Galp Energia SGPS (GALP) Q2 2024 (Q&A) earnings summary

Executive summary

• Q2 2024 delivered strong operational and financial performance, with upstream production at 106 kboepd and EBITDA RCA of €849m, supported by portfolio rotation and mid/downstream transformation.

• Robust cash generation and disciplined investments led to significant net debt reduction, with net debt at €1.2bn and net debt to RCA EBITDA at 0.35x.

• Asset rotation advanced with completion of Angolan farm-down and announced Mozambique divestment, focusing on higher-return, lower-risk projects.

• Company maintains significant financial flexibility to pursue high-return growth projects and support future investments.

• 1H24 saw continued strong operating results, with RCA Ebitda of €1,788m and OCF of €1,205m, excluding Mozambique Coral South FLNG.

Financial highlights

• 2Q24 RCA Ebitda reached €849m (down 7% YoY), OCF was €646m, and net income was €299m (up 16% YoY); FCF at €789m, including Angola divestment proceeds.

• 1H24 RCA Ebitda was €1,788m (flat YoY), RCA net income €624m (up 23% YoY), and FCF €838m; net debt down 17% from end-2023 to €1,158m.

• Dividend per share increased by 4% to €0.56/share, with €0.28/share interim to be paid in August; €350 million buyback program ongoing.

• Upstream production costs expected to decrease to $1.7–$3 per barrel, with DD&A per barrel at $10–$12.

• Cash tax guidance for the full year maintained at €1–1.1 billion, with a tax rate around 46%.

Outlook and guidance

• FY24 guidance revised: RCA Ebitda now expected above €3.1bn, OCF above €2.0bn, net capex around €1.0bn, and WI production above 105 kboepd.

• Net CapEx guidance reiterated, with flexibility due to contingent payments and pending Mozambique deal closure.

• Further cash-ins of ~$1.2bn from Mozambique and Angola divestments expected in 2024/25.

• Decarbonization targets for 2030 suspended due to slower-than-expected renewables progress, but net zero by 2050 remains the long-term goal.

• Several renewable projects expected to start construction by year-end, despite licensing delays in Iberia.