Portuguese Galp Output Rises
Portuguese Galp saw output rise by a fifth while oil and gas sales prices rose by almost half, propelling it to strong Q2 financial results despite the pre-tax (Ebitda) earnings at both its downstream and its gas and power divisions each being down by a quarter year on year. Its IFRS profit was up over threefold from €102mn to €330mn ($385mn), while its replacement cost profit was up 74% on Q2 2017 at €457mn.
Announcing its results July 30, it also raised its guidance to above €2.1bn, a few hundred million euros above the start of the year; while capital expenditure (capex) guidance is maintained at €1.0bn - €1.1 bn, now including the signature bonuses from the exploration blocks acquired in the recent bidding rounds in Brazil.
The growth in output came from Brazil, up while it saw decline in Angola. Total output rose from 90,000 barrels of oil equivalent/day to 108,000 boe/d, of which 101,400 boe/d came from Brazil, up 24%. Capex totalled €218mn during the quarter, of which 81% was allocated to the E&P business. Production costs came down by 16% to average $7.7/boe.
Expenditure in development and production activities reached €105mn, which was mainly allocated to the development of projects in block BM-S-11 in Brazil, and in Angolan block 32 where the Total-run Kaombo oilfield has just started up. Capex of €71mn in exploration and appraisal activities was mainly related to the payment of the 3% stake acquisition in BM-S-8, in Brazil, announced in October 2017.
Q2 2018 gas sales during the second quarter of 2018 reached 1,892mn m³, up 10% year on year, following the increase in network trading volumes and in sales to industrial clients. But there were lower contribution from the supply and trading activity, driven by lower LNG volumes sold in the international market. Sales of electricity increased 13% to 1,326 GWh, with better marketing activity. During May, Galp announced the signature of a 20-year LNG SPA with Venture Global LNG for 1mn metric tons/yr from the Calcasieu Pass LNG export facility in the US, which is expected to start operations in 2022.
Galp is also a 10% partner in the Exxon-led Rovuma LNG (or Mamba LNG) project, which recently submitted its phase 1 development plan for two LNG trains onshore Mozambique, each of 7.6mn mt/yr.