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Galp Energia
Earnings Release • Feb 12, 2024
1908_iss_2024-02-12_dde19943-2f47-417f-916c-03a38d8b5bb9.pdf
Earnings Release
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4 th QUARTER AND FULL YEAR 2023
12 February, 2024 Unaudited
Cautionary Statement
This document may include forward-looking statements. 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", "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 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 may include data and information provided by third parties, 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.
Table of Contents
| 1. | Results Highlights | 4 |
|---|---|---|
| 2. | Upstream | 9 |
| 3. | Renewables & New Businesses | 12 |
| 4. | Industrial & Midstream | 15 |
| 5. | Commercial | 18 |
| 6. 6.1 6.2 6.3 6.4 6.5 6.6 6.7 6.8 6.9 |
Financial Data Income Statement Capital Expenditure Cash Flow Financial Position Financial Debt Reconciliation of IFRS and RCA Figures Special Items IFRS Consolidated Income Statement Consolidated Financial Position |
21 22 24 25 26 27 28 29 30 31 |
| 7. | Basis of Reporting | 32 |
| 8. | Definitions | 35 |
RESULTS HIGHLIGHTS
1. RESULTS HIGHLIGHTS
Fourth quarter 2023
Galp delivered a robust set of results, driven by solid Upstream operating performance and continued supportive Midstream contribution, although limited in refining by the large planned turnaround executed in Sines. At the end of the period, Galp maintained a strong financial position with net debt to RCA Ebitda at 0.4x.
RCA Ebitda reached €720 m:
• Upstream: RCA Ebitda was €599 m, down YoY, reflecting the de-recognition of the Angolan upstream assets and a less favourable oil and gas pricing environment.
On a comparable basis, in Brazil and Mozambique, working interest (WI) production was up 8% YoY, supported by the ramp-up of Coral Sul FLNG, in Mozambique, and by the continued increased availability and efficiency from the operating units in Brazil.
- Renewables & New Businesses: RCA Ebitda was €21 m in a seasonally low generation quarter, reflecting a lower market price environment YoY, but benefitting from added operating capacity.
- Industrial & Midstream: RCA Ebitda was €63 m, with a robust contribution from Midstream across oil, gas and power trading, more than offsetting a negative contribution from Industrial as result of the planned large turnaround in the Sines refinery.
- Commercial: RCA Ebitda was €54 m, in a seasonally lower demand quarter in Iberia, although reflecting a YoY increased contribution of non-fuel and lower carbon business, namely on convenience and gas & power activities.
Group RCA Ebit was €411 m, mostly following RCA Ebitda. RCA net income was €284 m.
Galp's adjusted operating cash flow (OCF) was €488 m, reflecting sound operating performance. Cash flow from operations (CFFO), including working capital and inventory effects, reached €457 m.
Net capex totalled €382 m, with investments mostly directed towards Upstream projects under development in the Brazilian pre-salt and the exploration campaign in Namibia, as well as to the start of construction of the advanced biofuels plant and the 100MW electrolyser unit in Sines.
After payment to non-controlling interests and share buybacks, net debt increased by €189 m during the period.
Full year 2023
Galp's RCA Ebitda was €3,558 m, while OCF was €2,269 m, reflecting a robust operating performance across all business units.
Economic capex amounted to €1,052 m, mostly directed towards Upstream's growth, downstream transformation and renewables capacity construction. Investments in Portugal represented 1/3 of total spending, mostly allocated to the FID of two world-class projects in Sines, namely 100 MW electrolysers for green hydrogen and an advanced biofuels unit (HVO/SAF), growth in electric mobility and modernization of the retail network.
Net capex totalled €859 m, considering €209 m of down payment and other inflows related to the ongoing disposal of the Angolan upstream assets (completion now expected during 1H24).
Free Cash Flow amounted to €1,373 m, more than covering dividends to non-controlling interests of €169 m, dividends paid to shareholders of €422 m and €500 m of share buybacks.
Net debt was reduced to €1.4 bn, further strengthening Galp's financial position whilst executing an ambitious growth and transformational investment plan.
4 th QUARTER AND FULL YEAR 2023 FEBRUARY 2024
Following the capital allocation guidelines in place, Galp's Board of Directors will propose to the Annual General Shareholders Meeting a dividend increase of 4% in 2024 to €0.54 per share and, based on 2023 performance, a €350 m share repurchase programme with the purpose of share capital reduction, planned to be executed in 2024.
Subsequent events
Galp initiated the exploration campaign in PEL 83, offshore Namibia, on November 17, 2023.
Already in 2024, drilling and logging activities in the first exploration well, Mopane-1X, confirmed the discovery of two significant columns of light oil in reservoir-bearing sands of high quality.
The rig was relocated to the second exploration well location, Mopane-2X, to evaluate the extent of the Mopane prospects, after which a Drill Stem Test (DST) is expected to be performed in Mopane-1X.
No impact on the Group financial position, income statement or cashflow statement as at 31 December 2023.
Short Term Outlook
Galp is providing key operating and financial guidance for 2024, in accordance with its updated views and macro assumptions.
Assumptions for 2024
| Brent | \$/bbl | 80 |
|---|---|---|
| Realised refining margin | \$/boe | c.8 |
| Iberian PVB natural gas price | €/MWh | c.30 |
| Iberian solar price | €/MWh | c.50 |
| Average exchange rate | EUR:USD | 1.10 |
Financial indicators
| RCA Ebitda € bn |
c.3.1 |
|---|---|
| € bn Upstream |
c.2.1 |
| Renewables & NB € m |
c.60 |
| Industrial & Midstream € m |
>700 |
| Commercial € m |
c.300 |
| € bn OCF |
c.2.0 |
| € bn Net capex (avg. 2023-25) |
c.1.0 |
Financial data
€m (RCA, except otherwise stated)
| Quarter | Twelve Months | ||||||
|---|---|---|---|---|---|---|---|
| 4Q22 | 3Q23 | 4Q23 | % Var. YoY | 2022 | 2023 | % Var. YoY | |
| 951 | 1,057 | 720 | (24%) RCA Ebitda | 3,849 | 3,558 | (8%) | |
| 791 | 594 | 599 | (24%) | Upstream | 3,083 | 2,263 | (27%) |
| 17 | 43 | 21 | 24% | Renewables & New Businesses | 50 | 131 | n.m. |
| 118 | 342 | 63 | (46%) | Industrial & Midstream | 451 | 929 | n.m. |
| 42 | 111 | 54 | 29% | Commercial | 298 | 303 | 2% |
| (17) | (32) | (17) | 4% | Others | (34) | (69) | n.m. |
| 475 | 741 | 411 | (13%) RCA Ebit | 2,345 | 2,469 | 5% | |
| 602 | 469 | 428 | (29%) | Upstream | 2,229 | 1,739 | (22%) |
| 5 | (27) | (1) | n.m. | Renewables & New Businesses | 32 | 18 | (44%) |
| (15) | 258 | 19 | n.m. | Industrial & Midstream | 66 | 693 | n.m. |
| (104) | 78 | 19 | n.m. | Commercial | 75 | 145 | 94% |
| (13) | (37) | (54) | n.m. | Others | (57) | (126) | n.m. |
| 273 | 210 | 284 | 4% RCA Net income | 881 | 1,002 | 14% | |
| 388 | 24 | 45 | (88%) | Special items | 560 | 278 | (50%) |
| (206) | 69 | 6 | n.m. | Inventory effect | 35 | (38) | n.m. |
| 455 | 303 | 336 | (26%) IFRS Net income | 1,475 | 1,242 | (16%) | |
| 701 | 716 | 488 | (30%) Adjusted operating cash flow (OCF) | 2,788 | 2,269 | (19%) | |
| 529 | 363 | 417 | (21%) | Upstream | 2,022 | 1,179 | (42%) |
| 19 | 43 | 3 | (83%) | Renewables & New Businesses | 49 | 138 | n.m. |
| 116 | 252 | 29 | (75%) | Industrial & Midstream | 459 | 764 | 66% |
| 56 | 79 | 54 | (4%) | Commercial | 290 | 218 | (25%) |
| 1,107 | 686 | 457 | (59%) Cash flow from operations (CFFO) | 3,071 | 2,376 | (23%) | |
| (342) | (161) | (382) | 12% Net Capex | (1,266) | (859) | (32%) | |
| 737 | 497 | 22 | (97%) Free cash flow (FCF) | 1,681 | 1,373 | (18%) | |
| (100) | (2) | (80) | (19%) Dividends paid to non-controlling interests | (245) | (169) | (31%) | |
| - | (213) | - | n.m. Dividends paid to Galp shareholders | (420) | (422) | 1% | |
| (34) | (72) | (192) | n.m. Share buybacks | (150) | (500) | n.m. | |
| 1,555 | 1,211 | 1,400 | (10%) Net debt | 1,555 | 1,400 | (10%) | |
| 0.4x | 0.3x | 0.4x | n.m. Net debt to RCA Ebitda1 | 0.4x | 0.4x | n.m. |
1Ratio considers the LTM Ebitda RCA (€3,301 m), which includes the adjustment for the impact from the application of IFRS 16 (€257 m).
Operating data
| Quarter | Twelve Months | ||||||
|---|---|---|---|---|---|---|---|
| 4Q22 | 3Q23 | 4Q23 | % Var. YoY | 2022 | 2023 | % Var. YoY | |
| 130.4 | 125.1 | 126.8 | (3%) Working interest production (kboepd) | 127.1 | 122.3 | (4%) | |
| 128.6 | 124.7 | 126.4 | (2%) Net entitlement production (kboepd) | 125.5 | 122.0 | (3%) | |
| 84.2 | 84.1 | 81.6 | (3%) Upstream oil realisations indicator (USD/bbl) | 98.9 | 78.7 | (20%) | |
| 54.6 | 40.8 | 43.8 | (20%) Upstream gas realisations indicator (USD/boe) | 52.7 | 44.1 | (16%) | |
| 307 | 760 | 355 | 16% Equity renewable power generation (GWh) | 1,629 | 2,338 | 44% | |
| 100 | 77 | 84 | (17%) Renewables' realised sale price (EUR/MWh) | 144 | 80 | (44%) | |
| 20.5 | 22.4 | 15.4 | (25%) Raw materials processed in refinery (mboe) | 88.0 | 78.9 | (10%) | |
| 13.5 | 14.6 | 6.1 | (54%) Galp refining margin (USD/boe) | 11.6 | 11.0 | (5%) | |
| 3.8 | 3.9 | 3.4 | (11%) Oil products supply1 (mton) |
15.8 | 14.8 | (6%) | |
| 12.7 | 13.1 | 10.0 | (21%) NG/LNG supply & trading volumes1 (TWh) |
54.6 | 46.5 | (15%) | |
| 166 | 159 | 111 | (33%) Sales of electricity from cogeneration (GWh) | 630 | 590 | (6%) | |
| 1.8 | 1.8 | 1.7 | (4%) Oil Products - client sales (mton) | 7.4 | 7.1 | (4%) | |
| 4.3 | 3.4 | 3.4 | (21%) Natural gas - client sales (GWh) | 19.0 | 13.8 | (28%) | |
| 0.9 | 0.9 | 1.4 | 47% Electricity - client sales (GWh) | 4.1 | 4.1 | (1%) |
1 Includes volumes sold to the Commercial segment.
Market indicators
| Quarter | Twelve Months | ||||||
|---|---|---|---|---|---|---|---|
| 4Q22 | 3Q23 | 4Q23 | % Var. YoY | 2022 | 2023 | % Var. YoY | |
| 1.02 | 1.09 | 1.08 | 5% Exchange rate EUR:USD | 1.05 | 1.08 | 3% | |
| 5.37 | 5.31 | 5.33 | (1%) Exchange rate EUR:BRL | 5.44 | 5.40 | (1%) | |
| 88.9 | 86.7 | 84.3 | (5%) Dated Brent price (USD/bbl) | 101.3 | 82.6 | (18%) | |
| 75.2 | 33.7 | 38.8 | (48%) Iberian MIBGAS natural gas price (EUR/MWh) | 99.8 | 39.4 | (61%) | |
| 94.4 | 33.0 | 40.6 | (57%) Dutch TTF natural gas price (EUR/MWh) | 120.5 | 40.7 | (66%) | |
| 101.8 | 39.5 | 47.5 | (53%) Japan/Korea Marker LNG price (EUR/MWh) | 108.6 | 43.5 | (60%) | |
| 394.8 | 249.4 | 223.0 | (44%) Diesel 10 ppm CIF NWE Crack (USD/ton) | 309.4 | 217.0 | (30%) | |
| 159.1 | 283.9 | 137.8 | (13%) EuroBob NWE FOB BG Crack (USD/ton) | 212.1 | 213.1 | 0% | |
| 113.2 | 96.5 | 75.4 | (33%) Iberian power baseload price (EUR/MWh) | 167.5 | 87.1 | (48%) | |
| 102.2 | 79.2 | 66.3 | (35%) Iberian solar market price (EUR/MWh) | 149.8 | 72.2 | (52%) | |
| 16.0 | 16.1 | 15.9 | (1%) Iberian oil market (mton) | 62.7 | 62.9 | 0% | |
| 98.6 | 91.0 | 91.2 | (7%) Iberian natural gas market (TWh) | 426.2 | 373.0 | (12%) |
Source: Platts for commodities prices; MIBGAS for Iberian natural gas price; APETRO and CORES for Iberian oil market; REN and Enagás for Iberian natural gas market; OMIE and REE for Iberian pool price and solar captured price.
UPSTREAM
2. UPSTREAM
€m (RCA, except otherwise stated; unit figures based on net entitlement production)
| Quarter | Twelve Months | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| 4Q22 | 3Q23 | 4Q23 | % Var. YoY | 2022 | 2023 | % Var. YoY | |||
| 130.4 | 125.0 | 126.8 | interest production1 (3%) Working (kboepd) |
127.1 | 122.3 | (4%) | |||
| By product | |||||||||
| 115.3 | 102.9 | 104.1 | (10%) | Oil production (kbpd) | 113.8 | 101.9 | (10%) | ||
| 15.1 | 22.2 | 22.7 | 50% | Gas production (kboepd) | 13.3 | 20.4 | 54% | ||
| By country | |||||||||
| 115.8 | 116.2 | 117.2 | 1% | Brazil | 114.6 | 115.0 | 0% | ||
| 2.0 | 8.9 | 9.6 | n.m. | Mozambique | 0.5 | 7.4 | n.m. | ||
| 12.6 | - | - | n.m. | Angola | 12.0 | - | n.m. | ||
| 117.9 | 125.0 | 126.8 | 8% | Working interest production excluding Angola2 | 115.1 | 122.3 | 6% | ||
| 128.6 | 124.7 | 126.4 | (2%) Net | entitlement production1 (kboepd) |
125.5 | 122.0 | (3%) | ||
| Realisations indicators3 | |||||||||
| 84.2 | 84.0 | 81.6 | (3%) | Oil (USD/bbl) | 98.9 | 78.7 | (20%) | ||
| 54.6 | 40.8 | 43.8 | (20%) | Gas (USD/boe) | 52.7 | 44.1 | (16%) | ||
| 6.8 | 7.1 | 7.1 | 4% Royalties (USD/boe) | 7.9 | 6.8 | (14%) | |||
| 3.0 | 2.9 | 2.1 | (31%) Production costs (USD/boe) | 2.8 | 2.6 | (8%) | |||
| 14.9 | 11.9 | 15.9 | 6% DD&A4 (USD/boe) |
13.6 | 12.7 | (6%) | |||
| 791 | 594 | 599 | (24%) RCA Ebitda | 3,083 | 2,263 | (27%) | |||
| (189) | (125) | (171) | (9%) Depreciation, Amortisation, Impairments and Provisions | (854) | (524) | (39%) | |||
| 602 | 469 | 428 | (29%) RCA Ebit | 2,229 | 1,739 | (22%) | |||
| 602 | 532 | 466 | (23%) IFRS Ebit | 2,229 | 1,960 | (12%) | |||
| 529 | 363 | 417 | (21%) Adjusted operating cash flow | 2,022 | 1,179 | (42%) | |||
| 174 | 160 | 174 | 0% Capex | 640 | 562 | (12%) |
1Includes natural gas exported; excludes natural gas used or reinjected.
2 Excludes Angola's contribution for comparison purposes.
3 Oil realisation indicator is estimated based on the differential to the average Brent price of the period when each of Galp's oil cargoes were negotiated, deducted from logistic costs associated with its delivery. Gas realisation indicator represents the revenues collected from the equity gas sold during the period net of all gas delivery and treatment costs.
4 Includes abandonment provisions. 2022 and 2023 unit figures exclude impairments of €265 m and €27 m, respectively, related with exploration and appraisal assets in Brazil and São Tomé e Principe (2022).
Fourth quarter 2023
Operations
WI production was 126.8 kboepd, lower YoY, as a result of the Angolan upstream assets de-recognition. On a comparable basis, current portfolio (Brazil and Mozambique) production was 8% higher YoY, supported by the contribution at plateau from Coral Sul, in Mozambique, and sustained production from the units operating in Brazil. Natural gas accounted for 18% of WI production.
In Brazil, production was higher YoY at 117.2 kboepd, with higher units' availabilities and efficiencies offsetting the natural decline rates of the portfolio.
In Mozambique, WI production was 9.6 kboepd as, following the end of commissioning activities in the third quarter, Coral Sul FLNG produced at plateau levels throughout the period.
Net entitlement (NE) production followed WI production and amounted to 126.4 kboepd.
Results
RCA Ebitda was €599 m, down YoY, given the de-recognition of the Angolan upstream assets, as well as the less favourable environment in oil and gas prices.
Production costs were €22 m, or \$2.1/boe on a net entitlement basis, down YoY. IFRS 16 lease costs accounted for €57 m during the period, now also reflecting the lease of the FLNG unit in Coral Sul, in Mozambique.
Amortisation and depreciation charges (including right-of-use of assets) were €171 m. On a net entitlement basis, DD&A was \$15.9/boe, already incorporating the effects of the right-of-use of assets depreciation related with Coral FLNG.
RCA Ebit was €428 m. IFRS Ebit amounted to €466 m, considering the special item related to the Angolan upstream business held for sale.
Full year 2023
Operations
Average WI production was 122.3 kboepd, lower YoY, as result of the Angolan upstream assets de-recognition. On a comparable basis, current portfolio production is up 6% YoY, supported by the gradual ramp-up of Coral Sul FLNG in Mozambique and robust production levels in Brazil.
NE production followed WI at 122.0 kboepd, with currently only Mozambique operating under a Production Sharing Contract (PSC) regime.
Results
RCA Ebitda was €2,263 m, down 27% YoY, excluding any contribution from Angolan upstream assets and also reflecting the lower oil and gas pricing context.
Production costs were €105 m, excluding IFRS 16 leases, or \$2.6/boe on a net entitlement basis. IFRS 16 leases during the period amounted to €158 m.
Amortisation and depreciation charges (including right-of-use of assets) amounted to €524 m, lower YoY, following the de-recognition of the Angolan assets, and considering the exploration and appraisal impairments booked throughout 2022. On a net entitlement basis, unit DD&A was \$12.7/boe.
RCA Ebit was €1,739 m, down 22% YoY, while IFRS Ebit amounted to €1,960 m, with special items mostly related to the Angolan upstream assets, booked under "non-current assets held for sale" until completion of the transaction.
RENEWABLES & NEW BUSINESSES
3. RENEWABLES & NEW BUSINESSES
€m (RCA, except otherwise stated)
| Quarter | Twelve Months | |||||
|---|---|---|---|---|---|---|
| 4Q22 | 3Q23 | 4Q23 | % Var. YoY | 2022 | 2023 | % Var. YoY |
| Renewable power generation (GWh) | ||||||
| 307 | 760 | 355 | 16% | Net to Galp 1,629 |
2,338 | 44% |
| 100 | 77 | 84 | (17%) Galp realised sale price (EUR/MWh) 144 |
80 | (44%) | |
| Consolidated Indicators | ||||||
| 17 | 43 | 21 | 24% | RCA Ebitda 50 |
131 | n.m. |
| 5 | (27) | (1) | n.m. | RCA Ebit1 32 |
18 | (44%) |
| 5 | (27) | (1) | n.m. | IFRS Ebit1 32 |
18 | (44%) |
| 19 | 43 | 3 | operating cash flow2 (83%) Adjusted 49 |
138 | n.m. | |
| 47 | 40 | 38 | (19%) Capex 402 |
142 | (65%) | |
| Renewables pro-forma - equity to Galp3 | ||||||
| 19 | 46 | 25 | 32% | RCA Ebitda 180 |
143 | (20%) |
| 9 | (24) | 7 | (25%) | RCA Ebit 148 |
35 | (77%) |
| 8 | 46 | 7 | (6%) | Adjusted operating cash flow 168 |
129 | (23%) |
12023 includes €59 m of impairments related to renewables portfolio under development in Brazil.
2 Includes dividends from vegetable oil business in Brazil (BBB).
3 Renewables Pro-forma excludes all other New Businesses and considers all renewables projects consolidated according to Galp's equity stakes. Titan Solar, which includes most of the operating portfolio in Spain, has been 100% owned and consolidated since August 2022.
Fourth quarter 2023
Operations
Renewable installed capacity was 1.4 GW by the end of the quarter, 4% higher YoY, following additional 50 MW capacity brought online in Spain during the period.
Renewable energy generation amounted to 355 GWh, a 16% increase YoY, supported by the added capacity.
Results
Galp's realised sale price was €84/MWh, following the lower price environment in Iberia, but above the average solar market prices registered during the period, given short term hedge agreements.
Renewables & New Businesses RCA Ebitda was €21 m, higher YoY given the increased installed capacity and despite the lower prices.
| In Operation | Under Construction | Under Development1 | Total | |
|---|---|---|---|---|
| Galp Renewable capacity (GW) | 1.4 | 0.2 | 5.5 | 7.1 |
| Spain | 1.3 | 0.2 | 2.0 | 3.5 |
| Portugal | 0.2 | 0.0 | 0.8 | 1.0 |
| Brazil | - | - | 2.5 | 2.5 |
1 Considers a portfolio of projects in very early stages of development and without significant commitments, with the development up to the construction phase dependent on the Company's assessment. Despite the impairment booked in 3Q23 related to the Brazil portfolio, Galp maintains part of this pipeline and might pursue its development at a later stage, depending on the evolution of the projects' returns assessment.
Full year 2023
Operations
Renewable energy generation, net to Galp, amounted to 2,338 GWh, a 44% increase YoY, mostly supported by new capacity online and the acquisition of the remaining stake on Titan during 2022.
Galp's current renewable generation is almost entirely from solar PV projects and fully exposed to merchant conditions, with no fixed price long term power sale contracts established with third parties.
Results
During the period, Galp's realised sale price was €80/MWh, down from €143/MWh in 2022, mostly reflecting the lower Iberian market wholesale prices.
Renewables & New Businesses RCA Ebitda was €131 m.
RCA Ebit was €18 m, including €59 m of impairments related to renewables portfolio under development in Brazil, in light of the challenging market conditions in the country.
OCF amounted to €138 m. On a last 12 months basis, a 14% return was achieved on a €0.9 bn invested capital (on operating assets as of 31 December 2023).
INDUSTRIAL & MIDSTREAM
4. INDUSTRIAL & MIDSTREAM
| Quarter | Twelve Months | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| 4Q22 | 3Q23 | 4Q23 | % Var. YoY | 2022 | 2023 | % Var. YoY | ||||
| 20.5 | 22.4 | 15.4 | (25%) Raw materials processed (mboe) | 88.0 | 78.9 | (10%) | ||||
| 13.5 | 14.6 | 6.1 | (54%) Galp refining margin (USD/boe) | 11.6 | 11.0 | (5%) | ||||
| 3.1 | 2.6 | 8.7 | n.m. Refining cost (USD/boe) | 2.2 | 4.5 | n.m. | ||||
| 3.8 | 3.9 | 3.4 | (11%) Oil | products supply1 (mton) |
15.8 | 14.8 | (6%) | |||
| 12.7 | 13.1 | 10.0 | supply & trading volumes1 (21%) NG/LNG (TWh) |
54.6 | 46.5 | (15%) | ||||
| 5.5 | 5.4 | 3.4 | (39%) | Trading (TWh) | 23.1 | 18.4 | (21%) | |||
| 166 | 159 | 111 | (33%) Sales of electricity from cogeneration (GWh) | 630 | 590 | (6%) | ||||
| 118 | 342 | 63 | (46%) RCA Ebitda | 451 | 929 | n.m. | ||||
| (134) | (84) | (44) | (67%) Depreciation, Amortisation, Impairments and Provisions | (385) | (236) | (39%) | ||||
| (15) | 258 | 19 | n.m. RCA Ebit | 66 | 693 | n.m. | ||||
| (310) | 356 | 51 | n.m. IFRS Ebit | 86 | 650 | n.m. | ||||
| 116 | 252 | 29 | (75%) Adjusted operating cash flow | 459 | 764 | 66% | ||||
| 29 | 40 | 110 | n.m. Capex | 72 | 196 | n.m. |
1 Includes volumes sold to the Commercial segment.
Fourth quarter 2023
Operations
Sines refinery raw materials processed amounted to 15.4 mboe, lower YoY, reflecting the lower availability and utilisation of all the units involved in the planned large turnaround of the refinery, which occurred during October and November.
Total supply of oil products decreased 11% YoY to 3.4 mton, reflecting the lower availability of the refining system.
Supply and trading volumes sold of natural gas and LNG reached 10.0 TWh, lower than previous periods, as result of persistent sourcing limitations.
Results
RCA Ebitda was €63 m, down YoY, reflecting the continued robust midstream contribution, across gas, oil and power trading, which more than offset the negative contribution from the refining business, impacted by the planned turnaround executed during the period.
Galp's refining margin was \$6.1/boe, down YoY, following the lower international oil cracks environment and reflecting the sub-optimal operations in the refinery during most of the quarter, given the planned maintenance stoppages in key units, such as the Atmospheric Distillation unit, the Fluid Catalytic Cracking unit and the Hydrocracker unit.
Refining costs were €124 m, or \$8.7/boe in unit terms, up YoY, as it includes costs associated with the planned maintenance. Refining hedging operations had a €-18 m impact on RCA Ebitda, covering 1.7 mboe during the period. No hedges in place for 2024.
RCA Ebit was €19 m, including €16 m increased provisions related to Matosinhos retrofitting, whilst IFRS Ebit followed suit at €51 m, with an inventory effect of €-32 m.
Full year 2023
Operations
Raw materials processed in the Sines refinery were 78.9 mboe during the period, 10% lower YoY, reflecting extensive planned maintenance activities performed during 1Q23 and 4Q23.
Crude oil accounted for 85% of raw materials processed, of which 75% corresponded to medium and heavy crudes. All crudes processed were sweet grades.
On the refinery yields during the period, middle distillates (diesel, bio-diesel and jet) accounted for 44% of production, light distillates (gasolines and naphtha) accounted for 27% and fuel oil for 20%, with consumption and losses representing 9%.
Total oil products supplied decreased 6% YoY to 14.8 mton, following the refining availability during the period.
Supply & trading volumes of NG/LNG were 46.5 TWh, down 15% YoY, as per the overall optimisation of the portfolio and reflecting continued sourcing constraints.
Results
RCA Ebitda for Industrial & Midstream was €929 m, €478 higher YoY, mostly reflecting the improved contribution from Midstream trading activities. OCF was €764 m.
Galp's refining margin was down 5% YoY, to \$11.0/boe, as the less supportive international oil products' cracks was partially offset by the normalisation of energy costs. Refining unit cash costs increased YoY to \$4.5/boe, reflecting the planned maintenance activities performed in Sines during 1Q23 and 4Q23, and impacted by inflation.
Midstream was supported by the robust performance of natural gas trading activities, after significant unplanned impacts driven by the gas market context in 2022, as well as by the positive contribution from supply and trading of oil and power.
RCA Ebit was €693 m, although including impairments and provisions of €116 m during the year. IFRS Ebit was €650 m.
COMMERCIAL
5. COMMERCIAL
€m (RCA, except otherwise stated)
| Quarter | Twelve Months | ||||||
|---|---|---|---|---|---|---|---|
| 4Q22 | 3Q23 | 4Q23 | % Var. YoY | 2022 | 2023 | % Var. YoY | |
| Commercial sales to clients | |||||||
| 1.8 | 1.8 | 1.7 | (4%) | Oil products (mton) | 7.4 | 7.1 | (4%) |
| 4.3 | 3.4 | 3.4 | (21%) | Natural Gas (GWh) | 19.0 | 13.8 | (28%) |
| 0.9 | 0.9 | 1.4 | 47% | Electricity (GWh) | 4.1 | 4.1 | (1%) |
| 42 | 111 | 54 | 29% RCA Ebitda | 298 | 303 | 2% | |
| (146) | (33) | (35) | (76%) | Depreciation, Amortisation, Impairments and Provisions | (223) | (158) | (29%) |
| (104) | 78 | 19 | n.m. RCA Ebit | 75 | 145 | 94% | |
| (103) | 79 | (8) | (92%) IFRS Ebit | 91 | 117 | 28% | |
| 56 | 79 | 54 | (4%) Adjusted operating cash flow | 290 | 218 | (25%) | |
| 66 | 19 | 72 | 10% Capex | 113 | 111 | (2%) |
Fourth quarter 2023
Operations
Oil products' sales decreased 4% YoY to 1.7 mton, mostly reflecting a deliberate retraction in the Spanish B2B segment.
Natural gas volumes sold decreased 21% YoY to 3.4 TWh, resulting from natural gas sourcing limitations, while sales of electricity were 1.4 TWh, up 47% YoY.
Results
RCA Ebitda was €54 m, 29% higher YoY, following the increased contribution of non-fuel and lower carbon business, namely on convenience and gas & power activities.
As a result of the ongoing transformation of its operations, aiming to improve the customer experience, non-fuel contribution to Ebitda increased by 9% YoY to €18 m.
In addition, during the quarter, a relevant discount campaign was introduced on the retail network to support clients.
OCF was €54 m. RCA Ebit was €19 m, whilst IFRS Ebit was €-8 m.
Full year 2023
Operations
Total oil products' sales decreased 4% YoY, to 7.1 mton, with the more pressured environment in some B2B segments in Spain offsetting the improved demand in Portugal, namely in the aviation sector.
Natural gas sales were down 28% to 13.8 TWh, mainly impacted by the moderate winter temperatures. Electricity sales amounted to 4.1 TWh, flattish YoY.
During the period, Galp continued its business transformation to leverage convenience and expand regional leadership in Electric Vehicles charging. At the end of the period, Galp had close to 5,000 charging points installed in Portugal and Spain, up 105% from year-end 2022.
Results
RCA Ebitda increased 2% YoY to €303 m, driven by increased contribution of non-fuel and lower carbon businesses, already representing 33% of the Commercial Ebitda, benefitting from a record-high performance in segments such as convenience, gas and power.
RCA Ebit was €145 m, up 94% YoY, considering the impairments registered in 4Q22. IFRS Ebit was €117 m.
Overall Commercial results have been key to support the ongoing significant transformation of its operations, and to accelerate projects to integrate lower carbon solutions and promote the transition to a cleaner Iberian energy system. Nonetheless, these activities have been heavily impacted by discriminatory taxes targeting energy companies, namely in Spain.
FINANCIAL DATA
6. FINANCIAL DATA
6.1 Income Statement
| Quarter | Twelve Months | ||||||
|---|---|---|---|---|---|---|---|
| 4Q22 | 3Q23 | 4Q23 | % Var. YoY | 2022 | 2023 | % Var. YoY | |
| 6,188 | 5,391 | 5,128 | (17%) Turnover | 26,840 | 20,679 | (23%) | |
| (4,691) | (3,724) | (3,683) | (21%) Cost of goods sold | (20,956) | (14,439) | (31%) | |
| (497) | (539) | (585) | 18% Supply & Services | (1,888) | (2,167) | 15% | |
| (122) | (103) | (147) | 20% Personnel costs | (370) | (449) | 22% | |
| 74 | 37 | (47) | n.m. Other operating revenues (expenses) | 232 | (75) | n.m. | |
| (0) | (6) | 52 | n.m. Impairments on accounts receivable | (9) | 10 | n.m. | |
| 951 | 1,057 | 720 | (24%) RCA Ebitda | 3,849 | 3,558 | (8%) | |
| 657 | 1,220 | 763 | 16% IFRS Ebitda | 3,885 | 3,710 | (4%) | |
| (404) | (262) | (261) | (36%) Depreciation, Amortisation and Impairments | (1,380) | (983) | (29%) | |
| (72) | (54) | (48) | (34%) Provisions | (124) | (105) | (15%) | |
| 475 | 741 | 411 | (13%) RCA Ebit | 2,345 | 2,469 | 5% | |
| 181 | 903 | 454 | n.m. IFRS Ebit | 2,381 | 2,618 | 10% | |
| 54 | 4 | (25) | n.m. Net income from associates | 166 | 2 | (99%) | |
| 134 | (58) | (14) | n.m. Financial results | (154) | (62) | (60%) | |
| (1) | (1) | 13 | n.m. | Net interests | (16) | 6 | n.m. |
| 12 | 4 | 15 | 34% | Capitalised interest | 30 | 49 | 62% |
| 15 | (34) | 11 | (32%) | Exchange gain (loss) | 10 | 30 | n.m. |
| 136 | - | - | n.m. | Mark-to-market of derivatives | (80) | - | n.m. |
| (25) | (22) | (36) | 43% | Interest on leases (IFRS 16) | (85) | (102) | 21% |
| (3) | (5) | (17) | n.m. | Other financial charges/income | (13) | (44) | n.m. |
| 663 | 687 | 372 | (44%) RCA Net income before taxes and minority interests | 2,358 | 2,409 | 2% | |
| (313) | (434) | (48) | (85%) Taxes | (1,254) | (1,227) | (2%) | |
| (158) | (140) | (173) | 9% | Taxes on oil and natural gas production1 | (843) | (615) | (27%) |
| (76) | (43) | (40) | (47%) Non-controlling interests | (223) | (180) | (19%) | |
| 273 | 210 | 284 | 4% RCA Net income | 881 | 1,002 | 14% | |
| 388 | 24 | 45 | n.m. Special items | 560 | 278 | (50%) | |
| 661 | 234 | 330 | (50%) RC Net income | 1,440 | 1,280 | (11%) | |
| (206) | 69 | 6 | n.m. Inventory effect | 35 | (38) | n.m. | |
| 455 | 303 | 336 | (26%) IFRS Net income | 1,475 | 1,242 | (16%) |
1 Includes taxes on oil and natural gas production, such as SPT payable in Brazil (also IRP payable in Angola until 2022).
Fourth quarter 2023
RCA Ebitda decreased 24% YoY, to €720 m, following the commodities price macro environment as well as the de-recognition of the Angolan upstream assets, now booked as a special item. IFRS Ebitda amounted to €763 m, considering €-18 m of inventory effect and €-25 m of special items.
Group RCA Ebit was €411 m, already incorporating the effects of the rights-of-use depreciation related with Coral FLNG. IFRS Ebit was €454 m.
Financial results1 were negative at €-14 m, driven by IFRS 16 interest payments.
Taxes amounted to €48 m, materially lower YoY, following a 2023 inter-quarter allocation adjustments related to corporate income and windfall taxes.
Non-controlling interests were €-40 m, attributed to Sinopec's stake in Petrogal Brasil.
RCA net income was €284 m. IFRS net income was €336 m, with an inventory effect of €6 m and special items of €45 m2 .
1 All mark-to-market swings related with derivative hedges, including refining, are registered as special items and therefore not impacting RCA financial results.
2 Refer to page 29 of this report for more details.
Full year 2023
RCA Ebitda of €3,558 m, down 8% YoY, with continued strong operating performance under a softer commodity price environment, as well as the effects of the de-recognition of the Angolan upstream contribution.
Following RCA Ebitda, RCA Ebit was €2,469 m, although including €265 m in impairments and provisions.
Financial results1 were €-62 m, with interests on leases being partially offset by exchange gains.
RCA taxes was flattish YoY at €1,227 m, reflecting extraordinary taxes of €75 m applicable to Iberian activities (windfall, CESE and FNEE), as well as €64 m related with the temporary Brazilian levy on oil exports which was applicable from March to the end of June.
Non-controlling interests were €-180 m, related with Sinopec's stake in Petrogal Brasil.
RCA net income was €1,002 m, while IFRS net income was €1,242 m, considering an inventory effect of €-38 m and special items of €278 m2 .
6.2 Capital Expenditure
| Quarter | Twelve Months | |||||||
|---|---|---|---|---|---|---|---|---|
| 4Q22 | 3Q23 | 4Q23 | % Var. YoY | 2022 | 2023 | % Var. YoY | ||
| 174 | 160 | 174 | 0% Upstream | 640 | 562 | (12%) | ||
| 47 | 40 | 38 | (19%) Renewables & New Businesses | 402 | 142 | (65%) | ||
| 29 | 40 | 110 | n.m. Industrial & Midstream | 72 | 196 | n.m. | ||
| 66 | 19 | 72 | 10% Commercial | 113 | 111 | (2%) | ||
| 13 | 12 | 16 | 23% Others | 39 | 41 | 7% | ||
| 329 | 271 | 411 | (economic)1 25% Capex |
1,266 | 1,052 | (17%) |
1 Capex figures based in change in assets during the period
Fourth quarter 2023
Capex, not considering divestments, totalled €411 m during the quarter.
Investments in Upstream were mostly directed towards projects under execution and development in the Brazilian pre-salt, namely Bacalhau and BM-S-11, as well as to the exploration campaign in Namibia.
Investments within the Renewables & New Businesses segment were deployed towards the continued development and execution of the solar portfolio in Iberia.
Industrial & Midstream capex was directed towards refinery maintenance and the start of construction of the new industrial low carbon projects in Sines, namely the advanced biofuels unit and the 100 MW electrolysers for green hydrogen production.
Commercial capex was mostly allocated to the transformation of the retail business, both in Portugal and Spain, including the transformation of sites and development of new convenience stores.
Full year 2023
Capex, not considering divestments, totalled €1,052 m in 2023. Upstream accounted for 53% of total investments, whilst the downstream activities represented 29% and Renewables & New Businesses 13%.
Upstream investments were mainly directed to Brazil, namely Bacalhau and BM-S-11, as well as the start of the exploration campaign in Namibia.
Investments within the Renewables & New Businesses segment supported the execution of solar projects.
Industrial & Midstream investments were mostly directed to initiatives to improve the efficiency of the refining system and the execution of maintenance activities.
Commercial investments were allocated to the business' transformation.
During 2023, capex directed to developments in the low-to-no carbon energy space accounted for 22% of total investments, whilst about 1/3 of investments were deployed in Portugal.
6.3 Cash Flow
€m (IFRS figures)
| Quarter | Twelve Months | |||||
|---|---|---|---|---|---|---|
| 4Q22 | 3Q23 | 4Q23 | 2022 | 2023 | ||
| 951 | 1,057 | 720 | RCA Ebitda | 3,849 | 3,558 | |
| 13 | 2 | 2 | Dividends from associates | 26 | 31 | |
| (264) | (344) | (233) Taxes paid | (1,087) | (1,320) | ||
| 701 | 716 | 488 Adjusted operating cash flow1 | 2,788 | 2,269 | ||
| - | 19 | (40) Special items | - | (13) | ||
| (294) | 99 | 18 | Inventory effect | 36 | (59) | |
| 700 | (148) | (9) Changes in working capital | 247 | 179 | ||
| 1,107 | 686 | 457 Cash flow from operations1 | 3,071 | 2,376 | ||
| (342) | (161) | (382) Net capex | (1,266) | (859) | ||
| - | 132 | - | o.w. Divestments2 | - | 209 | |
| (3) | (7) | (17) Net financial expenses | (39) | (42) | ||
| (25) | (22) | (36) IFRS 16 leases interest | (85) | (102) | ||
| 737 | 497 | 22 Free cash flow | 1,681 | 1,373 | ||
| (100) | (2) | (80) Dividends paid to non-controlling interest3 | (245) | (169) | ||
| - | (213) | - | Dividends paid to Galp shareholders | (420) | (422) | |
| (34) | (72) | (192) Share buybacks4 | (150) | (500) | ||
| (41) | (33) | (51) Reimbursement of IFRS 16 leases principal | (132) | (157) | ||
| (21) | (23) | 113 Others | 69 | 30 | ||
| (541) | (152) | 189 Change in net debt | (802) | (155) |
1Considers adjustments to exclude contribution from Angolan assets held for sale.
2 2023 includes proceeds from the Angolan upstream assets' sale.
3 Mainly dividends paid to Sinopec.
4 Related to the 2022 fiscal year, share repurchase programme of €500 m started in February and completed in December 2023. At completion of the programme Galp had acquired the equivalent of 5.16% of its share capital at the time. All shares were repurchased with the sole purpose of cancellation.
Fourth quarter 2023
OCF was €488 m, supported by a solid operating performance during the period, with paid taxes of €233 m.
CFFO reached €457 m, with a €18 m inventory effect and minor working capital changes.
Net capex was €382 m and FCF was €22 m, with net debt going up during the period, also considering the share buyback execution of €192 m and dividends paid to non-controlling interests of €80 m.
Full year 2023
Galp's OCF was €2,269 m, considering the robust business performance and despite the increased tax payments, which include €207 m related to extraordinary taxes, namely Iberian windfall taxes, temporary Brazilian levy on oil exports and CESE.
CFFO amounted to €2,376 m, including a working capital release from the decrease in commodities price environment against year-end 2022.
Net capex totalled €859 m, including a €209 m inflow related to the Angolan upstream assets disposal agreement, namely its downpayment together with interim distributions from the subsidiaries held for sale (to be deducted to the agreed sale price at completion).
FCF amounted to €1,373 m. Dividends to shareholders and non-controlling interests amounted to €422 m and €169 m, respectively, and a €500 m share buyback programme was executed. Net debt decreased €155 m compared to the end of last year.
6.4 Condensed Financial Position
| €m (IFRS figures) | |||||
|---|---|---|---|---|---|
| 31 Dec. 2022 30 Sep. 2023 31 Dec. 2023 | Var. vs 31 Dec. 2022 |
Var. vs 30 Sep. 2023 |
|||
| Net fixed assets | 6,876 | 7,185 | 7,273 | 397 | 88 |
| Right-of-use of assets (IFRS 16) | 1,116 | 1,191 | 1,630 | 514 | 439 |
| Working capital | 1,632 | 1,445 | 1,453 | (179) | 9 |
| Other assets/liabilities | (2,089) | (2,288) | (2,257) | (167) | 32 |
| Assets held for sale | 413 | 451 | 440 | 27 | (11) |
| Capital employed | 7,948 | 7,983 | 8,540 | 592 | 557 |
| Short term debt | 800 | 524 | 575 | (225) | 51 |
| Medium-Long term debt | 3,187 | 2,957 | 3,026 | (162) | 68 |
| Total debt | 3,987 | 3,481 | 3,600 | (387) | 119 |
| Cash and equivalents | 2,432 | 2,270 | 2,200 | (232) | (70) |
| Net debt | 1,555 | 1,211 | 1,400 | (155) | 189 |
| Leases (IFRS 16) | 1,277 | 1,370 | 1,810 | 533 | 440 |
| Equity | 5,117 | 5,402 | 5,330 | 214 | (72) |
| Equity, net debt and leases | 7,948 | 7,983 | 8,540 | 592 | 557 |
On December 31, 2023, net fixed assets were €7,273 m, including work-in-progress of €2.5 bn, mostly related to the Upstream business. Right-of-use of assets and leases increased following the recognition of IFRS 16 to the Coral Sul FLNG, amounting to €475 m (which also led to an increase in IFRS 16 leases obligations).
Assets/liabilities held for sale are entirely related to the net position of the Angola upstream portfolio.
Equity was up €214 m YoY, supported by the IFRS net income and results attributed to minorities in the period, although partially offset by dividends to shareholders and noncontrolling interest, and the completed buyback programme.
6.5 Financial Debt
€m (except otherwise stated)
| 31 Dec. 2022 30 Sep. 2023 | 31 Dec. 2023 |
Var. vs 31 Dec. 2022 |
Var. vs 30 Sep. 2023 |
||
|---|---|---|---|---|---|
| Cash and equivalents | 2,432 | 2,270 | 2,200 | (232) | (70) |
| Undrawn credit facilities | 1,484 | 1,665 | 1,645 | (1,484) | (1,665) |
| Bonds | 2,467 | 1,869 | 1,865 | (601) | (3) |
| Bank loans and other debt | 1,520 | 1,612 | 1,735 | 214 | 122 |
| Net debt | 1,555 | 1,211 | 1,400 | (155) | 189 |
| Leases (IFRS 16) | 1,277 | 1,370 | 1,810 | 533 | 440 |
| Net debt to RCA Ebitda1 | 0.4x | 0.3x | 0.4x | 0.0x | 0.1x |
1Ratio considers the LTM Ebitda RCA (€3,301 m), which includes the adjustment for the impact from the application of IFRS 16 (€257 m).
On December 31, 2023, net debt was €1,400 m, down €155 m from year-end 2022. Net debt to RCA Ebitda stands robust at 0.4x.
At the end of the period, cash and equivalents reached €2,200 m, whilst unused credit lines were €1,645 m, of which c.82% were contractually guaranteed. The average cost of funding for the period, including the cost of credit lines, was 3.5%.
Leases increased following the recognition of IFRS 16 to the Coral Sul FLNG, amounting to €475 m.
Debt maturity profile (€ m)
6.6 Reconciliation of IFRS and RCA Figures
Ebitda by segment
€m
th QUARTER AND FULL YEAR 2023
| Fourth Quarter | Twelve Months | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Ebitda IFRS |
Inventory effect |
RC Ebitda |
Special items | RCA Ebitda |
Ebitda IFRS |
Inventory effect |
RC Ebitda |
Special items | RCA Ebitda |
|
| 763 | (18) | 745 | (25) | 720 | Galp | 3,710 | 59 | 3,769 | (211) | 3,558 |
| 637 | - | 637 | (38) | 599 | Upstream | 2,488 | - | 2,488 | (225) | 2,263 |
| 21 | - | 21 | - | 21 Renewables & New Businesses | 131 | - | 131 | - | 131 | |
| 95 | (32) | 63 | - | 63 | Industrial & Midstream | 886 | 43 | 929 | - | 929 |
| 26 | 14 | 40 | 13 | 54 | Commercial | 275 | 15 | 290 | 13 | 303 |
| (17) | 0 | (17) | - | (17) | Others | (69) | (0) | (69) | - | (69) |
Ebit by segment
€m
| Fourth Quarter | Twelve Months | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Ebit IFRS | Inventory effect |
RC Ebit | Special items | RCA Ebit | Ebit IFRS | Inventory effect |
RC Ebit | Special items | RCA Ebit | |
| 454 | (18) | 436 | (25) | 411 | Galp | 2,618 | 59 | 2,676 | (207) | 2,469 |
| 466 | - | 466 | (38) | 428 | Upstream | 1,960 | - | 1,960 | (221) | 1,739 |
| (1) | - | (1) | - | (1) Renewables & New Businesses | 18 | - | 18 | - | 18 | |
| 51 | (32) | 19 | - | 19 | Industrial & Midstream | 650 | 43 | 693 | - | 693 |
| (8) | 14 | 6 | 13 | 19 | Commercial | 117 | 15 | 132 | 13 | 145 |
| (54) | 0 | (54) | - | (54) | Others | (126) | (0) | (126) | - | (126) |
FEBRUARY 2024
6.7 Special Items
| €m | ||||
|---|---|---|---|---|
| Quarter | Twelve Months | |||
| 4Q22 | 3Q23 | 4Q23 | 2022 | 2023 |
| - | (63) | (25) Items impacting Ebitda | (211) - |
|
| - | - | 13 | Regulated market (IFRS 9) | 13 - |
| - | (63) | (65) | Ebitda - Assets/liabilities held for sale (Angola) | (225) - |
| - | (0) | 27 | Compensation from Brazilian equity gas contracts | - - |
| - | (0) | 0 Items impacting non-cash costs | 4 - |
|
| - | (0) | 0 | DD&A-Assets/liabilities held for sale (Angola) | 4 - |
| (615) | 50 | 41 Items impacting financial results | (852) (28) |
|
| 7 | - | - | Gains/losses on financial investments (GGND) | 15 (47) |
| - | 0 | 39 | Gains/losses on financial investments (Coral)1 | - - |
| - | (1) | (1) | Financial costs - Others | (3) - |
| (654) | 51 | 2 | Mark-to-Market of derivatives | (885) 22 |
| 32 | 0 | 0 | FX differences from natural gas derivatives | 19 0 |
| 216 | (3) | (79) Items impacting taxes | (71) 265 |
|
| 195 | (11) | (4) | Taxes on special items | 274 25 |
| (38) | 26 | (75) | BRL/USD FX impact on deferred taxes in Brazil | (91) (96) |
| 6 | (18) | - | Energy sector contribution taxes | 30 (0) |
| 11 | (8) | 17 Non-controlling interests | 27 29 |
|
| (388) | (24) | (45) Total special items | (560) (278) |
1 Impact from transition to IFRS 16.
6.8 IFRS Consolidated Income Statement
| Quarter | Twelve Months | ||||
|---|---|---|---|---|---|
| 4Q22 | 3Q23 | 4Q23 | 2022 | 2023 | |
| 6,107 | 5,317 | 5,031 | Sales | 26,485 | 20,364 |
| 81 | 74 | 97 | Services rendered | 355 | 314 |
| 70 | 124 | 105 | Other operating income | 321 | 437 |
| 6,258 | 5,515 | 5,233 Operating income | 27,160 | 21,115 | |
| (4,985) | (3,629) | (3,664) | Inventories consumed and sold | (20,920) | (14,497) |
| (498) | (552) | (596) | Materials and services consumed | (1,888) | (2,220) |
| (122) | (103) | (147) | Personnel costs | (370) | (450) |
| (0) | (6) | 39 | Impairments on accounts receivable | (9) | (4) |
| 4 | (6) | (102) | Other operating costs | (88) | (235) |
| (5,601) | (4,295) | (4,471) Operating costs | (23,275) | (17,405) | |
| 657 | 1,220 | 763 Ebitda | 3,885 | 3,710 | |
| (404) | (262) | (261) Depreciation, Amortisation and Impairments | (1,380) | (987) | |
| (72) | (54) | (48) Provisions | (124) | (105) | |
| 181 | 903 | 454 Ebit | 2,381 | 2,618 | |
| 46 | 4 | (64) Net income from associates | 152 | 49 | |
| 757 | (108) | (15) Financial results | 713 | (81) | |
| 21 | 32 | 45 | Interest income | 53 | 127 |
| (22) | (33) | (32) | Interest expenses | (70) | (122) |
| 12 | 4 | 15 | Capitalised interest | 30 | 49 |
| (25) | (22) | (36) | Interest on leases (IFRS 16) | (85) | (102) |
| (16) | (34) | 11 | Exchange gain (loss) | (9) | 29 |
| 791 | (51) | (2) | Mark-to-market of derivatives | 806 | (22) |
| (3) | (4) | (17) | Other financial charges/income | (13) | (40) |
| 984 | 799 | 374 Income before taxes | 3,246 | 2,586 | |
| (383) | (379) | (74) Taxes1 | (1,434) | (997) | |
| (53) | (76) | 99 Windfall Taxes | (53) | (95) | |
| (6) | (6) | sector contribution taxes2 (5) Energy |
(34) | (44) | |
| 542 | 339 | 393 Income before non-controlling interests | 1,726 | 1,451 | |
| (87) | (36) | (57) Income attributable to non-controlling interests | (251) | (209) | |
| 455 | 303 | 336 Net income | 1,475 | 1,242 |
1 Includes SPT payable in Brazil and IRP payable in Angola.
2 Includes €10 m, €20 m and €14 m related to CESE I, CESE II and FNEE, respectively, during 2023.
6.9 Consolidated Financial Position
| €m | ||||
|---|---|---|---|---|
| 31 Dec. 2022 |
30 Sep. 2023 |
31 Dec. 2023 |
||
| Assets | ||||
| Tangible fixed assets | 5,700 | 5,942 | 6,029 | |
| Goodwill | 70 | 45 | 44 | |
| Other intangible fixed assets | 672 | 668 | 659 | |
| Rights of use (IFRS 16) | 1,116 | 1,191 | 1,630 | |
| Investments in associates | 417 | 238 | 255 | |
| Receivables | 263 | 306 | 305 | |
| Deferred tax assets | 559 | 609 | 616 | |
| Financial investments | 256 | 418 | 351 | |
| Total non-current assets | 9,055 | 9,417 | 9,889 | |
| Inventories1 | 1,361 | 1,452 | 1,447 | |
| Trade receivables | 1,464 | 1,406 | 1,395 | |
| Other receivables | 942 | 840 | 864 | |
| Financial investments | 339 | 187 | 207 | |
| Current Income tax recoverable | 3 | 0 | 0 | |
| Cash and equivalents | 2,432 | 2,270 | 2,200 | |
| Non-current assets held for sale | 500 | 557 | 537 | |
| Total current assets | 7,041 | 6,712 | 6,649 | |
| Total assets 16,096 | 16,129 | 16,539 |
1 Includes €37 m of inventories made on behalf of third parties as of 31 December 2023. €m
| 31 Dec. 2022 30 Sep. 2023 31 Dec. 2023 | |||
|---|---|---|---|
| Equity | |||
| Share capital | 815 | 815 | 773 |
| Treasury Stocks | - | (308) | - |
| Share premium | 82 | - | - |
| Reserves | 1,562 | 1,889 | 1,449 |
| Retained earnings | 226 | 1,090 | 946 |
| Net income | 1,475 | 906 | 1,242 |
| Total equity attributable to equity holders of the parent | 4,161 | 4,392 | 4,410 |
| Non-controlling interests | 956 | 1,011 | 920 |
| Total equity | 5,117 | 5,402 | 5,330 |
| Liabilities | |||
| Bank loans and overdrafts | 1,470 | 1,383 | 1,451 |
| Bonds | 1,717 | 1,574 | 1,575 |
| Leases (IFRS 16) | 1,095 | 1,230 | 1,595 |
| Other payables | 99 | 125 | 95 |
| Retirement and other benefit obligations | 252 | 235 | 225 |
| Deferred tax liabilities | 555 | 513 | 476 |
| Other financial instruments | 48 | 65 | 99 |
| Provisions | 1,430 | 1,430 | 1,437 |
| Total non-current liabilities | 6,666 | 6,556 | 6,952 |
| Bank loans and overdrafts | 50 | 229 | 284 |
| Bonds | 750 | 294 | 290 |
| Leases (IFRS 16) | 182 | 139 | 215 |
| Trade payables | 1,005 | 1,044 | 1,237 |
| Other payables | 1,505 | 1,759 | 1,722 |
| Other financial instruments | 373 | 134 | 100 |
| Income tax payable | 361 | 465 | 311 |
| Liabilities related to non-current assets held for sale | 87 | 106 | 97 |
| Total current liabilities | 4,313 | 4,170 | 4,256 |
| Total liabilities 10,979 | 10,727 | 11,208 | |
| Total equity and liabilities 16,096 | 16,129 | 16,539 |
BASIS OF REPORTING
7. BASIS OF REPORTING
Galp's consolidated financial statements have been prepared in accordance with IFRS. The financial information in the consolidated income statement and in the consolidated financial position is reported for the quarters ended on December 31, 2022, and on September 30 and December 31, 2023.
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.
Other factors that may affect the Company's results, without being an indicator of its true performance, are set as special items.
For the purpose of evaluating Galp's operating performance, RCA profitability measures exclude special 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.
All mark-to-market swings related with derivatives are registered as special items (starting from January 1, 2023).
With regards to risks and uncertainties, please read Part II – C. III Internal control and risk management (page 34) of Corporate Governance Report 2022, here.
DEFINITIONS DEFINITIONS
8. Definitions
Replacement cost (RC)
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.
Replacement cost adjusted (RCA)
In addition to using the replacement cost method, RCA items exclude special items such as mark-to-market of derivatives hedges, contributions from assets held for sale, capital gains or losses on the disposal of assets, impairment or reinstatement of fixed assets and environmental or restructuring charges which may affect the analysis of the Company's P&L metrics and do not reflect its operational performance.
Acronyms
%: Percentage ACS: Actividades de Construccion Y Servicios SA APETRO: Associação Portuguesa de Empresas Petrolíferas (Portuguese association of oil companies) B2B: Business to business B2C: Business to consumer bbl: barrel of oil bn: billion boe: barrels of oil equivalent BRL: Brazilian real c.: circa CO2: Carbon dioxide COD: Commercial Operation Date Capex: Capital expenditure
CESE: Contribuição Extraordinária sobre o Sector Energético (Portuguese Extraordinary Energy Sector Contribution) CFFO: Cash flow from operations COD: Commercial Operation Date COFINS: Contribution for the Financing of Social Security CMVM: Portuguese Securities Market Commission CORES: Corporación de Reservas Estratégicas de Produtos Petrolíferos (Spain) d: day DD&A: Depreciation, Depletion and Amortisation Ebit: Earnings before interest and taxes Ebitda: Ebit plus depreciation, amortisation and provisions EMPL: Europe Magreb Pipeline, Ltd EUR/€: Euro FCC: Fluid Catalytic Cracker FCF: Free Cash Flow FID: Final Investment Decision 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 GGND: Galp Gás Natural Distribuição, S.A. GSBV: Galp Sinopec Brazil Services GW: Gigawatt GWh: Gigawatt hour I&EM: Industrial & Midstream IAS: International Accounting Standards 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 kboepd: thousands of barrels of oil equivalent per day
kbpd: thousands of barrels of oil per day LNG: liquefied natural gas LTM: last twelve months m: million MIBGAS: Iberian Market of Natural Gas mbbl: million barrels of oil mboe: million barrels of oil equivalent mbtu: million British thermal units mm³: million cubic metres MTM: Mark-to-Market mton: million tonnes MW: Megawatt MWh: Megawatt-hour NE: Net entitlement NG: natural gas n.m.: not meaningful NWE: Northwestern Europe OCF: Adjusted Operating Cash Flow (RCA Ebitda + dividends associates – taxes paid) PV: photovoltaic p.p.: percentage point Q: Quarter QoQ: Quarter-on-quarter R&NB: Renewables & New Businesses RC: Replacement Cost RCA: Replacement Cost Adjusted SPA: Sale and purchase agreement SPT: Special participation tax ton: tonnes TTF: Title transfer facility TWh: Terawatt-hour U.S.: United States UOP: Units of production USD/\$: Dollar of the United States of America Var.: Variation WI: working interest YoY: year-on-year
Galp Energia, SGPS, S.A. Investor Relations
Otelo Ruivo, Director João G. Pereira Teresa Toscano Tommaso Fornaciari César Teixeira
Contacts: +351 21 724 08 66
Address: Avenida da India, 8 1349-065 Lisbon Portugal
Website: www.galp.com/corp/en/investors Email: [email protected]
Reuters: GALP.LS Bloomberg: GALP PL
