February 11, 2019 / 2:31 PM / 8 months ago

Portuguese oil firm Galp girds for belated Brazilian boost

LISBON, Feb 11 (Reuters) - Portuguese oil company Galp said on Monday it expects higher crude output, refining margins and efficiency gains to deliver a steep rise in 2020 and beyond as its Brazilian and Angolan operations pump up the volumes.

While a relative minnow compared with oil majors such as Royal Dutch Shell, BP, Total and Exxon , Galp is a household name in Portugal, distributing gas and selling petrol via a network of branded service stations.

Traditionally an oil refiner, Galp has attracted interest because of its oil and gas production growth prospects from stakes in projects in Brazil, Angola and Mozambique and China’s Sinopec owns a 30 percent in its Brazilian assets.

Galp said its oil output rose 15 percent in 2018 and it expects a rise of 8-12 percent in 2019 after delays with the start-up of Brazilian projects, and by 12-16 percent in 2020.

The offshore Iara field is now due to start producing in the second half of 2019, its chief executive Carlos Gomes da Silva said on a post-earnings conference call, adding that Galp also expects its upstream earnings to benefit from lower oil taxes.

“After 2020, we are assuming a higher production versus the previous guidance. We expect to benefit from the increase contributions from Lula and Iara, where we see positive signs,” Gomes da Silva added.


While Galp’s fourth-quarter net profit was below forecasts, falling by 42 percent to 109 million euros, its earnings before interest, tax, depreciation and amortization (EBITDA) rose four percent, ending the full year at 2.2 billion euros.

It projected EBITDA of 2.1 to 2.2 billion euros for 2019, but said that this should jump to more than 3 billion euros in 2020, with further growth through 2025.

Shares in Galp were up 0.5 percent at 1423 GMT, helped by a 15-percent proposed increase in the dividend payout, of 0.63 euros a share, traders said.

Analysts at Santander said that despite a weak quarter, affected by mark-to-market hedging losses and scheduled refinery maintenance, they expected “highly differentiated upward earnings trend” in the next few years.

“We still reason to be optimistic for sound delivery 2019 onward - particularly upstream,” they wrote, reinforcing their ‘buy’ recommendation on the stock. “The value support and cash outlook is bright for Galp in our view.”

Galp CFO Filipe Silva said that hedging contracts should have a positive impact in the coming quarters, while in refining, Galp expects recent initiatives aimed at increasing gains by $1 per barrel to make a full contribution by 2020.

The company also said it hopes to see the first oil from the Kaombo South project in Angola this year. (Reporting by Andrei Khalip and Goncalo Almeida Editing by Alexander Smith)

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