Galp reports 16% rise in Q2 2024 net profit amid higher oil prices and lower production costs

Galp, the Portuguese energy giant, has announced a 16% year-on-year increase in net profit for the second quarter of 2024, driven by higher oil prices and lower production costs.

The company's net profit reached €299 million (US $325.34 million), despite a volatile commodity price environment. However, adjusted earnings before interest, taxes, depreciation, and amortisation (EBITDA) fell 7% to €849 million compared to the same period last year.

During this period, Galp achieved solid results across its various segments. The upstream segment delivered €531 million in EBITDA, supported by consistent production and cost-effective operations in Brazil. The industrial and midstream segment contributed €226 million to EBITDA, benefiting from high utilisation of the refining system and strong midstream activities, particularly in oil and natural gas supply and trading.

The commercial segment generated €79 million in EBITDA, with notable contributions from Iberian operations and a recovery in African markets. However, the renewables segment faced challenges, contributing only €5 million in EBITDA due to highly pressured electricity market prices in Iberia.

Galp also completed the sale of its Angolan upstream assets and announced the divestment from Area 4 in Mozambique. These moves align with Galp's strategy to focus on high-return, low-cost, and low-carbon intensity projects. Filipe Silva, CEO  of Galp, emphasised the importance of these actions, stating, "These actions allow us to crystallise value, reduce risk, and focus on higher return projects aligned with Galp’s strategy: continue de-risking and growing our upstream from low-cost & low-carbon intensity projects, whilst transforming our integrated mid and downstream positions."

Financially, Galp's adjusted operating cash flow (OCF) was €646 million, reflecting robust business performance. Cash flow from operations (CFFO) reached €562 million. Investments amounted to €241 million, primarily directed towards upstream projects such as Bacalhau and industrial low-carbon developments in Sines, including the construction of the Advanced Biofuels unit (HVO/SAF). During this period, divestment proceeds amounted to €518 million, mainly related to the completion of the Angolan upstream assets' farm-out.

Net debt decreased by €348 million to approximately €1.2 billion, thanks to strong operating performance and the proceeds collected. This reduction occurred after dividends to minorities of €93 million, the payment of the second semi-annual dividend tranche of €206 million and share buybacks totaling €85 million.

For the first half of 2024, Galp reported an RCA EBITDA of €1.788 billion and an OCF of €1.205 billion, reflecting robust operating performance and the exclusion of contributions from Coral South FLNG in Area 4, Mozambique. Net capex totaled €61 million, with investments focused on upstream projects in Brazil and initial exploration in Namibia, while accounting for proceeds from divestments completed during the period.

Free cash flow (FCF) amounted to €838 million, with net debt down 17% compared to the end of 2023. This decrease was achieved despite dividends to non-controlling interests of €95 million, dividends to shareholders of €206 million, and €133 million invested in share buybacks.

Looking ahead, Galp revised its key operating and financial guidance for 2024 to reflect the exclusion of Coral South’s contribution and the performance in the first half of the year. The Board of Directors will propose a €0.56/share dividend for the 2024 fiscal year, a 4% increase year-over-year, with an interim dividend of €0.28/share to be paid in August 2024.