• Operating Cash Flow: Expected to increase by 20% in 2026 compared to 2024.
• EPS: Increased by 15%.
• CapEx: Emphasis on disciplined capital expenditure.
• Dividend: Proposal to increase cash dividend base.

Release Date: February 17, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Galp Energia SGPS SA (GLPEF) reported strong performance across all business segments in 2024, with significant achievements in Namibia, including the drilling of four wells in the Northwest region of Mopane.
• The company plans to increase its cash dividend base, with EPS up by 15%, reflecting confidence in its growth plan and disciplined CapEx.
• Galp Energia SGPS SA (GLPEF) expects operating cash flow to increase by 20% in 2026 compared to 2024, driven by the start of key projects and normalized asset operations.
• The company is maintaining a disciplined approach to its renewables business, with plans for a 400-megawatt increase between 2025 and 2026, focusing on projects that meet expected returns.
• Galp Energia SGPS SA (GLPEF) has a solid financial position, allowing flexibility in its farm-down strategy for its assets in Namibia, without rushing into decisions that could compromise value.

Negative Points

• The company anticipates a weaker macroeconomic environment in 2025, with one-off maintenance activities expected to limit operating performance.
• Galp Energia SGPS SA (GLPEF) faces challenges in its renewables business, with returns currently below target levels, raising questions about the accelerated growth strategy.
• There is uncertainty regarding the permeability of wells in Namibia, which could impact plateau production levels and the ability to reinject gas.
• The company has not provided specific guidance on the gas strategy for its Namibia operations, leaving questions about long-term plans for gas handling.
• Galp Energia SGPS SA (GLPEF) is undergoing a competitive recruitment process for a permanent CEO, which could impact strategic continuity and leadership stability.

Q & A Highlights

• Warning! GuruFocus has detected 6 Warning Signs with ASX:CGF.

Q: Can you provide an update on the permeability issues in Namibia and the potential impact on production levels? A: Maria Joao Carioca, Co-CEO & CFO, stated that they are still gathering and analyzing data from their exploration activities in Namibia. They have not revised their numbers yet and are focused on integrating all the data, including seismic information, to assess the situation accurately.

Q: Why is Galp continuing to push for growth in the renewables sector despite lower-than-target returns? A: Maria Joao Carioca explained that Galp remains disciplined in its investment plans, ensuring that each project meets expected returns. Georgios Papadimitriou, Executive Director, added that their growth strategy is selective, focusing on solar, storage, and hybridization projects that offer good returns.

Q: What is the status of the farm-down process in Namibia, and how does it align with your development plans? A: Maria Joao Carioca mentioned that while a farm-down is a natural solution for the asset, they are not in a rush due to their solid financial position. They aim to align incentives with a future partner and are focused on analyzing and integrating data before proceeding.

Q: Can you elaborate on the expected increase in operating cash flow for 2026 despite similar EBITDA guidance to 2024? A: Maria Joao Carioca highlighted that the increase in operating cash flow is due to greater fiscal efficiency in Bacalhau and a return to normalized levels after one-off maintenance in 2025. The start of key projects will also contribute to this growth.

Q: What are the key factors driving the decision to accelerate low-carbon CapEx towards industrial projects? A: Maria Joao Carioca explained that the acceleration is for projects already undergoing development stages, crucial for Galp's industrial transformation. These projects are expected to deliver IRRs above 12%, aligning with their investment criteria.

Q: How does Galp plan to handle the gas strategy in Namibia, especially regarding reinjection and future plans? A: Maria Joao Carioca stated that they are not providing specific guidance on gas content yet, as they are still analyzing overall recoverability and development concepts. The focus is on assessing the feasibility of development concepts for the first hub.

Q: What is the rationale behind the 15% increase in the dividend, and how does it relate to your financial strategy? A: Maria Joao Carioca explained that the increase is based on the visibility of upcoming projects and expected 20% growth in operating cash flow by 2026. The decision aligns with maintaining a competitive distribution strategy anchored on one-third of overall OCF.

Q: Can you provide more details on the additional 50 days of maintenance in the upstream sector and its impact? A: Nuno Holbech Bastos, EVP Upstream, clarified that the additional maintenance is a one-off investment to ensure the integrity and longevity of facilities, specifically addressing corrosion issues. The impact is expected to be around 2,000 to 3,000 barrels per day.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.