | Services rendered | 493 | 456 | |
| 21 | 101 | (31) | Other operating income | 157 | 198 | |
| 4,561 | 4,688 | 4,253 | Total operating income | 13,134 | 12,627 | |
| (3,338) | (3,491) | (3,168) | Inventories consumed and sold | (9,557) | (9,536) | |
| (432) | (404) | (401) | Materials and services consumed | (1,336) | (1,198) | |
| (88) | (73) | (90) | Personnel costs | (243) | (245) | |
| (5) | (1) | (1) | Impairments on accounts receivable | (11) | 0 | |
| (13) | (54) | (5) | Other operating costs | (64) | (80) | |
| (3,875) | (4,022) | (3,664) | Total operating costs | (11,211) | (11,059) | |
| 686 | 666 | 589 | Ebitda | 1,924 | 1,569 | |
| (172) | (230) | (249) | Depreciation, Amortisation and Impairments | (519) | (690) | |
| 514 | 437 | 340 | Ebit | 1,404 | 879 | |
| 39 | 47 | 27 | Net income from associates | 106 | 103 | |
| (34) | (9) | (98) | Financial results | (6) | (119) | |
| 11 | 8 | 9 | Interest income | 31 | 29 | |
| (20) | (14) | (14) | Interest expenses | (64) | (40) | |
| 4 | 5 | 7 | Capitalised interest | 30 | 18 | |
| - | (23) | (23) | Operating leases interest (IFRS 16) | - | (68) | |
| (15) | 7 | (35) | Exchange gain (loss) | (33) | (34) | |
| (6) | 15 | (30) | Mark-to-market of hedging derivatives | 43 | 16 | |
| (8) | (7) | (12) | Other financial costs/income1 | (13) | (39) | |
| 520 | 474 | 269 | Income before taxes | 1,504 | 863 | |
| (232) | (200) | (169) | Taxes2 | (636) | (470) | |
| (10) | (9) | (9) | Energy sector contribution taxes3 | (51) | (49) | |
| 278 | 265 | 90 | Income before non-controlling interests | 817 | 344 | |
| (43) | (34) | (30) | Income attributable to non-controlling interests | (120) | (61) | |
| 235 | 231 | 60 | Net income | 697 | 283 |
1 Mostly related to Lula's unitisation process
2 Includes SPT payable in Brazil and IRP payable in Angola.
3 Includes €14.5 m, €25.1 m and €9.0 m related to CESE I, CESE II and FNEE, respectively, during the first nine months of 2019.
| €m | |||
|---|---|---|---|
| 31 Dec., 2018 | 30 Jun., 2019 | 30 Sep., 2019 | |
| Assets | |||
| Tangible fixed assets | 5,333 | 5,324 | 5,539 |
| Goodwill | 85 | 86 | 87 |
| Other intangible fixed assets | 547 | 597 | 576 |
| Rights of use (IFRS 16) | - | 1,240 | 1,202 |
| Investments in associates | 1,295 | 1,297 | 1,089 |
| Financial investments held for sale | 3 | 3 | 3 |
| Receivables | 298 | 344 | 375 |
| Deferred tax assets | 369 | 428 | 439 |
| Financial investments | 31 | 41 | 40 |
| Total non-current assets | 7,960 | 9,359 | 9,351 |
| Inventories1 | 1,171 | 1,211 | 1,210 |
| Trade receivables | 1,032 | 1,209 | 1,183 |
| Other receivables | 636 | 689 | 919 |
| Loan to Sinopec | 176 | - | - |
| Financial investments | 200 | 107 | 107 |
| Current Income tax recoverable | 4 | 7 | 0 |
| Cash and equivalents | 1,508 | 1,410 | 1,246 |
| Total current assets | 4,726 | 4,632 | 4,665 |
| Total assets | 12,687 | 13,991 | 14,016 |
| Equity | |||
| Share capital | 829 | 829 | 829 |
| Share premium | 82 | 82 | 82 |
| Reserves | 1,843 | 1,403 | 1,449 |
| Retained earnings | 1,091 | 2,054 | 1,791 |
| Net income | 741 | 223 | 283 |
| Total equity attributable to equity holders of the parent | 4,587 | 4,591 | 4,434 |
| Non-controlling interests | 1,460 | 1,226 | 1,243 |
| Total equity | 6,047 | 5,817 | 5,678 |
| Liabilities | |||
| Bank loans and overdrafts | 1,041 | 518 | 499 |
| Bonds | 1,644 | 1,819 | 1,827 |
| Operating leases (IFRS 16) | - | 1,073 | 1,089 |
| Other payables2 | 126 | 122 | 127 |
| Retirement and other benefit obligations | 304 | 298 | 297 |
| Deferred tax liabilities | 196 | 261 | 280 |
| Other financial instruments | 37 | 8 | 12 |
| Provisions | 658 | 767 | 808 |
| Total non-current liabilities | 4,006 | 4,865 | 4,938 |
| Bank loans and overdrafts | 61 | 671 | 566 |
| Bonds | 498 | - | - |
| Operating leases (IFRS 16) | - | 179 | 186 |
| Trade payables | 933 | 1,075 | 1,060 |
| Other payables | 958 | 1,160 | 1,391 |
| Other financial instruments | 102 | 114 | 103 |
| Income tax payable | 82 | 109 | 95 |
| Total current liabilities | 2,634 | 3,309 | 3,400 |
| Total liabilities | 6,640 | 8,174 | 8,338 |
| Total equity and liabilities | 12,687 | 13,991 | 14,016 |
| 1 Includes €50.6 m in inventories made on behalf of third parties as of 30 September 2019. |
2 Includes €1.3 m in advanced payments related to inventories from third parties as of 30 September 2019.
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 September 30, 2019 and 2018, and June 30, 2019. The information in the consolidated financial position is reported as of September 30 and June 30, 2019 and as of 31 December 2018.
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 material items considering the Group's activities.
For the purpose of evaluating Galp's operating performance, RCA profitability 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.
With regards to risks and uncertainties, please read chapter 7. Part I – C. III Internal control and risk management of Galp's Integrated Report 2018, as no material changes are expected during the following six months.
Galp started adopting IFRS 16 as of January 1, 2019. Under this accounting standard, most lease agreements were recognised in the balance sheet as a right-of-use asset and a financial liability. Subsequently, the right-of-use asset is depreciated through the shortest of its economic useful life or the lease agreement tenure. The financial liability considers interest based on the agreement's effective interest rate or the contracting entity's borrowing rate. Lease payments are reflected as a reduction of lease liabilities.
The adoption of IFRS 16 will not impact the Company's cash generation.
| Condensed Consolidated Statement of Financial Position 27 | ||
|---|---|---|
| Condensed Consolidated Income Statement and Consolidated Statement of Comprehensive Income28 | ||
| Condensed Consolidated Statement of Changes in Equity29 | ||
| Condensed Consolidated Statement of Cash Flows 30 | ||
| Notes to the condensed consolidated financial statements 31 | ||
| 1. | Corporate information31 | |
| 2. | Basis for preparation and changes to the Group's accounting policies31 | |
| 3. | Segment reporting32 | |
| 4. | Tangible assets 36 | |
| 5. | Intangible assets and Goodwill37 | |
| 6. | Leases 38 | |
| 7. | Investments in associates and joint ventures39 | |
| 8. | Inventories40 | |
| 9. | Trade and other receivables 41 | |
| 10. | Other financial assets 42 | |
| 11. | Cash and cash equivalents 42 | |
| 12. | Financial debt 43 | |
| 13. | Other payables 44 | |
| 14. | Taxes and other contributions 44 | |
| 15. | Post-employment benefits 46 | |
| 16. | Provisions 46 | |
| 17. | Other financial instruments 46 | |
| 18. | Non-controlling interests 47 | |
| 19. | Revenue and income48 | |
| 20. | Costs and expenses48 | |
| 21. | Financial results 49 | |
| 22. | Approval of the financial statements 50 | |
| 23. | Explanation regarding translation 50 | |
| (Amounts stated in million Euros - € m) | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| Assets | Notes | September 2019 | December 2018 | ||||||
| Non-current assets: | |||||||||
| Tangible assets | 4 | 5,539 | 5,333 | ||||||
| Intangible assets and Goodwill | 5 | 663 | 632 | ||||||
| Right-of-use of assets | 6 | 1,202 | - | ||||||
| Investments in associates and joint ventures | 7 | 1,089 | 1,295 | ||||||
| Deferred tax assets | 14.1 | 439 | 369 | ||||||
| Other receivables | 9.2 | 375 | 298 | ||||||
| Other financial assets | 10 | 43 | 33 | ||||||
| Total non-current assets: | 9,351 | 7,960 | |||||||
| Current assets: | |||||||||
| Inventories | 8 | 1,210 | 1,171 | ||||||
| Other financial investments | 10 | 107 | 200 | ||||||
| Trade receivables | 9.1 | 1,183 | 1,032 | ||||||
| Other receivables | 9.2 | 919 | 640 | ||||||
| Loans to Sinopec | 9.4 | - | 176 | ||||||
| Cash and cash equivalents | 11 | 1,246 | 1,508 | ||||||
| Total current assets: | 4,665 | 4,726 | |||||||
| Total assets: | 14,016 | 12,687 | |||||||
| Equity: Share capital and share premium 911 911 Reserves 1,449 1,843 Retained earnings 2,075 1,832 Total equity attributable to shareholders: 4,434 4,587 Non-controlling interests 18 1,243 1,460 Total equity: 5,678 6,047 |
|---|
| Liabilities: |
| Non-current liabilities: |
| Financial debt 12 2,326 2,686 |
| Lease liabilities 6 1,089 - |
| Other payables 13 127 126 |
| 15 Post-employment and other employee benefit liabilities 297 304 |
| 14.1 Deferred tax liabilities 280 196 |
| Other financial instruments 17 12 37 |
| Provisions 16 808 658 |
| Total non-current liabilities: 4,938 4,006 |
| Current liabilities: |
| Financial debt 12 566 559 |
| Lease liabilities 6 186 - |
| Trade payables 1,060 933 |
| Other payables 13 1,391 958 |
| Other financial instruments 17 103 102 |
| Current income tax payable 95 82 |
| Total current liabilities: 3,400 2,634 |
| Total liabilities: 8,338 6,640 |
| Total equity and liabilities: 14,016 12,687 |
The accompanying notes form an integral part of the condensed consolidated statement of financial position and must be read in conjunction.
Condensed Consolidated Income Statement and Consolidated Statement of Comprehensive Income for the nine-month periods ended 30 September 2019 and 30 September 2018 (Amounts stated in million Euros - € m) Unid: € m
| September | September | ||
|---|---|---|---|
| Notes | 2019 | 2018 | |
| Sales | 19 | 11,973 | 12,484 |
| Services rendered | 19 | 456 | 493 |
| Other operating income | 19 | 198 | 157 |
| Financial income | 21 | 47 | 77 |
| Earnings from associates and joint ventures | 7/19 | 103 | 106 |
| Total revenues and income: | 12,778 | 13,317 | |
| Cost of sales | 20 | (9,536) | (9,557) |
| Supplies and external services | 20 | (1,198) | (1,336) |
| Employee costs | 20 | (245) | (243) |
| Amortisation, depreciation and impairment losses on fixed assets | 20 | (690) | (519) |
| Provisions and impairment losses on receivables | 20 | - | (11) |
| Other operating costs | 20 | (80) | (64) |
| Financial expenses | 21 | (166) | (83) |
| Total costs and expenses: | (11,915) | (11,813) | |
| Profit before taxes and other contributions: | 863 | 1,504 | |
| Taxes and SPT | 14.1 | (470) | (636) |
| Energy sector extraordinary contribution | 14.2 | (49) | (51) |
| Consolidated net profit for the period | 344 | 817 | |
| Income attributable to: | |||
| Galp Energia, SGPS, S.A. Shareholders | 283 | 697 | |
| Non-controlling interests | 18 | 61 | 120 |
| Basic and Diluted Earnings per share (in Euros) | 0.34 | 0.84 | |
| Consolidated net profit for the period | 344 | 817 | |
| Items which will not be recycled in the future through net income: | |||
| Remeasurements | 30 | 4 | |
| Items which may be recycled in the future through net income: | - | ||
| Currency translation adjustments | 81 | (273) | |
| Hedging reserves | (1) | (11) | |
| Income taxes related to the above items | 21 | 62 | |
| Total Comprehensive income for the period, attributable to: | 474 | 599 | |
| Galp Energia, SGPS, S.A. Shareholders | 407 | 548 | |
| Non-controlling interests | 67 | 51 |
The accompanying notes form an integral part of the condensed consolidated income statement and consolidated statement of comprehensive income.
Condensed Consolidated Statement of changes in equity for the nine-month periods ended 30 September 2019 and 30 September 2018 (Amounts stated in million Euros - € m)
| Share Capital and Share Premium |
Reserves | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| Share Capital |
Share Premium |
Currency Translation Reserves |
Hedging Reserves |
Other Reserves |
Retained earnings |
Sub-Total | Non controlling interests |
Total | |
| As at 1 January 2018 | 829 | 82 | (151) | 4 | 2,688 | 889 | 4,341 | 1,435 | 5,776 |
| Consolidated net income for the period | - | - | - | - | - | 697 | 697 | 120 | 817 |
| Other gains and losses recognised in equity | - | - | (154) | 9 | - | (4) | (149) | (69) | (218) |
| Comprehensive income for the period | - | - | (154) | 9 | - | 693 | 548 | 51 | 599 |
| Dividends distributed | - | - | - | - | - | (477) | (477) | (28) | (505) |
| Increase in reserves | - | - | - | - | - | - | - | (64) | (64) |
| As at 30 September 2018 | 829 | 82 | (305) | 13 | 2,688 | 1,105 | 4,412 | 1,394 | 5,806 |
| Balance as at 1 January 2019 | - 829 |
- 82 |
- (186) |
- 6 |
- 2,024 |
- 1,832 |
- 4,587 |
- 1,460 |
- 6,047 |
| Consolidated net income for the period | - | - | - | - | - | 283 | 283 | 61 | 344 |
| Other gains and losses recognised in equity | - | - | 95 | (1) | - | 30 | 123 | 6 | 130 |
| Comprehensive income for the period | - | - | 95 | (1) | - | 313 | 406 | 67 | 474 |
| Dividends distributed | - | - | - | - | - | (559) | (559) | (40) | (599) |
| Increase/decrease in reserves | - | - | - | - | (489) | 489 | - | (244) | (244) |
| Balance as at 30 September 2019 | 829 | 82 | (91) | 5 | 1,535 | 2,075 | 4,434 | 1,243 | 5,678 |
The accompanying notes form an integral part of the condensed consolidated statement of changes in equity and must be read in conjunction.
| Notes | September 2019 |
September 2018 |
|
|---|---|---|---|
| Operating activities: | |||
| Cash received from customers | 13,831 | 14,671 | |
| (Payments) to suppliers | (8,558) | (9,452) | |
| (Payments) relating to tax on oil products ("ISP") | (1,905) | (1,940) | |
| (Payments) relating to VAT | (1,228) | (1,226) | |
| (Payments) relating to royalties, levies, "PIS" and "COFINS" and Others | (139) | (124) | |
| (Payments) relating to payroll | (254) | (245) | |
| Other (payments) relating to the operational activity | (29) | (149) | |
| (Payments) of income taxes - income tax (IRC), oil income tax (IRP), special | |||
| participation (SPT) | (389) | (418) | |
| Cash received relating to dividends | 7 | 114 | 74 |
| Cash Flows from operating activities (1) | 1,445 | 1,191 | |
| Investing activities: | |||
| Cash received from disposal of tangible and intangible assets | 33 | - | |
| (Payments) for the acquisition of tangible and intangible assets | (779) | (842) | |
| Cash received relating to financial investments | 300 | 307 | |
| (Payments) relating to financial investments | (53) | (69) | |
| Cash received from loans granted | 254 | 61 | |
| (Payments) relating to loans granted | (98) | (38) | |
| Cash received from interests and similar income | 26 | 20 | |
| Cash Flows used in investing activities (2) | (317) | (561) | |
| Financing activities: | |||
| Cash received from loans obtained | 12 | 1,427 | 1,500 |
| (Payments) relating to loans obtained | 12 | (1,808) | (1,242) |
| (Payments) from interest and similar costs | (72) | (84) | |
| (Payments) relating to leasing (IFRS16) | 6 | (73) | - |
| (Payments) relating to leasing (IFRS16) interests | 6 | (68) | - |
| Capital/reserves reduction and other equity instruments | 9.4 | (244) | 19 |
| Dividends paid | (598) | (510) | |
| Cash Flows used financing activities (3) | (1,436) | (317) | |
| Net change in cash and cash equivalents (4) = (1) + (2) + (3) | (308) | 313 | |
| Effect of foreign exchange rate changes in cash and cash equivalents | 34 | (66) | |
| Cash changes due to changes in the consolidation perimeter | - | - | |
| Cash and cash equivalents at the beginning of the period | 1,504 | 1,096 | |
| Cash and cash equivalents at the end of the period | 11 | 1,230 | 1,343 |
The accompanying notes form an integral part of the condensed consolidated statement of Cash Flows.
Galp Energia SGPS, S.A. (the Company) has its Head Office in Lisbon, Portugal and its shares are listed on Euronext Lisbon.
The condensed consolidated financial statements for the nine-month period ended 30 September 2019 were prepared under IAS 34 - Interim Financial Reporting. These financial statements do not include all the information and disclosures required in the annual financial statements. In addition, only the material changes required by IFRS 7 and IFRS 13 are disclosed. For this reason, these financial statements should be read in conjunction with the consolidated financial statements of the Galp Group for the year ended 31 December 2018.
Based on the results of the Galp Group and its business units, as well as on the macroeconomic conditions in the countries and segments in which each business unit operates, there were no indications, as at 30 September 2019, leading us to alter the conclusions reached during the preparation of the annual financial statements as at 31 December 2018 regarding the recoverability of tangible and intangible assets, goodwill and financial investments in associates and joint ventures.
The condensed consolidated financial statements have been prepared in millions of Euros, except where expressly indicated otherwise. Due to rounding, the totals and sub-totals of the presented tables may not be equal to the sum of the figures presented.
The Group has applied IFRS 16 using the modified retrospective approach, and therefore the comparative information has not been restated and continues to be reported in accordance with IAS 17 and IFRIC 4.
The Group recognises both a right-of-use asset and a lease liability as at the lease commencement date. The right-of-use asset is initially measured at cost, which represents the initial amount of the lease liability adjusted for any lease payments made on or before the commencement date, plus any initial direct costs incurred, plus an estimate of the costs required to dismantle and remove the underlying asset or to restore the site on which it is located (if applicable), less any lease incentives received.
The lease liability is initially measured at the present value of the lease payments that have not yet been paid as at the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot readily be determined, the Group's incremental borrowing rate. Generally, the Group uses its incremental borrowing rate as the discount rate.
The types of lease payments included in the measurement of the lease liability are as follow:
The lease liability is remeasured when there are changes in the amounts of future lease payments arising from a change in an index or rate, if there is a change in the Group's estimate of the amount expected to be payable under a residual value guarantee, or if the Group changes its assessment of whether it will exercise a purchase, extension or termination option.
When the lease liability is remeasured in this way, a corresponding adjustment is made to the carrying amount of the right-of-use asset, or it is recorded in profit or loss if the carrying amount of the right-ofuse asset has been reduced to zero.
The Group presents right-of-use assets and lease liabilities in a separate line in the statement of financial position.
As permitted under the standard, the Group does not recognise right-of-use assets and lease liabilities for short-term leases of assets that have lease terms of 12 months or less, and leases of low-value assets. The Group recognises the lease payments associated with these leases as expenses on a straight-line basis over the lease term.
The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term. The estimated useful lives of right-of-use assets are determined on the same basis as the lives of the property and equipment items.
The right-of-use assets are periodically reduced by the amounts of impairment losses and adjusted to reflect certain remeasurements of the respective lease liabilities.
The calculation of the assets' residual values, the estimation of the useful lives, and the discount rates used are based on the lease contracts (or the values for similar assets) and are set based on Management's judgment, as well as on industry practices.
Identifying impairment indicators, estimating the future cash flow and determining the fair value of assets requires Management to use significant judgment in terms of the identification and evaluation of the different impairment indicators, the expected cash flow, the applicable discount rates, useful lives and residual amounts.
For quantitative information, please see Note 6.
The Group operates across three different business segments based on the types of products sold and services rendered: Exploration & Production, Refining & Marketing and Gas & Power.
The Exploration & Production segment is Galp's presence in the upstream sector of the oil and gas industry, which involves the management of all activities relating to the exploration, development and production of hydrocarbons, mainly focused in Brazil, Mozambique and Angola.
The Refining & Marketing segment owns two refineries in Portugal, and also covers all activities relating to the retail and wholesale marketing of oil products (including LPG). This segment also cover storage and transportation infrastructure for oil products in Portugal and Spain, both for export and import, and the marketing of its products to the main consumer centres. This retail marketing activity using the Galp brand also extends to certain countries in Africa.
The Gas & Power segment encompasses the procurement, supply, distribution and storage of natural gas, electric and thermal power generation.
Besides these three business segments, the Group has also included within the category "Others" the holding company Galp Energia, SGPS, S.A. and companies with various other activities including Tagus Re, S.A. and Galp Energia, S.A., a reinsurance company and a provider of shared services at the corporate level.
The segment reporting is presented on a replacement cost (RC) basis, which is the earnings measure used by the Chief Operating Decision Maker to make decisions regarding the allocation of resources and to assess performance. Under the RC method, the current cost of sales measured under IFRS (the weighted average cost) is replaced by the crude reference price (i.e. Brent-dated) as at the balance sheet date, as though the cost of sales had been measured at the replacement cost of the inventory sold.
The financial information for the previously identified segments, for the nine-month periods ended 30 September 2019 and 2018 is as follows:
| Unit: € m | |||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Consolidated | Exploration and Production |
Refining and Marketing |
Gas and Power | Others | Consolidation adjustments |
||||||||
| 2019 | 2018 | 2019 | 2018 | 2019 | 2018 | 2019 | 2018 | 2019 | 2018 | 2019 | 2018 | ||
| Sales and services rendered Cost of sales |
12,429 (9,553) |
12,977 (9,727) |
1,877 (375) |
1,138 460 |
9,214 (8,236) |
9,762 (8,639) |
2,001 (1,508) |
2,209 (1,640) |
112 - |
103 - |
(774) 566 |
(235) 92 |
|
| of which Variation of Production | (433) | 149 | (346) | (5) | (87) | 154 | - | - | - | - | - | - | |
| Other revenues & expenses | (1,324) | (1,496) | (452) | (498) | (636) | (602) | (351) | (458) | (97) | (82) | 211 | 143 | |
| of which Under & Overliftings | 90 | 55 | 90 | 55 | - | - | - | - | - | - | - | - | |
| EBITDA at Replacement Cost | 1,552 | 1,754 | 1,050 | 1,100 | 342 | 521 | 141 | 112 | 16 | 21 | 3 | - | |
| Amortization, depreciation and impairment losses on fixed assets |
(690) | (519) | (389) | (251) | (283) | (250) | (14) | (15) | (4) | (3) | - | - | |
| EBIT at Replacement Cost | 862 | 1,235 | 661 | 849 | 59 | 271 | 127 | 96 | 12 | 18 | 3 | - | |
| Earnings from associates and joint ventures | 103 | 106 | 36 | 39 | (5) | 2 | 72 | 65 | - | - | - | - | |
| Financial results | (119) | (6) | - | - | - | - | - | - | - | - | - | - | |
| Taxes at Replacement Cost | (462) | (604) | - | - | - | - | - | - | - | - | - | - | |
| Energy Sector Extraordinary Contribution | (49) | (51) | - | - | (21) | (23) | (28) | (28) | - | - | - | - | |
| Consolidated net income at Replacement Cost, of which: | 336 | 680 | - | - | - | - | - | - | - | - | - | - | |
| Attributable to non-controlling interests | (61) | (120) | - | - | - | - | - | - | - | - | - | - | |
| Attributable to shareholders of Galp Energia SGPS SA | 275 | 560 | - | - | - | - | - | - | - | - | - | - | |
| OTHER INFORMATION Segment Assets (1) |
|||||||||||||
| Financial investments (2) | 1,092 | 1,297 | 716 | 918 | 93 | 97 | 283 | 282 | - | - | - | - | |
| Other assets | 12,924 | 11,389 | 7,334 | 5,871 | 4,930 | 4,566 | 1,174 | 1,086 | 2,487 | 2,441 | (3,001) | (2,575) | |
| Segment Assets | 14,016 | 12,686 | 8,050 | 6,789 | 5,023 | 4,663 | 1,456 | 1,367 | 2,488 | 2,441 | (3,001) | (2,575) | |
| of which Rights of use of assets | 1,202 | - | 804 | - | 394 | - | 1 | - | 3 | - | - | - | |
| Investment in Tangible and Intangible Assets | 772 | 856 | 648 | 752 | 116 | 96 | 4 | 7 | 4 | 1 | - | - | |
| 1) Net amount 2) Accounted for based on the equity method of accounting |
The details of sales and services rendered, tangible and intangible assets and financial investments for each geographic region in which Galp operates are as follows:
| Unit: € m | |||||||
|---|---|---|---|---|---|---|---|
| Sales and services rendered 1 |
Tangible and intangible assests |
Financial investments | |||||
| 2019 | 2018 | 2019 | 2018 | 2019 | 2018 | ||
| 12,429 | 12,977 | 6,202 | 5,965 | 1,092 | 1,297 | ||
| Africa | 494 | 417 | 1,019 | 1,207 | 56 | 58 | |
| Latin America | 1,135 | 1,035 | 2,937 | 2,561 | 733 | 928 | |
| Europe | 10,800 | 11,525 | 2,247 | 2,197 | 303 | 311 |
1 Net consolidation operation
The reconciliation between the segment reporting and the Condensed Consolidated Income Statement for the periods ended 30 September 2019 and 2018 is as follows:
| Unit: €m | ||
|---|---|---|
| 2019 | 2018 | |
| Sales and services rendered | 12,429 | 12,977 |
| Cost of sales | (9,536) | (9,557) |
| Replacement cost adjustments (1) | (17) | (169) |
| Cost of sales at Replacement Cost | (9,553) | (9,727) |
| Other revenues & expenses | (1,324) | (1,496) |
| Depreciation and amortization | (690) | (519) |
| Earnings from associates and joint ventures | 103 | 106 |
| Financial results | (119) | (6) |
| Profit before taxes and other contributions at Replacement Cost | 846 | 1,335 |
| Replacement Cost adjustments | 17 | 169 |
| Profit before taxes and other contributions at IFRS | 863 | 1,504 |
| Income tax | (470) | (636) |
| Income tax on Replacement Cost Adjustment (2) | 9 | 32 |
| Energy Sector Extraordinary Contribution | (49) | (51) |
| Consolidated net income for the period at Replacement Cost | 336 | 680 |
| Replacement Cost (1) +(2) | 8 | 137 |
| Consolidated net income for the period at IFRS | 344 | 817 |
| Unit: € m | |||||
|---|---|---|---|---|---|
| Land, natural resources and buildings |
Plant and machinery |
Other equipment |
Assets under constructio n |
Total | |
| As at 30 September 2019 | |||||
| Acquisition cost | 1,217 | 9,786 | 476 | 2,082 | 13,561 |
| Impairment | (31) | (82) | (4) | (99) | (216) |
| Accumulated depreciation and depletion | (742) | (6,632) | (432) | - | (7,806) |
| Net Value | 444 | 3,071 | 40 | 1,983 | 5,539 |
| Balance as at 1 January 2019 | 458 | 2,614 | 39 | 2,221 | 5,333 |
| Additions | - | 108 | 1 | 708 | 818 |
| Depreciation, depletion and impairment | (16) | (531) | (10) | (4) | (562) |
| Disposals/Write-offs | (8) | - | - | (6) | (14) |
| Transfers | 9 | 882 | 10 | (901) | - |
| Currency exchange differences and other | |||||
| adjustments | 1 | (1) | - | (36) | (35) |
| Balance as at 30 September 2019 | 444 | 3,071 | 40 | 1,983 | 5,539 |
During the period under review and in line with its strategy, the Group made the following investments: in the E&P business unit, related to projects in Brazil (€580 m), Angola (€75 m) and Mozambique (€48 m). The R&M segment made investments in the amount of €112 m. The additions to tangible assets for the nine-month period ended 30 September 2019 also include the capitalization of financial charges in the amount of €18 m (Note 21).
During the period under analysis, the Brazilian National Agency of Petroleum, Natural Gas and Biofuels (ANP) approved the Unitisation Agreements (UA) related to the shared deposits of Lula, Atapu and Sépia.
Regarding Lula, submitted by consortium BM-S-11, the approval of the UA was effective from April 1, 2019. As a result of this unitisation process, Galp's participation, through its subsidiary Petrogal Brasil, stood at 9.209% of the Unitised Lula area (BM-S-11 consortium + Transfer of Rights area + Open area).
With regard to Sépia, covered by the BM-S-24 licence, the approval of the UA was effective from 1 September 2019. Following this unitisation process, Galp's participation, through its subsidiary Petrogal Brasil, stood at 2.414% of the Unitised Sépia area (BM-S-24 consortium + Transfer of Rights area).
In the case of Atapu, whose accumulation extends beyond the boundaries of the BM-S-11A license, the approval of the UA was effective from 1 September 2019. Following this unitisation process, Galp's participation, through its subsidiary Petrogal Brasil, stood at 1.703% of the Unitised Atapu area (BM-S-11A consortium + Transfer of Rights area + Open area).
It should be noted that the BM-S-11A license holds two additional accumulations, Berbigão and Sururu, which are also subject to unitisation processes. These UAs were submitted to ANP in 2018 and have not yet been approved by the regulator.
Unitisation processes require equalisations among the parties, based on the past capital expenditures carried by partners on account of their original interest, and to reflect operational profits resulting from the production received there-under. These equalisations lead to reimbursements among partners as per the terms and conditions agreed between themselves.
During the period under analysis, regarding Lula's UA, Galp recognised a negative impact of €96 m in net profit (after non-controlling interests) and a decrease of €130 m in other assets/liabilities (of which €71 m is included in currency exchange differences and other adjustments in the table above), resulting from the adjustment of past revenues and net Investments. Additional amounts related to the associate Tupi B.V. have not yet been recognised and should lead to a net equalisation payable position of approximately €85 m.
Regarding Sépia, a negative impact on net profit (after non-controlling interests) of €4 m was recognised in September 2019 and an increase in investments of €17 m (included in currency exchange differences and other adjustments in the table above), which resulted in a net equalisation payable position of approximately €26 m.
Concerning Atapu, the unitisation process is concentrated significantly on the associate Iara B.V.. The accounting impacts from such unitisation process is dependent on certain legal and regulatory procedures to
be carried out by Iara B.V.. We estimate that this unitisation process will result in a net receivable of c.€150 m.
Altogether, the expected Group's position related to these five unitisation processes is a net receivable of c.€110 m.
| Unit: € m | ||||
|---|---|---|---|---|
| Industrial properties and other rights |
Intangible assets in progress |
Goodwill | Total | |
| As at 30 September 2019 | ||||
| Acquisition cost | 992 | 55 | 89 | 1.136 |
| Impairment | (19) | (25) | (2) | (46) |
| Accumulated amortization | (426) | - | - | (426) |
| Net Value | 546 | 30 | 87 | 663 |
| Balance as at 1 January 2019 | 516 | 31 | 85 | 632 |
| Additions | - | 62 | - | 62 |
| Amortisation and impairment | (29) | - | - | (29) |
| Write-offs/Disposals | - | - | - | - |
| Transfers | 64 | (64) | - | - |
| Currency exchange differences and other adjustments | (5) | 1 | 2 | (2) |
| Balance as at 30 September 2019 | 546 | 30 | 87 | 663 |
The additions to intangible assets for the period under analysis include €53 m related to the final 3% interest acquisition in BM-S-8. The Group's stake in this license now stands at 20%, in line with the adjacent block of Carcará North.
The details of Right-of-use assets are as follows:
| Unit: € m | ||||||
|---|---|---|---|---|---|---|
| FPSOs | Buildings | Service stations |
Vessels | Other usage rights |
Total | |
| As at 30 September 2019 | ||||||
| Acquisition cost | 683 | 86 | 132 | 189 | 211 | 1,301 |
| Accumulated amortization | (36) | (4) | (13) | (32) | (13) | (99) |
| Net Value | 646 | 82 | 119 | 157 | 198 | 1,202 |
| As at 1 January 2019 | 657 | 83 | 118 | 166 | 208 | 1,233 |
| Additions | - | 1 | 28 | 6 | 3 | 38 |
| Amortisation | (38) | (4) | (13) | (31) | (13) | (100) |
| Currency exchange differences and other adjustments |
27 | 1 | (14) | 17 | - | 31 |
| Balance as at 30 September 2019 | 646 | 82 | 119 | 157 | 198 | 1,202 |
| Unit: € m | |
|---|---|
| September 2019 | |
| Maturity analysis – contractual undiscounted cash flow | 2,028 |
| Less than one year | 194 |
| One to five years | 636 |
| More than five years | 1,198 |
| Lease liabilities included in the statement of financial position | 1,274 |
| Non Current | 1,089 |
| Current | 186 |
| Unit: € m | |
|---|---|
| September 2019 | |
| 326 | |
| Interest on lease liabilities | 68 |
| Expenses related to short term, low value and variable payments of operating leases 1 | 258 |
1 Includes variable payments and short term leases recognised within the caption of transport of goods.
| Unit: € m | |
|---|---|
| September 2019 | |
| Financing activities | 141 |
| (Payments) relating to leasing (IFRS16) | 73 |
| (Payments) relating to leasing (IFRS16) interests | 68 |
Investments in associates and joint ventures are as follows:
| Unit: € m | ||
|---|---|---|
| September 2019 | December 2018 | |
| 1,089 | 1,295 | |
| Joint ventures | 1,010 | 1,220 |
| Associates | 79 | 75 |
| As at 31 December 2018 |
Share capital increase/ decrease |
Equity Method |
Foreign exchange rate differences |
Dividends | Unit: € m As at 30 September 2019 |
|
|---|---|---|---|---|---|---|
| 1,220 | (252) | 46 | 49 | (53) | 1,010 | |
| Tupi B.V. | 648 | (138) | 36 | 35 | (18) | 563 |
| Iara B.V. | 229 | (130) | - | 12 | - | 111 |
| Galp Gás Natural Distribuição, S.A. | 220 | - | 21 | - | (28) | 213 |
| Belém Bioenergia Brasil, S.A. | 51 | 15 | (5) | (2) | - | 59 |
| Coral FLNG, S.A. | 41 | - | - | 2 | - | 42 |
| Other joint ventures | 31 | 2 | (6) | 2 | (7) | 22 |
During the period, the joint ventures Tupi BV and Iara BV repaid share premium contributions to their shareholders in the amount of €304 m (€138 m and €166 m, respectively) as a result of a cash surplus arising from the sale of equipment to the E&P operations in Brazil. The capital of Iara B.V. was also increased by €36 m.
During the nine-month period, Galp recognised €21 m related to the application of the equity method from GGND, of which €8 m is related to GGND's acquisition of a 58.03% stake in Tagusgás S.A..
In August 2019, Galp signed an agreement to acquire from Petrobras, the 50% interest that it held in Belém Bioenergia Brasil, S.A. (BBB) becoming the sole shareholder of this company. The closing of this transaction is conditional upon formal approval from the Brazilian Competition Authority. Therefore, the consolidated financial statements for the nine-month period ended 30 September 2019 do not yet reflect the accounting impacts resulting from this transaction.
Simultaneously with the acquisition of a 50% interest in BBB, Galp, in partnership with Ecotauá, Participações, S.A., will constitute a new entity - Tauá Brasil Palma, SA. (Tauá), where BBB will hold 49.9%. BBB will perform capital contributions in kind to Tauá using certain BBB's assets. At the closing of the transaction, BBB will only have significant influence on Tauá's operational and financial decision-making and therefore it will be classified as an associate in Galp's consolidated financial statements.
| Unit: € m | ||||||
|---|---|---|---|---|---|---|
| As at 31 December 2018 |
Share capital increase/ decrease |
Equity Method | Foreign exchange rate differences |
Dividend s |
As at 30 September 2019 |
|
| 75 | - | 57 | 3 | (53) | 81 | |
| EMPL - Europe Magreb Pipeline, Ltd |
35 | - | 46 | 2 | (35) | 48 |
| Sonangalp - Sociedade Distribuição e Comercialização de Combustíveis, Lda. |
13 | - | 3 | (1) | (5) | 10 |
| Gasoduto Al-Andaluz, S.A. | 11 | - | 4 | - | (7) | 8 |
| Other associates | 16 | - | 4 | 2 | (6) | 16 |
During the nine-month period under review, the amount of €106 m was declared in dividends from investments in joint ventures and in associates and the amount of €3 m was still to be received. Additionally, €10 m was received from associates related to dividends declared in 2018, namely in the first quarter of 2019. Consequently, the amount of €114 m was received.
Inventories as at 30 September 2019 and 31 December 2018 were as follows:
| Unit: € m | ||
|---|---|---|
| September 2019 | December 2018 | |
| 1,210 | 1,171 | |
| Raw, subsidiary and consumable materials | 568 | 439 |
| Crude oil | 340 | 198 |
| Other raw materials | 66 | 59 |
| Raw materials in transit | 162 | 181 |
| Finished and semi-finished products | 472 | 561 |
| Goods | 187 | 222 |
| Adjustments to net realisable value | (18) | (51) |
The movements in the adjustments to net realisable value balance for the nine-month period ended 30 September 2019 are as follows:
| Unit: € m | |||||
|---|---|---|---|---|---|
| Notes | Raw, subsidiary and consumable materials |
Finished and semi-finished products |
Goods | Total | |
| Adjustments to net realisable value at 1 January 2019 | 24 | 26 | 2 | 51 | |
| Net reductions | 20 | (8) | (24) | - | (33) |
| Adjustments to net realisable value at 30 September 2019 | 15 | 2 | 1 | 18 |
The net reductions in the amount of €33 m (Note 20) were recorded in the income statement as part of cost of sales. These reductions are mainly related to adjustments due to expected market price movements during the period under review.
The details of trade receivables as at 30 September 2019 and 31 December 2018 are as follows:
| Unit: € m | |||
|---|---|---|---|
| Notes | September 2019 |
December 2018 | |
| 1,183 | 1,032 | ||
| Trade receivables | 1,347 | 1,206 | |
| Allowance for doubtful amounts | 9.3 | (164) | (173) |
The details of other receivables as at 30 September 2019 and 31 December 2018 were as follows:
| Unit: € m | |||||
|---|---|---|---|---|---|
| September 2019 | December 2018 | ||||
| Notes | Current | Non-current | Current | Non-current | |
| 919 | 375 | 640 | 298 | ||
| State and other Public Entities | 22 | 28 | 11 | 43 | |
| Other debtors | 532 | - | 259 | - | |
| Non-operated oil blocks | 393 | - | 191 | - | |
| Underlifting | 114 | - | 40 | - | |
| Other receivables | 24 | - | 29 | - | |
| Related Parties | 51 | 118 | 61 | 60 | |
| Share capital to be subscribed | 44 | - | 42 | - | |
| Loans to associates, joint ventures and other related | |||||
| parties | 2 | 118 | - | 60 | |
| Other receivables from associates, joint ventures and | |||||
| other related parties | 5 | - | 19 | - | |
| Other accounts receivables | 39 | 53 | 43 | 34 | |
| Accrued income | 212 | 68 | 198 | 67 | |
| Sales and services rendered but not yet invoiced | 117 | - | 138 | - | |
| Adjustments to tariff deviation - "pass through" | 16 | - | 16 | - | |
| Other accrued income | 79 | 68 | 45 | 67 | |
| Deferred charges | 69 | 108 | 74 | 94 | |
| Energy sector extraordinary contribution (CESE II) | 14.2 | 17 | 50 | 24 | 61 |
| Prepaid relating to contracts | 3 | 21 | 3 | 22 | |
| Other deferred charges | 49 | 37 | 47 | 11 | |
| Impairment of other receivables | 9.3 | (6) | - | (6) | - |
The balance of €393 m recorded under "Other debtors - Non-operated oil blocks" includes €69 m related to receivables from partners regarding payments made on their behalf, which will be recovered from such partners during the production period.
The balance of €114 m recorded in "Other debtors – Underlifting" corresponds to the amounts receivable by the Group as a result of the lifting of barrels of crude oil below the production quota, and is valued at the lower of the market price as at the date of sale and the market price as at 30 September 2019.
The balance of €44 m refers to the right to receive held by Petrogal Brasil S.A. from Winland International Petroleum (Sinopec) for the capital subscribed but not yet paid in during the period.
Other deferred charges include the amount of €36 m relating to post-employment benefits (Note 15).
The movements noted in impairment of trade receivables and other receivables, for the nine-month period ended 30 September 2019, were as follows:
| Unit: € m | ||||||
|---|---|---|---|---|---|---|
| Initial balance |
Increase | Decrease | Utilisation | Others | Ending balance |
|
| 179 | 9 | (9) | (11) | 2 | 170 | |
| Trade receivables | 173 | 9 | (9) | (11) | 1 | 164 |
| Other receivables | 6 | - | - | - | 1 | 6 |
During the period, namely in the first quarter of 2019, Galp Sinopec Brazil Services (GSBV) carried out a share premium reduction in the amount of €813 m of which €244 m is the Sinopec share in the share premium reduction (Note 18). Part of such share premium reduction (€176 m) was funded by Sinopec reimbursement of the entirety of the outstanding loan it had received from GSBV.
As at 30 September 2019 and 31 December 2018, Other financial assets are as follows:
| Unit: € m | |||||
|---|---|---|---|---|---|
| September 2019 | December 2018 | ||||
| Notes | Current | Non-current | Current | Non-current | |
| 107 | 43 | 200 | 33 | ||
| Financial Assets at fair value through profit & loss | 17 | 107 | 17 | 200 | 7 |
| Financial Assets at fair value through comprehensive income |
- | 3 | - | 3 | |
| Others | - | 23 | - | 23 | |
For the periods ended 30 September 2019 and 31 December 2018, Cash and cash equivalents as in the Condensed consolidated statement of cash flow are detailed as follows:
| Unit: € m | |||
|---|---|---|---|
| Notes | September 2019 | December 2018 | |
| 1,230 | 1,504 | ||
| Cash at bank | 1,246 | 1,508 | |
| Bank overdrafts | 12 | (16) | (4) |
Results Third Quarter 2019 October, 2019
Unit: € m September 2019 December 2018 Notes Current Non-current Current Non-current 566 2,326 559 2,686 Bank loans 566 499 61 1,042 Origination fees - (1) (1) (1) Loans and commercial paper 549 500 59 1,044 Bank overdrafts 11 16 - 4 - Bonds and notes - 1,827 498 1,644 Origination fees - (7) (2) (6) Bonds - 834 - 650 Notes - 1,000 500 1,000
The details of financial debt as at 30 September 2019 and 31 December 2018 are as follows:
Changes in financial debt during the period from 31 December 2018 to 30 September 2019 were as follows:
| Unit: € m | ||||||
|---|---|---|---|---|---|---|
| Initial balance |
Loans obtained |
Principal Repayment |
Changes in Overdrafts |
Foreign exchange rate differences and others |
Ending balance |
|
| 3,246 | 1,427 | (1,808) | 13 | 14 | 2,892 | |
| Bank loans: | 1,104 | 1,250 | (1,308) | 13 | 6 | 1,065 |
| Origination fees | (2) | - | - | - | 2 | (1) |
| Loans and commercial paper | 1,102 | 1,250 | (1,308) | - | 4 | 1,049 |
| Bank overdrafts | 4 | - | - | 13 | - | 17 |
| Bond and notes: | 2,142 | 177 | (500) | - | 8 | 1,827 |
| Origination fees | (8) | - | - | - | 1 | (7) |
| Bonds | 650 | 177 | - | - | 7 | 834 |
| Notes | 1,500 | - | (500) | - | - | 1,000 |
The average cost of financial debt for the period under review, including charges for the use of credit lines, amounted to 1.84%.
During the first nine months of 2019, the Group contracted new bonds as detailed below:
| Unit: € m | |||||
|---|---|---|---|---|---|
| Issuance | Initial amount |
Due amount |
Interest rate | Maturity Reimbursement | |
| 177 | 184 | ||||
| GALP ENERGIA/2019 - USD 100 M DUE MARCH 2024 |
88 | 92 | USD Libor 6M + spread | March '24 | March '24 |
| GALP ENERGIA/2019 - USD 100 M DUE 2024 |
88 | 92 | USD Libor 6M + spread | March '24 | March '24 |
During this period, the Group issued and repayed €1,250 m under commercial paper programs.
During the first nine months of 2019, the following notes were repaid:
| Unit: €m | ||||
|---|---|---|---|---|
| Issuance | Due amount | Interest rate | Maturity | Reimbursement |
| 500 | ||||
| Galp 4.125% 01.2019 | 500 | Fixed Rate 4.125% | January '19 | January '19 |
During the period, €57 m of other bank loans and project finance were repaid.
Financial debt, excluding origination fees and bank overdrafts, had the following repayment plan as at 30 September 2019:
| Unit: €m | |||
|---|---|---|---|
| Maturity | Loans | ||
| Total | Current | Non-current | |
| 2,882 | 548 | 2,335 | |
| 2019 | 2 | 2 | - |
| 2020 | 549 | 546 | 3 |
| 2021 | 535 | - | 535 |
| 2022 | 468 | - | 468 |
| 2023 and onwards | 1,329 | - | 1,329 |
As at 30 September 2019 and 31 December 2018, the details of Other payables were as follows:
| Unit: € m | |||||
|---|---|---|---|---|---|
| September 2019 | December 2018 | ||||
| Current | Non-current | Current | Non-current | ||
| 1,391 | 127 | 958 | 126 | ||
| State and other public entities | 482 | - | 348 | - | |
| Payable VAT | 231 | - | 219 | - | |
| Tax on oil products (ISP) | 220 | - | 94 | - | |
| Other taxes | 31 | - | 35 | - | |
| Other payables | 407 | 72 | 259 | 74 | |
| Tangible and intangible assets suppliers | 373 | 72 | 154 | 74 | |
| Advances on sales | 1 | - | 7 | - | |
| Overlifting | 24 | - | 35 | - | |
| Other Creditors | 9 | - | 63 | - | |
| Related parties | 8 | - | 8 | - | |
| Other accounts payables | 34 | 5 | 33 | 5 | |
| Accrued costs | 440 | 34 | 302 | 30 | |
| External supplies and services | 304 | - | 153 | - | |
| Holiday, holiday subsidy and corresponding contributions | 47 | 3 | 51 | 4 | |
| Other accrued costs | 89 | 31 | 97 | 27 | |
| Deferred income | 20 | 16 | 8 | 16 |
The balance of accrued costs – external supplies and services, includes €156 m related to the unitisation process in Brazil (€130 m for Lula and €26 m for Sépia) – see Note 4 for details.
The Group's operations take place in several regions and are carried out by various legal entities, subject to locally established income tax rates, varying between 25% in Spain and the Netherlands, 31.5% in Portugal and 34% for companies based in Brazil.
Group companies headquartered in Portugal in which the Group has an interest equal to or greater than 75%, if such participation grants voting rights of more than 50%, are taxed in accordance with the special regime for the taxation of groups of companies, with the taxable income being determined at the level of Galp Energia, SGPS, S.A.
Spanish tax resident companies, in which the percentage held by the Group exceeds 75%, have been taxed on a consolidated basis in Spain from 2005 onwards. Currently, the fiscal consolidation in Spain is performed by Galp Energia España S.A.
The Company and its subsidiaries' income tax estimates are recorded based on the taxable income.
Taxes and SPT recognised in the consolidated income statement for the nine-month periods ended 30 September 2019 and 2018 are as follows:
| Unit: € m |
||||||
|---|---|---|---|---|---|---|
| September 2019 | September 2018 | |||||
| Current tax | Deferred tax |
Total | Current tax | Deferred tax |
Total | |
| Taxes for the period | 437 | 34 | 470 | 486 | 150 | 636 |
| Current income tax | 69 | 43 | 111 | 131 | 177 | 308 |
| Oil income Tax - (IRP) | 21 | 1 | 22 | 7 | 3 | 10 |
| Special Participation Tax (SPT) | 347 | (10) | 337 | 348 | (30) | 318 |
As at 30 September 2019, the movements in deferred tax assets and liabilities are as follows:
| Unit: € m | |||||
|---|---|---|---|---|---|
| As at 31 December 2018 |
Impact on the income statement |
Impact on equity |
Foreign exchange rate changes |
As at 30 September 2019 |
|
| Deferred Taxes – Assets | 369 | 75 | - | (5) | 439 |
| Adjustments to tangible and intangible assets | 13 | (1) | - | - | 11 |
| Retirement benefits and other benefits | 87 | (2) | - | - | 86 |
| Tax losses carried forward | 80 | (3) | - | (1) | 76 |
| Regulated revenue | 7 | 1 | - | - | 8 |
| Temporarily non-deductible provisions | 85 | 31 | - | (1) | 115 |
| Potential foreign exchange rate differences in Brazil | 24 | 43 | - | (1) | 65 |
| Others | 73 | 6 | - | (1) | 78 |
| Deferred Taxes – Liabilities | (196) | (109) | 21 | 4 | (280) |
| Adjustments to tangible and intangible assets | (170) | (87) | - | 4 | (253) |
| Adjustments to fair value of tangible and intangible | |||||
| assets | (7) | 1 | - | - | (6) |
| Regulated revenue | (13) | (1) | - | - | (14) |
| Potential foreign exchange rate differences in Brazil | - | (21) | 21 | - | - |
| Others | (6) | (1) | - | - | (7) |
As at 30 September 2019, the details of the Energy Sector Extraordinary Contribution balances are as follows:
| Unit: € m | |||||
|---|---|---|---|---|---|
| Statement of financial position | Income statement | ||||
| Provisions (Note 16) | "CESE II" Deferred Charges | (Note 9.2) | Energy Sector | ||
| Non | Extraordinary Contribution |
||||
| CESE I | CESE II | Current | current | ||
| As at 1 January 2019 | (86) | (211) | 24 | 61 | - |
| "CESE I" Increase | (14) | - | - | - | 14 |
| "CESE II" Increase | - | (7) | (7) | (11) | 25 |
| "Fondo Nacional de Eficiencia Energética (FNEE)" |
- | - | - | - | 9 |
| As at 30 September 2019 | (101) | (218) | 17 | 50 | 49 |
During the period under review there were no significant changes compared to 31 December 2018. As at 30 September 2019 and 31 December 2018, the detail of post employee benefits are as follows:
| Unit: € m | ||
|---|---|---|
| September 2019 | December 2018 | |
| Assets under the heading "Other Receivables" | 36 | 10 |
| Liability | (297) | (304) |
| Net responsabilities | (260) | (294) |
| Obligations, of which: | (528) | (541) |
| Past service liability covered by the pension fund | (232) | (238) |
| Others employee benefits liabilities | (296) | (303) |
| Assets | 268 | 247 |
During the nine-month period ended 30 September 2019, the movements in Provisions were as follows:
| Unit: € m | |||||
|---|---|---|---|---|---|
| September 2019 | |||||
| Decomissioning/ environmental provisions |
CESE (I and II) |
Other provisions |
Total | December 2018 |
|
| As at 1 January 2019 | 315 | 297 | 45 | 658 | 619 |
| Additional provisions and increases to existing provisions | 111 | 21 | 23 | 155 | 77 |
| Decreases of existing provisions | (1) | - | - | (1) | (39) |
| Amount used during the period | (2) | - | (1) | (3) | (11) |
| Regularization | - | - | - | 1 | - |
| Adjustments during the period | (1) | - | (1) | (2) | 12 |
| As at 30 September 2019 | 423 | 319 | 67 | 808 | 658 |
The increase in decommissioning/environmental provisions is due to a number of wells drilled during the period. This increase was also reflected in the additions to tangible assets in amount of €108 m and in other financial costs in the amount of €3 m.
The details of the financial position of the balance of derivative financial instruments as at 30 September 2019 and 31 December 2018 are as follows:
| Unit: € m | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| September 2019 | December 2018 | |||||||||
| Assets (Note 10) | Liabilities | Assets (Note 10) | Liabilities | |||||||
| Current | Non current |
Curren t |
Non current |
Equity | Current | Non current |
Curren t |
Non current |
Equity | |
| 107 | 17 | (103) | (12) | 6 | 200 | 7 | (102) | (37) | 7 | |
| Commodity swaps | 57 | 6 | (84) | (9) | (4) | 130 | 1 | (83) | (33) | 1 |
| Options | 3 | - | (2) | - | - | - | - | - | - | - |
| Commodity | ||||||||||
| futures | 11 | - | - | - | 4 | 50 | - | - | - | 6 |
| Forwards | 36 | 11 | (18) | (3) | 6 | 20 | 6 | (19) | (4) | - |
The accounting impact on the income statement and comprehensive income as at 30 September 2019 and 30 September 2018 related to the gains and losses on derivative financial instruments are presented as follows:
The realised results from derivative financial instruments are mainly recognised as part of cost of sales (Note 20), financial income or expenses. Results from financial instruments are as follows:
| Unit: € m | ||
|---|---|---|
| September 2019 | September 2018 | |
| 16 | 43 | |
| Commodity Swaps | (57) | 48 |
| Options | 2 | - |
| Commodity Futures | 40 | 1 |
| Other trading operations | 31 | (6) |
(a) Share capital decrease is related to the share premium reduction in Galp Sinopec Brazil Services (GSBV) as explained in Note 9.4.
The details of revenue and income for the nine-month periods ended 30 September 2019 and 2018 are as follows:
| Unit: € m | |||
|---|---|---|---|
| Notes | September 2019 | September 2018 | |
| 12,778 | 13,317 | ||
| Total sales | 11,973 | 12,484 | |
| Goods | 5,394 | 5,177 | |
| Products | 6,556 | 7,272 | |
| Exchange differences | 23 | 35 | |
| Services rendered | 456 | 493 | |
| Other operating income | 198 | 157 | |
| Underlifting income | 90 | 55 | |
| Others | 108 | 102 | |
| Earnings from associates and joint ventures* | 7 | 103 | 106 |
| Financial income | 21 | 47 | 77 |
* Earnings from associates and joint ventures represent the results of applying the equity method.
The details of costs and expenses, for the nine-month periods ended 30 September 2019 and 2018 are as follows:
| Unit: € m | |||
|---|---|---|---|
| Notes | September 2019 | September 2018 | |
| 11,915 | 11,813 | ||
| Cost of sales | 9,536 | 9,557 | |
| Raw and subsidiary materials | 3,980 | 4,633 | |
| Goods | 2,987 | 2,995 | |
| Tax on oil products | 2,128 | 2,102 | |
| Variation in production | 433 | (149) | |
| Adjustments to net realisable value in inventories | 8 | (33) | 3 |
| Financial derivatives | 17 | 30 | (39) |
| Exchange differences | 11 | 12 | |
| External supplies and services | 1,198 | 1,336 | |
| Subcontracts - network use | 276 | 352 | |
| Transport of goods | 229 | 161 | |
| E&P - production costs | 144 | 205 | |
| E&P - exploration costs | 26 | 31 | |
| Royalties | 141 | 140 | |
| Other costs | 381 | 447 | |
| Employee costs | 245 | 243 | |
| Amortisation, depreciation and impairment losses | |||
| on fixed assets | 4/ 5/ 6 | 690 | 519 |
| Provision and impairment losses on receivables | 9.3 | - | 11 |
| Other costs | 80 | 64 | |
| Other taxes | 16 | 17 | |
| CO2 Emissions | 20 | 16 | |
| Other operating costs | 44 | 31 | |
| Financial expenses | 21 | 166 | 83 |
The variation in production includes the negative amount of €201 m related to the unitisation process in Brazil (Note 4).
Results Third Quarter 2019 October, 2019
The details of financial income and costs for the nine-month periods ended 30 September 2019 and 2018 are as follows:
| Unit: € m | |||
|---|---|---|---|
| Notes | September 2019 | September 2018 | |
| (119) | (6) | ||
| Financial income | 47 | 77 | |
| Interest on bank deposits | 27 | 23 | |
| Interest and other income with related companies | 1 | 8 | |
| Other financial income | 3 | 3 | |
| Results from derivative financial instruments | 17 | 16 | 43 |
| Financial expenses | (166) | (83) | |
| Interest on bank loans, bonds, overdrafts and others | (41) | (59) | |
| Interest with related parties | - | (5) | |
| Interest capitalised in fixed assets | 4 | 18 | 30 |
| Interest on lease liabilities | 6 | (68) | - |
| Exchange gains/(losses) | (34) | (33) | |
| Other financial costs | (41) | (16) | |
Other financial costs include the amount of €21 m related to the unitisation process in Brazil (Note 4).
The consolidated financial statements were approved by the Board of Directors on 18 October 2019.
Paula Amorim
Independent Director: Miguel Athayde Marques
Carlos Gomes da Silva
Filipe Silva Thore E. Kristiansen Carlos Costa Pina Carlos Silva Sofia Tenreiro Susana Quintana-Plaza Marta Amorim Francisco Rêgo Carlos Pinto Luís Todo Bom Jorge Seabra Rui Paulo Gonçalves Diogo Tavares Edmar de Almeida Cristina Neves Fonseca Adolfo Mesquita Nunes
Paula de Freitas Gazul
These English language financial statements are a translation of the financial statements prepared in Portuguese in accordance with IAS 34 – Interim Financial Reporting and with the International Financial Reporting Standards adopted by the European Union, some of which may not comply with the generally accepted accounting principles in other countries. In the event of any discrepancies, the Portuguese language version shall prevail.
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 of 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 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, extraordinary taxes, 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.
%: Percentage ANP: Brazil's National Agency for Petroleum, Natural Gas and Biofuels APETRO: Associação Portuguesa de Empresas Petrolíferas (Portuguese association of oil companies) BBB: Belém Bioenergia Brasil,S.A. bbl: barrel of oil bn: billion boe: barrels of oil equivalent BRL: Brazilian real c.: circa CESE: Contribuição Extraordinária sobre o Sector Energético (Portuguese Extraordinary Energy Sector Contribution) CFFO: Cash flow from operations COFINS: Contribution for the Financing of Social Security CORES: Corporación de Reservas Estratégicas de Produtos Petrolíferos (Spain) DD&A: Depreciation, Depletion and Amortisation DST: Drill Stem Test E&A: Exploration & Appraisal E&P: Exploration & Production Ebit: Earnings before interest and taxes Ebitda: Ebit plus depreciation, amortisation and provisions EMPL: Europe Magreb Pipeline, Ltd EUR/€: Euro FCF: Free Cash Flow FLNG: Floating liquified natural gas FNEE: Fondo Nacional de Eficiência Energética (Spain) 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. GSBV: Galp Sinopec Brazil Services GWh: Gigawatt per hour IAS: International Accounting Standards
IFRIC: International Financial Reporting Interpretations Committee IRC: Income tax IFRS: International Financial Reporting Standards IRP: Oil income tax (Oil tax payable in Angola) ISP: Payments relating to tax on oil products JFT: Consortium of JGC, Fluor and Technip FMC kboepd: thousands of barrels of oil equivalent per day kbpd: thousands of barrels of oil per day LNG: liquefied natural gas LPG: Liquefied petroleum gas LTM: last twelve months m: million MIBGAS: Iberian Market of Natural Gas mmbbl: million barrels of oil mmboe: millions of barrels of oil equivalent mmbtu: million British thermal units mm³: million cubic metres mton: millions of tonnes MWh: Megawatt-hour NE: Net entitlement NG: natural gas n.m.: not meaningful NWE: Northwestern Europe PIS: payment initiation service p.p.: percentage point PPSA: Pré-Sal Petróleo S.A. QoQ: Quarter-on-quarter R&M: Refining & Marketing RC: Replacement Cost RCA: Replacement Cost Adjusted SPT: Special participation tax ton: tonnes ToR: Transfer of Rights UA: Unitisation Agreements USD/\$: Dollar of the United States of America 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.
Galp Energia, SGPS, S.A. Investor Relations
Pedro Dias, Head Otelo Ruivo, IRO Cátia Lopes João G. Pereira João P. Pereira Teresa Rodrigues
Contacts: +351 21 724 08 66
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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