Galp Energia

Earnings Release • Oct 25, 2021

3RD QUARTER 2021 RESULTS

25 October, 2021

Disclaimer

This document may include forward-looking statements, including, without limitation, regarding future results, namely cash flows, dividends, and shareholder returns; liquidity; capital and operating expenditures; performance levels, operational or environmental goals, targets or commitments and project plans, timing, and outcomes; production rates; developments of Galp's markets; and impacts of the COVID-19 pandemic on Galp's businesses and results; any of which may significantly differ depending on a number of factors, including supply and demand for oil, gas, petroleum products, power and other market factors affecting them; the outcome of government policies and actions, including actions taken to address COVID-19 and to maintain the functioning of national and international economies and markets; the impacts of the COVID-19 pandemic on people and economies; the impact of Galp's actions to protect the health and safety of its employees, customers, suppliers and communities; actions of Galp's competitors and commercial counterparties; the ability to access short- and long-term debt markets on a timely and affordable basis; the actions of consumers; other legal and political factors, including changes in law and regulations and obtaining necessary permits; unexpected operating events or technical difficulties; the outcome of commercial negotiations, including negotiations with governments and private entities; and other factors discussed in Galp's Management Report & Accounts filed with the Portuguese Securities Market Commission (CMVM) for the year ended December 31, 2020 and available on our website at galp.com. This document may also contain statements regarding the perspectives, objectives, and goals of Galp, including with respect to energy transition, carbon intensity reduction or carbon neutrality. An ambition expresses an outcome desired or intended by Galp, it being specified that the means to be deployed may not depend solely on Galp. It is important to note that as of June 2, 2021, Galp's business plans and budgets do not fully reflect Galp's Net Zero Emissions target. Galp aims that, in the future, its business plans and budgets will progressively change to reflect in full this movement towards its Net Zero Emissions target. All statements other than statements of historical facts are, or may be deemed to be, forward-looking statements. Forward-looking statements express future expectations that are based on management's expectations and assumptions as of the date they are disclosed and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in such those statements. Accordingly, neither Galp nor any other person can assure that its future results, performance or events will meet those expectations, nor assume any responsibility for the accuracy and completeness of the forward-looking statements. Forward-looking statements include, among other things, statements concerning the potential exposure of Galp to market risks and statements expressing management's expectations, beliefs, estimates, forecasts, projections, and assumptions. These forward-looking statements may generally be identified by the use of the future, gerund or conditional tense or the use of terms and phrases such as "aim"a, "ambition", "anticipate", "believe", "consider", "could", "develop", "envision", "estimate", "expect", "goals", "intend", "may'', "objectives", "outlook", "plan", "potential", "probably", "project", "pursue", "risks", "schedule", "seek", "should", "target", "think", "will" or the negative of these terms and similar terminology.

Financial information by business segment is reported in accordance with the Galp's management reporting policies and shows internal segment information that is used to manage and measure the Group's performance. In addition to IFRS measures, certain alternative performance measures are presented, such as performance measures adjusted for special items (adjusted operational cash flow, adjusted earnings before interest, taxes, depreciation and amortisation, adjusted earnings before interest and taxes, and adjusted net income), return on equity (ROE), return on average capital employed (ROACE), investment return rate (IRR), equity investment return rate (eIRR), gearing ratio, cash flow from operations and free cash flow. These indicators are meant to facilitate the analysis of the financial performance of Galp and comparison of results and cash flow among periods. In addition, the results are also measured in accordance with the replacement cost method, adjusted for special items. This method is used to assess the performance of each business segment and facilitate the comparability of the segments' performance with those of its competitors. This document also contains non-financial performance indicators, including a carbon intensity indicator for energy products sold by Galp, that measures the amount of greenhouse gas emissions of those products, from their production to their end use, per unit of energy delivered. This indicator covers the direct GHG emissions of production and processing facilities (scope 1) and their indirect emissions associated with energy purchased (scope 2), as well as the emissions associated with the use of products by Galp's costumers (scope 3). The same emissions are considered for products purchased from third parties and sold or transformed by Galp. For a complete definition of scopes 1, 2 and 3 and the methodology used by Galp for this indicator please refer to Galp's website at galp.com. This document may include data and information from sources that are publicly available. This document may also include data and information provided by third parties, including Wood Mackenzie, Rystad and market analysts, which are not publicly available. Such data and information should not be interpreted as advice and you should not rely on it for any purpose. You may not copy or use this data and information except as expressly permitted by those third parties in writing. To the fullest extent permitted by law, those third parties accept no responsibility for your use of such data and information except as specified in a written agreement you may have entered into with those third parties for the provision of such data and information.

Galp and its respective representatives, agents, employees or advisers 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 document to reflect any change in events, conditions or circumstances. This document does not constitute investment advice nor forms 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 Galp or any of its subsidiaries or affiliates in any jurisdiction or an inducement to engage in any investment activity in any jurisdiction.

Recent Developments

Andy Brown, CEO

01

3Q21 Highlights

Results reflecting a gradual operating recovery

Operational improvement and supportive macro

Cash generation reflecting temporary working capital build

Advancing with strategy execution Maintaining ESG recognition with AAA score at MSCI

Improved operational performance

capturing supportive oil and refining environment despite challenges in Energy Management

Upstream Industrial & Energy Management

• Increased oil production, although gas exports restricted
• Capturing the strong oil price environment

• Sépia start up during August

• Refining margin recovery supported by improved middle distillates cracks

• Gas sourcing restrictions and added regasification costs impacting EM results

• NG pre-sold volumes limiting upside from current prices

• Maintaining 125-130 kboepd FY guidance

• Coral FLNG sail away expected soon and moving forward with Bacalhau development
• Preparing exploration wells in Brazil Campos basin and São Tomé and Príncipe
• Upset in Sines atmospheric distillation unit and planned maintenance in the hydrocracker
• 4Q21 raw materials processed expected at c.15 mboe and refining margin at \$4-5/boe¹
• NG/LNG sourcing restrictions expected to persist during Q4

Iberia showing signs of recovery

and renewables benefitting from solar merchant exposure

Commercial	Renewables & New Businesses

• Oil products volumes benefiting from Iberian economic recovery and driving season

• B2C segment recovering faster than B2B

• Current generation exposed to merchant conditions, capturing higher solar prices

• Transformer upset impacting c.200 MW of solar capacity and expected to be fully resolved by 1Q22

• Continued volume pick up, namely on the B2B segment (aviation, marine)

• Taking steps forward on the business transformation
• Around 230 MW of new operating capacity start-up expected by YE
• Monitoring regulation evolution in Spain with no relevant impact expected

Expanding renewables footprint

in & outside Iberia in line with strategy guidelines

Implementing our energy transition strategy

increasing weight of low carbon and decarbonising our operations

Commercial transformation		New Energies development	Financing structuring
Testing new convenience concept	Expanding EV network	Preparing Green H 2	Securing low carbon financing
Renewed products and services, incl. gas & electricity offer	Mobiletric acquisition: 280 new EV charging points	2 MW pilot FID expected soon, fast tracking learning curve	EIB financing for solar and e-mobility projects up to €732 m
Double digit growth across several convenience categories YoY	>1,000 charging points by YE Targeting 10 k points by 2025	Advancing with engineering works of two projects of 100 MW each	Closed project finance for fully merchant operating solar projects
			Ensuring access to support mechanisms aligned with the energy transition

FY2021 updated guidance

considering macro adjustment and operational performance

>€2.3 bn

2021 distributions guidelines

Q3 net debt to Ebitda at 1.1x, anticipating deleverage by YE

9M21 reflecting c.€0.4 bn temporary derivatives impacting CFFO and net debt

FY21 CFFO and net debt sensitive to gas price and working capital evolution

2021 Ebitda

Distributions related to 2021 to take into consideration temporary working capital effects

Executing our distinctive investment proposition

to thrive through the energy transition

• Moving with Upstream developments, namely Coral and Bacalhau

• Implementing Commercial transformation: increased power sales, new concept stores and higher EV penetration

• Bringing new production into operation

• Launching renewable expansion in Brazil

• Advancing with green hydrogen and battery value chain projects

• Interim baseline dividend paid in September

• Confident on variable component distribution related to 2021 despite temporary working capital effects

3Q21 Results

02

Filipe Silva, CFO

Solid operational results

Q3 benefiting from Upstream and oil downstream performance

1

1

Upstream supported by the higher oil price environment

Commercial reflecting gradual recovery

Industrial & EM with improved refining offset by gas sourcing restrictions

Renewables pro-forma² capturing current Iberian power market price conditions

¹ Capex net of divestments, economic perspective. ²Pro-forma considers all renewables projects as if they were consolidated according to Galp's equity stakes.

RCA Ebitda of €607 m

IFRS net income impacted by special items

3Q21 P&L (€ m)

	3Q20	2Q21	3Q21
RCA Ebitda	401	571	607
Ebit RCA	108	305	369
Associates	23	26	42
Financial results	-93	-4	-28
Taxes1	-52	-153	-184
Non-controlling interests	-9	-34	-37
RCA Net Income	-23	140	161
Special items	-85	-137	-545
effect Inventory	2	68	50
IFRS Net Income	-106	71	-334

Ebit following the stronger operational performance

Associates up YoY reflecting the higher contribution from the solar renewables JV

Financial results of -€28 m, mainly reflecting the IFRS 16 leases and net interests

IFRS net income reflecting special items of -€545 m, which includes mark-to-market swings related with NG derivatives

Operational contribution supported by macro

although cash conversion impacted by temporary effects

CFFO impacted by a working capital build mostly driven by increased margin accounts on derivatives to cover gas positions and to be reversed throughout 2022

Net capex of €261 m including a €34 m payment for the BM-S-8 stake increase

Net debt increased to €2.1 bn, also considering the interim base dividend payment

Net debt to RCA Ebitda increased to 1.1x (dividends and margin accounts)

Appendix

3

Upstream results

benefiting from stronger oil price environment

	3Q20	2Q21	3Q21
kboepd	134	128	128
kbpd	120	115	118
kboepd	132	127	127
kbpd	12	12	11
kboepd	120	115	116
USD/boe	-4	-9	-9
USD/boe	2	1	2
USD/boe	16	13	15
€ m	302	467	522
€ m	133	290	375
€ m	253	346	364
€ m	71	135	187
	3Q20	2Q21	3Q21
USD/bbl	42.9	69.0	73.4

Oil production up QoQ, although total working interest flat due to lower gas exports (planned maintenance)

Ebitda and OCF up QoQ following the higher oil prices, still with higher discount on realisations

Ebit followed Ebitda, with no relevant impairments

Capex mostly reflecting the development activities in Tupi/Iracema and Bacalhau, namely a €34 m payment related to the BM-S-8 stake increase

Commercial results

gradual recovery in Iberian demand

		3Q20	2Q21	3Q21
Commercial sales clients to
Oil products	mton	1.5	1.5	1.8
Natural gas	TWh	5.3	4.5	4.4
Electricity	GWh	871	1,020	1,086
RCA Ebitda	€ m	105	73	87
RCA Ebit	€ m	81	48	58
OCF	€ m	101	69	84
Capex	€ m	28	22	21

Higher oil products driven by demand recovery in Iberia, namely in the retail and aviation segments

Ebitda and OCF lower YoY, despite the higher oil volumes, as 3Q20 benefited from an increased contribution from higher-value segments

Capex mostly related to business transformation and retail segment in Portugal

Industrial & Energy Management results

with stronger refining performance offset by challenging gas sourcing environment

		3Q20	2Q21	3Q21
Raw materials processed	mboe	23.4	21.0	22.5
Galp refining margin	USD/boe	-0.7	2.4	4.0
Oil products supply1	mton	3.6	3.6	3.9
NG/LNG supply & trading volumes1	TWh	15.8	18.1	16.6
Trading	TWh	3.6	9.1	7.5
Sales of electricity from cogeneration	GWh	340	269	261
RCA Ebitda	€ m	-12	50	15
RCA Ebit	€ m	-108	-9	-43
OCF	€ m	-18	64	31
Capex	€ m	15	11	15

Galp refining margin supported by improved international context, namely on gasoline and middle distillates cracks

Supply & Trading volumes reflecting NG/LNG sourcing restrictions and market price environment

Ebitda and OCF reflecting improved refining, despite a negative contribution from EM, driven by NG/LNG sourcing restrictions and regasification costs, as well as impact from the lag in pricing formulas for oil products

Capex mostly allocated to initiatives to improve the refining system efficiency

Renewables & New Businesses results

capturing higher solar prices in Iberia

		3Q20	2Q21	3Q21
Renewable power generation
Gross	GWh	143	475	408
Net Galp to	GWh	106	355	304
solar sale Average generation price	EUR/MWh	42	69	111
RCA Ebitda	€ m	-2	-6	-6
Ebit RCA	€ m	-2	-5	-6
OCF	€ m	-2	-2	-2
Capex	€ m	328	51	52
		3Q20	2Q21	3Q21
Galp1 Renewables pro-forma - Equity to
Ebitda	€ m	3	17	28
Ebit	€ m	0	11	23
OCF	€ m	3	17	28
		3Q20	2Q21	3Q21
price2 Iberian baseload pool	EUR/MWh	38	72	118
price2 Iberian solar captured	EUR/MWh	38	69	111

Renewable generation down QoQ impacted by an upset in one transformer constraining c.200 MW

Ebitda mainly reflecting G&A and corporate expenses as most businesses are not consolidated

Renewables pro-forma Ebitda, supported by the increased solar captured prices

Capex mostly allocated to the ongoing deployment of solar PV projects in Iberia

Maintaining a solid financial position

although temporarily impacted by derivatives effects

Balance Sheet (€ m)

	31 Dec ., 2020	30 Jun ., 2021	30 Sep ., 2021
Net fixed assets	6 259 ,	6 284 ,	6,484
Rights of use (IFRS 16)	1 002 ,	1 008 ,	1,061
Working capital	703	017 1 ,	1,359
Other assets/liabilities	-710	-1 267 ,	-1,895
Capital employed	7 254 ,	7 042 ,	7,009
Net debt	2 066 ,	1 711 ,	2,028
(IFRS 16) Leases	1 089 ,	1 105 ,	1,166
Equity	100 4 ,	225 4 ,	3,815
Equity debt and op. leases , net	7 254 ,	7 042 ,	7,009

Working capital and Other assets/liabilities

movements impacted by temporary effects of €638 m from the MTM of gas derivative positions

Equity was down driven by the negative IFRS Net Income and distributions to shareholders

Debt indicators

	31 Dec., 2020	30 Jun., 2021	30 Sep., 2021
Cash and cash equivalents	1,678	1,533	1,257
Undrawn credit facilities	1,262	1,133	1,133
Gross debt	3,743	3,244	3,285
funding Average cost	1.7%	1.4%	1.4%
debt Net	2,066	1,711	2,028
(IFRS 16) Leases	1,089	1,105	1,166
debt RCA Ebitda1 Net to	1.5x	1.0x	1.1x
Debt fixed % at rate	48%	40%	39%

Debt indicators (€ m) Debt reimbursement (€ m)

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