Investor Presentation • Feb 22, 2021
Investor Presentation
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galp
February 22 2021
An integrated energy player developing
profitable and sustainable businesses
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, 2019 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. 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. 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 or conditional tense or the use of terms and phrases such as "aim", "ambition", "anticipate", "believe", "consider", "could", "envision", "estimate", "expect", "goals", "intend", "may", "objectives", "outlook", "plan", "probably", "project", "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 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), 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.
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.
Andy Brown, CEO
WITH MACRO FUNDAMENTALS REMAINING UNCERTAIN
Focused investments Balanced shareholders returns Preparing Bacalhau I FID $\epsilon$ 0.35/sh Continuing
renewables build-up 2020 DPS proposal1 $\epsilon$ 0.5-0.7bn $\epsilon$ 0.50/sh Net capex 2021 2021 DPS target1
1 Subject to approval at the Annual General Meeting.
Note: Date to be announced.
Filipe Silva, CFO
RESULTS REFLECTING WEAK MARKET ENVIRONMENT
| 4Q19 | 3Q20 | 4Q20 | $\epsilon$ m | FY2019 | FY2020 |
|---|---|---|---|---|---|
| 653 | 401 | 410 | RCA Ebitda | 2,381 | 1,570 |
| 500 | 302 | 319 | Upstream | 1,751 | 1,111 |
| 102 | 105 | 71 | Commercial | 410 | 325 |
| 52 | $-12$ | 17 | Refining & Midstream | 207 | 113 |
| $-5$ | $-2$ | $-3$ | Renewables & New Businesses | -6 | $-9$ |
| 354 | 108 | 159 | RCA Ebit | 1,387 | 427 |
| 21 | 23 | 8 | Associates | 136 | 73 |
| 43 | -93 | $-19$ | Financial results | -54 | $-182$ |
| $-215$ | $-52$ | $-120$ | T oxes1 | $-758$ | $-337$ |
| $-46$ | $-9$ | $-25$ | Non-controlling interests | $-150$ | $-24$ |
| 157 | $-23$ | $\overline{\mathbf{3}}$ | RCA Net Income | 560 | $-42$ |
| 106 | $-106$ | $-35$ | IFRS Net Income | 389 | $-551$ |
Upstream performance YoY impacted by weaker Brent and USD, as well as lower production levels
Commercial results YoY following the lower market demand for oil products and natural gas sales
Refining & Midstream with a robust contribution from Midstream, but Refining impacted by the harsh refining environment
RCA net income of $6.3$ m and IFRS net income of -€35 m, including non-recurring items of -€60 m (Matosinhos refinery, GGND sale)2
REFLECTING ONE OF THE MOST CHALLENGING YEARS EVER
| 4Q19 | 3Q20 | 4Q20 | €m | FY2019 | FY2020 |
|---|---|---|---|---|---|
| 643 | 363 | 327 | Ebit IFRS1 + DD&A | 2.385 | 1.007 |
| 32 | 17 | 38 | Dividends from Associates | 146 | 90 |
| $-112$ | 103 | $-60$ | Change in Working Capital | $-129$ | 346 |
| $-117$ | $-93$ | $-74$ | Taxes | $-512$ | $-417$ |
| 446 | 391 | 231 | Cash flow from operations 2 | 1.890 | 1.025 |
| $-170$ | $-432$ | $-117$ | Net cape $x^2$ | $-734$ | -909 |
| $\mathbf{1}$ | $-3$ | $-1$ | Net financial expenses | $-45$ | $-43$ |
| $\circ$ | 17 | $\overline{2}$ | Realised Income from derivatives | $\circ$ | 80 |
| $-48$ | $-47$ | $-46$ | Operating lease payments (IFRS 16) | $-189$ | $-191$ |
| $\circ$ | $-3$ | $\circ$ | Equalisation related with unitisation processes |
$\bigcirc$ | 80 |
| 229 | $-79$ | 68 | Free cash flow | 922 | 42 |
| $-25$ | $-29$ | $-2$ | Dividends paid to non-controlling interests | $-132$ | $-225$ |
| $\circ$ | $\bigcirc$ | $\circ$ | Dividends paid to shareholders | $-559$ | $-318$ |
| $\overline{7}$ | $-51$ | $-41$ | Others | 71 | $-129$ |
| $-210$ | 159 | $-25$ | Change in net debt | $-302$ | 631 |
-46% YoY reflecting lower operational contribution under harsh market environment
Reflecting the cash preservation measures and including solar acquisition of €325 m
With higher FCF YoY from upstream offset by the negative impact of downstream
Mostly reflecting dividends paid to minorities and shareholders, as well as FX variations on cash positions
NET DEBT TO BE REDUCED IN 1Q21 WITH COMPLETION OF GGND SALE
| €m | 31 Dec., 2019 |
30 Sep., 2020 |
31 Dec., 2020 |
|---|---|---|---|
| Net fixed assets | 7,358 | 6,786 | 6,308 |
| Rights of use (IFRS 16) | 1,167 | 1,077 | 1,002 |
| Working capital | 943 | 537 | 597 |
| Other assets/liabilities | $-1,152$ | $-1,048$ | $-653$ |
| Assets available for sale | $\circ$ | 221 | $\mathbf{O}$ |
| Capital employed | 8,316 | 7,573 | 7,254 |
| Net debt | 1,435 | 2,091 | 2,066 |
| Operating leases (IFRS 16) | 1,223 | 1,147 | 1,089 |
| Equity | 5,657 | 4,335 | 4,100 |
| Equity, net debt and op. leases | 8,316 | 7,573 | 7,254 |
QoQ variation mainly reflecting the impairments related with Matosinhos discontinuity
Recognising GGND stake sale, with €368 m proceeds expected in 1Q21 booked under other receivables
Net debt stable QoQ
Maintaining liquidity of c.€3 bn, with a competitive cost of funding
SIGNIFICANT PLAN ADJUSTMENTS TO COPE WITH UNPRECEDENTED CONDITIONS
Filipe Silva, CFO Thore E. Kristiansen, Upstream COO
ENSURING A RESILIENT AND PROFITABLE PORTFOLIO
Industry average: c.18.8 kgCO2e/boe (source: IOGP 2019)
Working interest production (kboepd)
2 Galp's upstream carbon intensity indicator includes direct emissions from producing operated and non-operated assets, on a working interest basis.
$\epsilon$ 1.6 – 1.8 bn
2021 RCA Ebitda
$\epsilon$ 1.3 – 1.5 bn
2021 CFFO
$\epsilon$ 0.5 – 0.7 bn
Net capex
2020/21 average guidance maintained (considers GGND proceeds in 1Q21)
Dividend proposal1
$\epsilon$ 0.35/sh 2020 DPS to be paid in May
$\epsilon$ 0.50 /sh
2021 DPS target (with interim in Q3 depending on performance)
AND SENSITIVITIES
| Guidance | 2021 |
|---|---|
| Масго | |
| Brent (\$/bbl) | 50 |
| Galp refining margin (\$/boe) | $2 - 3$ |
| Average exchange rate EUR:USD | 1.20 |
| Operational Indicators | |
| WI production (kboepd) | $125 - 135$ |
| Sines refinery crude utilisation $(\%)$ | 90 |
| Oil products sales to direct clients (mton) | $7.0 - 8.0$ |
| NG and power sales to direct clients (TWh) | $26 - 27$ |
| Renewable generation @100% (TWh) | $1.1 - 1.4$ |
| Financial Indicators | |
| $RCA$ Ebitda ( $\in$ bn) | $1.6 - 1.8$ |
| $CFFO$ ( $\in$ bn) | $1.3 - 1.5$ |
| Net capex ( $\in$ bn) | $0.5 - 0.7$ |
| Sensitivities ( $\epsilon$ m) | Ebitda | CFFO |
|---|---|---|
| Brent | ||
| +\$5/bbl change | $155 - 165$ | $90 - 100$ |
| Galp refining margin | ||
| +\$1/boe change | $80 - 90$ | $80 - 90$ |
| EUR:USD | ||
| +0.10 change | $(125) - (135)$ $(80) - (90)$ |
galp 6
$17$ FY2020 Results & 2021 Outlook
PERFORMANCE HIGHIY IMPACTED BY MARKET CONDITIONS
18
Pandemic context and challenging macro conditions impacting operational results
Slowdown on development activities and non-sanctioned projects
High class portfolio allowing for flexibility and cash preservation
Operations reflecting pressured international environment and high inventories levels
Refining system reconfiguration, centring operations in Sines refinery
Midstream benefiting from market volatility
Sales drop impacted by substantial demand contraction
Continuous focus on operational efficiency and flexibility while expanding offer
Spanish solar PV acquisition
Galp as #1 solar player in Iberia (0.9 GW op.1 and 2.8 GW dev.2)
Assessing upcoming energies and new value pools
QoQ IMPROVEMENT DRIVEN BY MORE SUPPORTIVE MARKET CONDITIONS
| 4Q19 | 3Q20 | 4Q20 | FY2019 | FY2020 | ||
|---|---|---|---|---|---|---|
| 136.9 | 133.8 | 122.8 | Working interest production | kboepd | 121.8 | 130.0 |
| 121.8 | 120.0 | 111.1 | Oil production | kbpd | 108.0 | 116.9 |
| 135.1 | 132.0 | 121.1 | Net entitlement production | kboepd | 120.0 | 128.2 |
| 13.3 | 11.8 | 11.3 | Angola | kbpd | 11.7 | 12.5 |
| 121.8 | 120.2 | 109.8 | Brazil | kboepd | 108.3 | 115.8 |
| $-6.3$ | $-4.4$ | $-5.0$ | Oil and gas realisations - Dif. to Brent | USD/boe | $-7.3$ | $-5.6$ |
| 2.7 | 1.9 | 2.2 | Production costs | USD/boe | 3.6 | 2.3 |
| 15.2 | 16.3 | 15.9 | $D$ $D$ $6A$ | USD/boe | 14.4 | 14.7 |
| 500 | 302 | 319 | RCA Ebitda | $\notin$ m | 1,751 | 1,111 |
| 332 | 133 | 161 | RCA Ebit | $\epsilon$ m | 1,189 | 407 |
| $\circ$ | $\overline{4}$ | $\circ$ | Net Income from Upstream Associates | $\epsilon$ m | 36 | 7 |
| 184 | 71 | 69 | Capex | $\epsilon$ m | 600 | 326 |
| 77 | 1.17 | 1.19 | Average exchange rate | JR:USE | $\sim$ | |
|---|---|---|---|---|---|---|
| $\overline{\phantom{a}}$ 63 |
. – 42 |
44 | Dated Brent price | JSD/bbl | 04 | 42 |
WI production down QoQ, impacted by a concentration of maintenance activities and operational constraints, resulting primarily from the pandemic circumstances
Ebitda up QoQ supported by positive adjustments from previous periods costs and Brent evolution
Capex YoY reflecting significant adjustments to cope with challenging macro conditions, namely on exploration & development investments
PERFORMANCE STILL REFLECTING WEAK MACRO ENVIRONMENT
Iberian oil market1
Iberian natural gas market2
| 4Q19 | 3Q20 | 4Q20 | FY2019 | FY2020 | ||
|---|---|---|---|---|---|---|
| Commercial sales to clients | ||||||
| 2.0 | 1.5 | 1.5 | Oil products | mton | 8.3 | 6.0 |
| 7.8 | 5.4 | 5.9 | Natural gas | TWh | 31.6 | 22.9 |
| O.8 | 0.9 | 0.9 | Electricity | TWh | 3.2 | 3.3 |
| 102 | 105 | 71 | RCA Ebitda | $\notin$ m | 410 | 325 |
| 63 | 81 | 47 | RCA Ebit | $\notin$ m | 304 | 232 |
| $\circ$ | $\bigcirc$ | $-1$ | Net Income from Commercial Associates |
$\notin$ m | 5 | $-2$ |
| 34 | 28 | 49 | Capex | $\notin$ m | 83 | 127 |
65.7
466
mton
TWh
51.9
427
Volumes sold to clients reflecting QoQ seasonality and increased mobility restrictions during the period, especially in the B2C segment
Ebitda followed the lower oil products and natural gas sales
Capex activities mainly related to the retail segment in Portugal and logistic infrastructures in Africa
| FY2020 Results & 2021 Outlook | 1 Source: APETRO and CORES. |
|---|---|
2 Source: REN and Enagás.
$13.4$
$114$
$13.3$
109
$16.3$
122
20
ROBUST MIDSTREAM MITIGATES NEGATIVE REFINING CONTRIBUTION
| 4Q19 | 3Q20 | 4Q20 | FY2019 | FY2020 | ||
|---|---|---|---|---|---|---|
| 26.5 | 23.4 | 23.5 | Raw materials processed | mboe | 96.0 | 87.1 |
| 3.3 | $-0.7$ | 1.6 | Galp refining margin | USD/boe | 3.1 | 1.1 |
| 4.2 | 3.6 | 3.7 | Oil products supply 1 | mton | 16.2 | 13.9 |
| 23.2 | 17.9 | 24.1 | NG/LNG supply & trading volumes 1 | TWh | 89.3 | 71.4 |
| 9.0 | 5.6 | 11.3 | Trading | TWh | 34.3 | 26.0 |
| O.4 | O.3 | 0.4 | Sales of electricity to the grid 2 | TWh | 1.3 | 1.4 |
| 52 | $-12$ | 17 | RCA Ebitda | $\epsilon$ m | 207 | 113 |
| $-38$ | $-108$ | $-51$ | RCA Ebit | $\epsilon$ m | $-109$ | $-210$ |
| 21 | 16 | 13 | Net Income from Ref. & Midstream Associates |
$\notin$ m | 95 | 70 |
| 60 | 15 | 25 1 | Capex | $\epsilon$ m | 142 | 76 |
| 1.17 | rate $\sim$ $\sim$ $\sim$ |
$\sim$ . |
1. I H | |
|---|---|---|---|---|
Galp refining margin up QoQ, following the improvement in the international market environment
Supply & Trading volumes increased QoQ driven by higher natural gas network trading activities
Ebitda supported by Midstream activities, mitigating weak refining performance
galp
Investments YoY reflecting refining activities' slowdown
PERFORMANCE MOSTLY REFLECTING SEASONALITY AND OPERATIONAL UPSETS
| 4Q19 | 3Q20 | 4Q20 | FY2019 | FY2020 | ||
|---|---|---|---|---|---|---|
| Indicators on a 100% basis | ||||||
| 12 | 926 | 926 | Renewable installed capacity | MW | 12 | 926 |
| 11 | 143 | 170 | Renewable power generation 1 | GWh | 31 | 327 |
| $\overline{\phantom{a}}$ | 36.2 | 39.2 | Galp solar captured price 2 | EUR/MWh | 30.3 | |
| Consolidated indicators | ||||||
| $-5$ | $-2$ | $-3$ | RCA Ebitda | $\varepsilon$ m | $-6$ | $-9$ |
| $-5$ | $-2$ | $-1$ | RCA Ebit | $\notin$ m | -6 | $-19$ |
| $\circ$ | 3 | $-4$ | Net Income from Renewables & New Businesses Associates 3 |
$\notin$ m | $\circ$ | $-2$ |
| $\circ$ | 328 | 20 | Capex | $\notin$ m | 16 | 350 |
| 41.0 | 37.5 | 40.1 | Iberian baseload pool price 4 | EUR/MWh | 34.0 | |
|---|---|---|---|---|---|---|
| 42.7 | 37.5 | 39.6 | Iberian solar captured price 4 | EUR/MWh | 48.4 | 33.0 |
Renewable generation up QoQ, with 3Q20 only including power generated in September
4Q20 generation reflecting lower sunlight hours, as well as transformer upsets in 375 MW
Full year capex considers the 2.9 GW Spanish solar PV acquisition concluded in 3Q20
| $\epsilon$ m | 31 Dec., 2019 |
30 Sep., 2020 |
31 Dec., 2020 |
|---|---|---|---|
| Cash and cash equivalents | 1,460 | 1,687 | 1,678 |
| Undrawn credit facilities | 1,163 | 1,263 | 1,262 |
| Gross debt | 2,895 | 3,777 | 3,743 |
| Average funding cost | 1.8% | $1.7\%$ | $1.7\%$ |
| Net debt | 1,435 | 2,091 | 2,066 |
| Operating leases (IFRS 16) | 1,223 | 1,147 | 1,089 |
| Net debt to RCA Ebitda 1 | 0.7x | 1.3x | 1.5x |
| % Debt at fixed rate | 40% | 48% | 48% |
galp(6)
RESERVES EVOLUTION REFLECTING 2020 PRODUCTION WITH NO IMPACT FROM WEAKER MACRO
| Reserves (mboe) | 2019 | 2020 | Change |
|---|---|---|---|
| 1P | 404 | 385 | $-5%$ |
| 2P | 739 | 700 | $-5%$ |
| 3P | 982 | 923 | $-6\%$ |
| Contingent resources (mboe) | 2019 | 2020 | Change |
| $1C$ | 498 | 525 | 6% |
| 2C | 1,680 | 1,720 | 2% |
| 3C | 3,394 | 3,471 | 2% |
| Prospective resources (mboe) | 2019 | 2020 | Change |
| Unrisked | 4,530 | 4,910 | 8% |
| Risked | 766 | 861 | 12% |
Note: All figures are based on DeGolyer and MacNaughton report as of 31.12.2020. Reserves figures on a net entitlement basis.
Contingent resources and prospective resources on a working interest basis. Reserves economic ev
CONSISTENT WITH OUR SUSTAINABLE STRATEGIC GOALS
Dow Jones Sustainability CDP climate Index A-, Leadership Level Best score in Europe, 3rd worldwide Industry average: B in the Oil & Gas sector2 Sustainalytics MSCI Medium risk (26.8) AAA #9 of 280 (global Oil & Gas Maximum score since July 2018 producers) Bloomberg Intelligence ISS ESG Environmental3: $#2$ of 31 Prime (B-) Carbon transition4: $#2$ of 39 High relative performance #1 decile rank Gender Equality Index 2021
www.galp.com [email protected]
$0.101000000000000000000000000000000000$
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