05/05/2023 | Resultados

Galp 1Q23 results

All the materials related with the results are available here. The analysts' Q&A session will be held at 14:00h (Portugal / U.K. time).

“The world continues to find itself in need of additional reliable and efficient energy supplies, aligned with a progressive decarbonisation. This reinforces our confidence in Galp’s strategy, which is focused on the growth of lower-carbon projects.

During 1Q23, we continued to progress in our key upstream projects, to ramp-up our renewable power generation and to transform our commercial footprint. Midstream’s contribution returned to normalised levels, and our industrial activities successfully captured the stronger international refining environment, whilst safely completing one of the biggest turnarounds in our Sines hydrocracker.

I would like to welcome the new directors who joined our board, fully energised to drive Galp’s transformational journey forward. My gratitude to the departing members Teresa and Thore, and a warm welcome to Maria João, Ronald, Rodrigo and João Diogo.” 

Filipe Silva, CEO

First quarter 2023

Galp’s 1Q23 results reflect a strong operating performance, namely on Industrial & Midstream and Commercial activities. Free cash flow generation was robust, at €352 m, enabling net debt to be reduced during the period by €214 m. 

RCA Ebitda reached €864 m, flat YoY:

  • Upstream: RCA Ebitda was €548 m, down YoY, reflecting the sale of the Angolan upstream assets, a less favourable oil price environment, as well as a negative contribution from Coral Sul, in Mozambique, still in commissioning phase.

    On a comparable basis, excluding Angolan assets, current portfolio working interest (WI) production was flat YoY, as the ramp-up of Coral Sul, was offset by increased maintenance and natural decline from some areas in Brazil.

  • Renewables & New Businesses: RCA Ebitda was €35 m, reflecting higher renewable equity generation YoY, on the back of increased capacity installed and 100% ownership of Titan Solar, and supported by a realised sale price above market benchmark, leveraging on energy management short-term agreements to lock in prices.

  • Industrial & Midstream: RCA Ebitda was €235 m, supported by the contribution from industrial activities, capturing the improved international cracks environment and despite increased costs due to planned maintenance. The strong performance from midstream activities benefited from higher flexibility given limited pre-sold and pre-hedged contracts, despite the reduction in sourced volumes and lower European natural gas prices.  

  • Commercial: RCA Ebitda was €71 m, up YoY, supported by an overall recovery in oil volumes, namely in the B2B aviation segment, which is already close to pre-pandemic levels.

Group RCA Ebit was €674 m, a 25% increase YoY, reflecting reduced DD&A from the exclusion of the Angolan upstream assets, and as 1Q22 included an impairment of €120 m related with exploration and appraisal assets in Brazil.

RCA net income was €250 m, reflecting taxes of €389 m, which includes €14 m related to the temporary Brazilian levy on oil exports and also the Iberian windfall taxes of €46 m. IFRS net income was €352 m, with an inventory effect of €-90 m and special items of €192 m.

Galp’s adjusted operating cash flow (OCF1) was robust at €363 m, although reflecting a high concentration of tax payments (phasing effect) related to upstream activities in Brazil. Cash flow from operations (CFFO) reached €500 m, including an inventory effect of €-122 m and a €275 m working capital release, driven by the decrease in commodities prices and reduced inventories.

Net capex totalled €109 m, mostly directed towards Upstream projects, namely for the execution of Bacalhau, and considering €77 m of initial proceeds from the Angolan upstream assets disposal.

Considering the robust free cash flow and also the buyback programme execution, net debt decreased €214 m during the quarter. At the end of the period, Galp’s financial position was sound, as net debt amounted to €1,341 m and net debt to RCA Ebitda was 0.4x.

Note: 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 report. 

Financial Data

€m (RCA, except otherwise stated)        
  1Q22 4Q22 1Q23 % Var. YoY
RCA Ebitda                  869                  951                  864 (1%)
Upstream                 803                 791                 548 (32%)
Renewables & New Businesses (1)                  17                  35 n.m.
Industrial & Midstream                    2                 118                 235 n.m.
Commercial                  56                  42                  71 26%
Others                  10 (17) (24) n.m.
RCA Ebit                  538                  475                  674 25%
Upstream                 555                 602                 438 (21%)
Renewables & New Businesses (1)                    5                  23 n.m.
Industrial & Midstream (51) (15)                 199 n.m.
Commercial                  31 (104)                  45 44%
Others                    5 (13) (31) n.m.
RCA Net income                  155                  273                  250 62%
Special items (320)                 388                 192 n.m.
Inventory effect                 152 (206) (90) n.m.
IFRS Net income (14)                 455                 352 n.m.
Adjusted operating cash flow (OCF)                  638                  701                  363 (43%)
Upstream                 576                 529                  74 (87%)
Renewables & New Businesses (1)                  19                  37 n.m.
Industrial & Midstream (1)                 116                 235 n.m.
Commercial                  55                  56                  42 (24%)
Others                    9 (19) (24) n.m.
Cash flow from operations (CFFO)                  193               1,107                  500 n.m.
Net Capex (122) (342) (109) (10%)
Free cash flow (FCF)                    30                  737                  352 n.m.
Dividends paid to non-controlling interests (110) (100) - n.m.
Dividends paid to Galp shareholders - - - n.m.
Buybacks - (34) (77) n.m.
Net debt               2,392               1,555               1,341 (44%)
Net debt to RCA Ebitda1 1.0x 0.4x 0.4x n.m.
1 Ratio considers the LTM Ebitda RCA (€3,618 m), which includes the adjustment for the impact from the application of IFRS 16 (€225 m).

Short term outlook

Key operating and financial guidance for 2023 is maintained, in accordance with the macro assumptions and sensitivities provided.

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