• Upstream Production: 104,000 barrels due to planned maintenance.
• Cash Breakeven: $20 per barrel for Upstream operations.
• Cash-In from Divestments: $870 million from Mozambique's Area 4 and Angola earnout.
• Planned Maintenance: Over 40% of full-year plan completed in Q1.

Release Date: April 28, 2025

• Warning! GuruFocus has detected 4 Warning Sign with TRATF.

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

Positive Points

• Galp Energia SGPS SA (GLPEF) reported a solid start to 2025 with robust contributions from its Iberian businesses, offsetting weaker Upstream performance.
• The company successfully completed the divestment of its stake in Mozambique's Area 4, resulting in an $870 million cash inflow.
• Galp's Upstream operating base maintains a cash breakeven of $20 per barrel, showcasing resilience amid market volatility.
• The company is engaging with credible top-tier operators for potential partnerships in Namibia, indicating strategic growth opportunities.
• Galp's disciplined capital allocation and focus on maintaining a lean organization are expected to support agile decision-making and long-term value creation.

Negative Points

• The Upstream performance was slightly weaker due to planned maintenance, resulting in over 40% of the full-year stoppage days being utilized in Q1.
• Galp refrained from updating its financial guidance due to market uncertainty, reflecting cautiousness amid volatile conditions.
• The farm-out process in Namibia may take time, with no strict timeline for completion, potentially delaying strategic partnerships.
• Refining margins were pressured in April, with expectations of $6 per barrel for 2025-2026 amid uncertain demand dynamics.
• The company faces challenges in optimizing CapEx amid lower oil prices, with potential delays in investment decisions to maintain financial stability.

Q & A Highlights

Q: Can you provide more details on the Namibia farm-down process and the timeline for potential partnerships? A: Maria Joao Carioca, Co-CEO and CFO, explained that Galp is reengaging with interested parties for partnerships in Namibia. Data sharing is ongoing, with a focus on aligning interests for a fair valuation. The process is expected to conclude by Q4, but there is no strict timeline, emphasizing no procrastination but also no rush.

Q: How is Galp handling capital priorities given the current market downturn and unchanged financial guidance? A: Maria Joao Carioca stated that Galp maintains a resilient base case with a cash breakeven of $20 per barrel. Despite market uncertainties, Galp is not revising its guidance and has already reduced CapEx by 20% from previous estimates. There is room for further optimization if needed, but the focus remains on disciplined investment decisions.

Q: What is the status of the Bacalhau project in Brazil, and how does it impact Galp's financial outlook? A: Maria Joao Carioca confirmed that first oil from Bacalhau is expected later in 2025, with ramp-up continuing through 2026 and plateau expected in 2027. The project is anticipated to add approximately $400 million in operating cash flow annually at plateau, contributing significantly to Galp's portfolio.

Q: Can you elaborate on the potential for a third hub in the Mopane complex in Namibia? A: Maria Joao Carioca indicated that while there is great potential in Mopane, the current focus is on developing the Northwest and Southeast regions. The idea of a third hub is premature, and the priority is to integrate data from the initial exploration campaign to inform future development concepts.

Q: How is Galp addressing the challenges of local content and collaboration in Namibia, as emphasized by the Namibian government? A: Maria Joao Carioca noted that Galp has had productive discussions with the Namibian government and views local content and synergies as normal and beneficial. Drawing from experiences in Brazil, Galp is committed to ensuring that the development of Namibian assets benefits both the company and the local community.

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