February 20, 2018 / 10:51 AM / 8 months ago

Galp predicts flat 2018 earnings as targets output rise

LISBON, Feb 20 (Reuters) - Portuguese oil company Galp Energia expects largely flat pre-tax earnings this year after a 32 percent increase in 2017 as production growth should slow, although it is still seeking to boost output by more than 50 percent by 2020.

Galp shares fell 2.65 percent after the release of the outlook in a capital markets day presentation, even as it increased its proposed dividend payout for 2017 by 10 percent to 0.55 euros a share.

It put this year’s earnings before interest, taxes, depreciation and amortization (EBITDA) at 1.8-1.9 billion euros, after last year’s 1.87 billion. Unlike last year, Galp would not provide a five-year EBITDA growth outlook, which it last put at 20 percent a year until 2021.

This year, Galp expects an output increase of 15-20 percent after last year’s 38 percent jump. In the last quarter of 2017, production exceeded 100,000 bpd for the first time, driving net profit 54 percent higher in the quarter to 186 million euros, the company said in a separate results statement.

EBITDA rose 24 percent in the quarter and 32 percent for all of last year, exceeding Galp’s initial guidance for 2017 of up to 1.6 billion euros.

Galp estimated annual average capital expenditure in the next five years at around 1 billion euros in a slight shift from the previous outlook, which put it in a 0.8 billion to 1 billion euro range.

“Capex guidance seems somewhat disappointing considering the expectations for savings with ongoing efficiencies in Brazil,” BPI analysts said in a note.

Still, Galp plans to boost output to 150,000 barrels of oil equivalent per day by 2020. Most of Galp’s production growth will come from Brazil, where it has stakes in large offshore oil fields and continues to look for expansion opportunities.

Galp, which is still largely a refiner, said that from 2020 onwards it plans to add new projects in Mozambique and Brazil which should boost the share of natural gas output in its total output to up to 30 percent from around 20 percent now.

Galp expects free cash flow of over 1 billion euros by 2020, up from 600 million last year, and should break even at oil prices around $25 a barrel shortly after 2020, down from a breakeven price of $35 in its previous forecast. (Reporting by Andrei Khalip; editing by Alexander Smith)

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