The continued execution of Galp’s Exploration and Production (E&P) projects in Brazil, and the resulting added production of oil and natural gas, offset a decline in Refining & Marketing (R&M) in a quarter affected by the introduction of new accounting norms (IFRS 16).
Earnings before interest, taxes, depreciation and amortization adjusted for extraordinary items (Ebitda RCA) rose 9% in the first quarter compared with a year before, to €494 million, of which 86% generated from the company’s international activities – and more than 75% directly from the E&P unit. Introduction of the new IFRS 16 had a positive Ebitda impact of €44 million.
Ebita from E&P activities increased 28% from the same period a year ago, to €374 million, on the back of an 8% increase in total oil and natural gas production, which averaged 112.6 thousand barrels of oil equivalent per day (kboepd) in the quarter. Production was boosted by the start of production and ramp-up throughout the year of two FPSO-type floating units in the Santos Basin, in Brazil, and another one in Angola. Ebitda at the E&P unit had a €33 million gain from the new IFRS 16 norm.
Earnings at the R&M unit dropped 42% to €70 million, reflecting a decline in international refining margins, as well as operational constraints that limited the availability of products, particularly to the international markets.
An increase in sales at the European hubs made up for a decline in sales to direct clients, which effected a 40% increase in the Gas & Power unit’s Ebitda from the same quarter a year earlier, to €47 million.
Adjusted net income for the first quarter totaled €103 million, 24% below the first quarter of 2018. According to IFRS standards, Galp has posted a first-quarter loss of €8 million due to a €126 million increase in negative one-time items that in essence reflect the impact of the Lula field unitization process, in Brazil. Galp’s economic position in this block, held through its subsidiary Petrogal Brasil, has declined from 10% to 9,2%, effective on April 1, 2019. Galp has recognized a one-time €98 million negative impact from this process.
Other financial indicators
Cash flow from operations in the first quarter rose 62% to €396 million from the same period of 2018, already accounting for the €44 million euro gain from the introduction of the IFRS 16 rules, and in spite of the lower contribution from Refining and Marketing. Free cash flow totaled €159 million, dropping to €91 million after dividend-distribution to minority interests.
Capex in the first quarter was in line with the same period from a year before, at €149 million, of which 89% were allocated to the E&P businesses, led by the Lula project, in Brasil, block 32 in Angola, which saw a second FPSO unit coming online in April, and the Mozambique LNG project.
On March 31, net debt was €1.6 billion, down €134 million from the year-end, reflecting cash generation during the period. Liabilities associated with operating leases were €1.23 billion. Net debt to Ebitda RCA was 0.7x, with Ebitda RCA adjusted for the impact from the new IFRS 16 standard.
Galp is a publicly held, Portuguese-based energy company, with an international presence. Our activities cover all stages of the energy sector's value chain, from prospection and extraction of oil and natural gas from reservoirs located kilometers under the sea surface, to the development of efficient and environmentally sustainable energy solutions for our customers. We help large industries to increase their competitiveness, or individual consumers looking for the most flexible solutions for their home and mobility needs. Our offerings combine all types of energy, from electricity to gas and liquid fuels. We also contribute to the economic development of the 11 countries where we operate and to the social progress of the communities that welcome us. Galp employs 6,360 people.