Third quarter 2021
Galp’s adjusted operating cash flow (OCF)1 reached €468 m, up €143 m YoY, driven by a higher Upstream contribution and a more supportive Industrial performance. Cash flow from operations (CFFO) was €175 m, impacted by a working capital build, which includes temporary margin accounts of €373 m related to hedges to de-risk gas sourcing and supply prices.
Considering the above-mentioned effects, free cash flow (FCF) generation was negative at -€113 m, with net debt at €2,028 m, also reflecting dividends paid to Galp’s shareholders of €207 m. Net debt to RCA Ebitda was 1.1x at the end of the period.
RCA Ebitda was €607 m, with the following highlights:
- Upstream: RCA Ebitda was €522 m, a €220 m increase YoY, reflecting the higher oil price environment, despite an increased discount on realisations, which more than offset the lower production. OCF was €364 m, compared to €253 m in 3Q20.
- Commercial: RCA Ebitda was €87 m, lower 17% YoY, while OCF was €84 m, down 17% YoY, despite increased sales volume, as 3Q20 benefited from a higher contribution from high value segments.
- Industrial & Energy Management: RCA Ebitda was €15 m, up from -€12 m in 3Q20, following an improved refining environment, although impacted by a negative contribution from Energy Management, mostly due to natural gas sourcing restrictions during the period, increased regasification costs in Portugal and a negative impact in supply from the lag in the pricing formulas for oil products.
- Renewables & New Businesses: No relevant RCA Ebitda as most of the operations are not consolidated. The pro-forma Ebitda2 of the Renewables operations reached €28 m in the period, capturing the robust Iberian solar capture prices in Iberia.
RCA Ebit was up €261 m YoY to €369 m, following the stronger operational performance.
RCA net income was €161 m. IFRS net income was -€334 m, with an inventory effect of €50 m and special items of -€545 m, which include mark-to-market swings from derivatives.
1 Adjusted operating cash flow (OCF) indicator represents a proxy of Galp’s operational performance excluding inventory effects, working capital changes and special items. The reconciliation of this indicator with CFFO using IFRS is in chapter 6.3 Cash Flow of the 3Q21 report.
First nine months 2021
Galp’s OCF1 was €1,383 m, 59% higher YoY, while RCA Ebitda was €1,678 m, 45% higher YoY, supported by the improved macro conditions. CFFO was €992 m, also reflecting a working capital build, from derivatives margin accounts.
Capex totalled €680 m, with Upstream accounting for 69% of total investments, whilst the downstream activities represented 12% and Renewables & New Businesses 17%. Net capex was of €253 m, considering the proceeds from divestments during the 1H21, most notably the stake sale in Galp Gás Natural Distribuição (GGND).
FCF amounted to €633 m. Considering dividends paid to shareholders of €498 m and to non-controlling interests of €78 m, as well as other adjustments, net debt decreased €38 m, compared to the end of last year.
Full year 2021 updated guidance
Galp updated its guidance for 2021, based on the past performance and the updated macro and operational outlook.
Group RCA Ebitda is now expected to surpass €2.3 bn (vs. >€2.0 bn previously):
- Upstream: RCA Ebitda expected at c.€2.0 bn, now assuming average Brent prices at c.$70.0/bbl while also reflecting the working interest production adjustments.
- Commercial: RCA Ebitda estimated at c.€300 m, following a slower oil products demand recovery in Iberia.
- Industrial & Energy Management: RCA Ebitda expected at <€100 m, as the higher Industrial performance offset by lower contribution from the Energy Management.
- Renewables: Estimated pro-forma Ebitda (not consolidated) is expected at c.€60 m, following the higher power prices in Iberia.
Group OCF is estimated at >€1.8 bn (vs. >€1.7 bn previously), while net capex is expected in the range of €0.5 – 0.6 bn (vs. €0.5 – 0.7 bn previously).
2 Pro-forma considers all Renewables projects as if they were consolidated according to Galp’s equity stakes.
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