Galp releases today the results of the second quarter and first half of 2020.

Second quarter 2020 highlights

CFFO was down YoY to €160 m due to the weaker market environment conditions experienced during a period highly impacted by the Covid-19 global outbreak. Net capex amounted to €149 m, already reflecting adjustments to the investment plan. FCF was -€10 m.

Consolidated RCA Ebitda of €291 m:

• Upstream: RCA Ebitda was €204 m, down 50% YoY, reflecting the sharp decrease of oil prices; Working interest (WI) production was up 18% YoY to 132.2 kboepd, mostly supported by the increased contribution of Lula and Berbigão/Sururu in Brazil;
• Refining & Midstream: RCA Ebitda was €19 m, a €77 m decrease YoY, due to the pressured international commodities market, which led to lower supply and trading contribution, and a significant slowdown of the refining activity;
• Commercial: RCA Ebitda of €59 m, a 43% decrease YoY, following the decline in oil products and natural gas sales in the quarter, reflecting the weak market demand conditions;
• During the period, Galp was able to implement immediate mitigation measures to reduce the impact on its business and operations from the unexpected market conditions caused by Covid-19.

RCA Ebit was down YoY at -€57 m, following the weaker operational performance and including impairments of €92 m related with smaller scale exploration assets in the Upstream business.

RCA net income stood at -€52 m. IFRS net income was -€154 m, with an inventory effect of -€84 m and non-recurring items of -€18 m.

During the period, Galp received €83 m related with its Upstream business from the settlement of the equalisation agreements related with the Lula, Atapu and Sépia unitisation processes, in Brazil, and registered a net payment of €43 m related with derivatives within Refining & Midstream.

First half 2020 highlights

CFFO was €404 m, 60% lower YoY, while RCA Ebitda amounted to €760 m, 31% lower YoY, both reflecting the materially adverse market conditions in the period.

Total investment reached €280 m with Upstream accounting for 66% of capex and the remaining mainly focused on Commercial and the improvement of refining energy efficiency.

FCF stood positive at €52 m. Considering dividends paid to shareholders of €318 m and to non-controlling interests of €194 m, as well as other adjustments, net debt increased €497 m.

Other highlights

• As part of the mitigation measures undertaken to preserve the strength of Galp's financial position under unprecedented market circumstances, no interim distribution will be made during the second half of 2020 in relation with the 2020 fiscal year dividend. The proposal for the 2020 dividend shall be made considering the full year results, expected to be announced in the first quarter of 2021.
• The SPA recently signed between Galp and ACS Group has been amended to establish new terms and conditions for the acquisition, including the setting up of a joint venture under which Galp acquires 75.01% and ACS Group maintains a stake of 24.99%, with a governance structure of joint control.
• Galp is expected to pay an amount of €300-350 m at closing, for the stake acquisition and previous development costs. All further development and construction costs related with the portfolio will be assumed by the joint venture and are intended to be project financed. The agreement maintains the development and construction of the portfolio to be made by Cobra, an affiliate of ACS.
• The amended SPA includes conditions precedent customary for this type of transaction, including competition approval from the European Commission. The transaction is expected to be completed before year end.
• Considering the recent developments and expected market outlook, Galp revised downwards its short and medium term macro assumptions, as well as a more conservative longer term balance between global oil supply and demand.