Galp Energia, SGPS S.A. Class B · EURONEXT:GALP

Galp Energia, SGPS S.A. Class B — Investor Presentation (September 2017)

47 slides from Galp Energia, SGPS S.A. Class B's investor presentation, September 2017

  1. Slide 1: Investor Presentation September 2017

    Investor Presentation September 2017

  2. Slide 2: Cautionary statement

    2 Cautionary statement By attending or reading this presentation, you acknowledge and agree to be bound by the following limitations and restrictions. This presentation has been prepared by Galp Energia, SGPS, S.A. (“Galp” or the “Company”) and may be amended and supplemented, but may not be relied

  3. Slide 3: Galp key takeaways

    3 Galp key takeaways Upstream Downstream Financials Shareholders and Governance Key Data Investor Presentation | September 2017

  4. Slide 4: An integrated energy player

    4 An integrated energy player 1,993 mmboe 2P + 2C Exploration 67.6 kboepd WI production & Production €494 m Ebitda 330 kbpd refining capacity Refining 8.8 mton sales to direct clients & Marketing €576 m Ebitda €11.5 bn Market Cap 7.1 bcm NG/LNG sales €1.4 bn Ebitda Gas 3,396 GWh electricity sales 6.

  5. Slide 5: Positioned to capture future growth

    5 Positioned to capture future growth Growth & value story Optionality & flexibility Financial priorities 15-20% Production CAGR 2016-21 FCF>0 During 2018 @$55/bbl Disciplined Capital allocation ≈20% Ebitda CAGR 2016-21 Start to Diversify capital allocation <2.0x Net debt / Ebitda ≈15% ROACE @2020+

  6. Slide 6: Galp’s 3E’s approach

    6 Galp’s 3E’s approach Execute Extract Explore Focus Unlock more Screen new on delivery value from opportunities and and returns current portfolio portfolio management Investor Presentation | September 2017

  7. Slide 7: Galp key takeaways: Upstream

    7 Galp key takeaways Upstream Downstream Financials Shareholders and Governance Key Data Investor Presentation | September 2017

  8. Slide 8: Developing upstream portfolio in three core areas

    8 Developing upstream portfolio in three core areas Brazilian pre-salt Angola offshore Mozambique Rovuma Investor Presentation | September 2017

  9. Slide 9: Delivering growth through project execution and extraction

    9 Delivering growth through project execution and extraction Working interest production from current portfolio (kboepd) 15 - 20% CAGR 2016-21 (sanctioned projects1) 23% CAGR 2010-16 90 - 95 68 20 2010 2016 2017E 2021E 2021E+ Portfolio breakeven2 <$25/bbl 1 Sanctioned projects include Lula/Iracema a

  10. Slide 10: Projects’ execution on track

    10 Projects’ execution on track Iracema N. Júpiter (2015) SOUTH AMERICA Iracema S. Berbigão/ Carcará (2014) Sururu Lula NE Lula Lula Ext. Atapu 2 (2013) Central South Lula Pilot Lula Lula Sépia Lula Alto Atapu 1 Lula West (2010) South North East 2010-15 2016 2017 2018 2019 2020 2021+ BBLT/Lianzi/ Ka

  11. Slide 11: Delivering and improving the Lula and Iracema projects

    11 Delivering and improving the Lula and Iracema projects BM-S-11 | Lula/Iracema Seven installed FPSOs, six in plateau Solid Currently producing over 80 kboepd execution Current development plan c.70% realised Significant operational efficiency to Economics’ maximise returns improvement Capture oppo

  12. Slide 12: Lula/Iracema: Strong productivity supporting ramp-up

    12 Lula/Iracema: Strong productivity supporting ramp-up Average production per well1 FPSO ramp-up period Plateau period (kboepd) (# months) (# years) 30 18 Plan 2017-21 15 7 23 13 13 11 10 c.20% 3 Brazilian pre-salt Lula/Iracema #1 #2 #3 #4 #5 #6 PoD 2016-20 Current FPSO#1 plan view expected  Outst

  13. Slide 13: Lula/Iracema: Working towards 40% recovery factor

    13 Lula/Iracema: Working towards 40% recovery factor Expected oil recovery factor (%) Infill drilling 40% Reservoir Seismic 4D WAG 30% 28% Separation 23% Subsea Boosting Seawater treatment Gas/CO2 handling Topsides Processing specifications Initial 2013 Current Ambition (2010) Note: Galp’s view Inve

  14. Slide 14: Greater Iara: Enhancing development of key pre-salt project

    14 Greater Iara: Enhancing development of key pre-salt project BM-S-11| Berbigão/Sururu/Atapu  FPSOs (replicants) under construction with first oil expected in Berbigão in 2018  Ongoing drilling campaign and optimising PoD for three different accumulations  Further appraisal in Sururu to support

  15. Slide 15: Preparing next wave of pre-salt developments

    15 Preparing next wave of pre-salt developments BM-S-8 | Carcará BM-S-24 | Sépia East/Júpiter  Carcará discovery expected to be developed under  Sépia unitisation agreement expected to be Greater Carcará unitised area submitted in 2017  Bid round for open area to the North of Carcará  Ongoing st

  16. Slide 16: Mozambique: One of the most competitive LNG regions

    16 Mozambique: One of the most competitive LNG regions LNG net present landed cost to Asia ($/ton)1 Quality and scalability of resource base 2,200 U.S. Favourable time to market to meet LNG demand 1,600 Mozambique Increase gas share in production and reserves 2,700 Australia Long-term cash flow gene

  17. Slide 17: Mozambique: A large scale integrated project

    17 Mozambique: A large scale integrated project Rovuma Area 4 Mamba onshore Coral offshore LNG trains Coral South FLNG (3.4 mtpa) World-class LNG project due to quality and FID made in June 2017 with total scalability of resource base development capex estimated at c.$7 bn1 First phase comprising 2

  18. Slide 18: Angola: Production to increase with Kaombo start-up

    18 Angola: Production to increase with Kaombo start-up Block 14/14k Block 32  Decrease in production due to natural decline of the  Two FPSOs expected to start production in 2018, fields offsetting decline from mature projects in Block 14  Block 14 cost reduction achieved through process  Execut

  19. Slide 19: Investing in competitive upstream projects

    19 Investing in competitive upstream projects Technical costs1 ($/boe) Lifting costs Leasing costs DD&A  Reservoir characteristics and project scale driving Brazil 27 technical costs close to $15/boe 21 <20  Potential from further capex and opex optimisation  Lifting costs expected to be under $5

  20. Slide 20: Exploration strategy focused on Atlantic margin

    20 Exploration strategy focused on Atlantic margin Galp current exploration projects  Leverage competitive advantages and synergies with current portfolio Portugal  Screening opportunities with focus on DROs S. Tomé and Príncipe Angola Brazil Namibia Investor Presentation | September 2017

  21. Slide 21: Planned exploration activities

    21 Planned exploration activities Alentejo basin Potiguar basin BM-S-8 Blocks 5, 6, 11, 12 (Portugal) (Brazil) (Brazil) (São Tomé and Príncipe)  First ever deepwater well  Broadband 3D seismic  Guanxuma expected to  Ongoing large scale 3D to be drilled in Portugal, across all blocks to start be

  22. Slide 22: Galp key takeaways: Downstream

    22 Galp key takeaways Upstream Downstream Financials Shareholders and Governance Key Data Investor Presentation | September 2017

  23. Slide 23: Galp to benefit from Iberian recovery and African growth

    23 Galp to benefit from Iberian recovery and African growth Iberian oil and NG market GDP 1.3% 3.0% 2.8% growth  Economic recovery contributing to the development of 62 oil and natural gas markets in Iberia 59 60  African downstream activities based on selected clusters 31 32 30  Regional referen

  24. Slide 24: R&M: efficient and competitive refining system

    24 R&M: efficient and competitive refining system Main product flows from Galp refining system  Modern refining system with high conversion capacity  Focus on maximising energy efficiency and optimising refining processes  Leveraging refineries’ location (SW Europe), namely competitiveness in the

  25. Slide 25: R&M: reference marketing player in Iberia and in core African clusters

    25 R&M: reference marketing player in Iberia and in core African clusters Service station in Portugal  1,436 service stations and 836 convenience stores  Number one player in Portugal, and third largest in Iberia  Launched innovative tri-fuel offer in Iberia (oil products, gas and electricity) 

  26. Slide 26: R&M: improving efficiency and optimising margin

    26 R&M: improving efficiency and optimising margin Galp refining margin improvements ($/bbl) R&M cost efficiency programme (€m) Galp Refining Margin Benchmark 6.0 150 4.3 5.2 c.90 3.1 2.2 2015 2016 2017E 2018E 2019E 2020E 2021E 2016 Target delivered efficiency by 2020  Implementing energy efficienc

  27. Slide 27: G&P: building a sustainable integrated business

    27 G&P: building a sustainable integrated business NG/LNG Supply & Trading Power Associated businesses  Focus on expanding and  Integration with remaining  77.5% stake in regulated gas leveraging client base downstream businesses infrastructure business in Portugal  Diversify and increase sourci

  28. Slide 28: Extracting value from downstream businesses

    28 Extracting value from downstream businesses Quality of assets | Business competitiveness Large client base | Brand recognition Increasing integration and cross-selling Leveraging on brand awareness Improving efficiency and returns Contributing with €1 bn per year1 1Includes Ebitda and Associates

  29. Slide 29: Galp key takeaways: Financials

    29 Galp key takeaways Upstream Downstream Financials Shareholders and Governance Key Data Investor Presentation | September 2017

  30. Slide 30: Disciplined capital allocation focused on key projects

    30 Disciplined capital allocation focused on key projects Business plan 2017-21 capex allocation Upstream Downstream €1.1 bn Brazil €0.8-€1.0 bn Other Angola Mozambique Last 5 years Annual avg. 2017-21 plan  Projects roll-over and efficiencies leading to capex  Around 60% of E&P capex committed an

  31. Slide 31: Growth plan supported by highly competitive assets

    31 Growth plan supported by highly competitive assets Results contribution per business (€m) 3,500  Group Ebitda CAGR 2016-21 of c.20%  Upstream contribution supported by high production growth 1,750 1,496  Downstream contribution of c.€1 bn p.a. during the period 889  2017 Ebitda now expected >

  32. Slide 32: Entering a new cash cycle

    32 Entering a new cash cycle Post dividend free cash flow1 (€m) and cash breakeven 1,000 100  Expected post-dividend FCF positive during 2018 500 50  Stronger 2017 cash generation Avg. cash breakeven benefiting from operating 2019-21 performance and market conditions <$35/bbl 0 0  Further upsides

  33. Slide 33: Focused on a competitive TSR and capital allocation

    33 Focused on a competitive TSR and capital allocation Long-term capital allocation New business models and low carbon solutions  Oil & Gas businesses to remain core activities  Start diversifying into lower carbon solutions  Committed to shareholder Oil & Gas remuneration Dividends businesses In

  34. Slide 34: Galp key takeaways: Shareholders and Governance

    34 Galp key takeaways Upstream Downstream Financials Shareholders and Governance Key Data Investor Presentation | September 2017

  35. Slide 35: Galp in the capital markets

    35 Galp in the capital markets Galp shareholding structure 33% Europe 50% Free Float1 North America 45% 60% RoW 5% 7% 1According to best available information, as of end of December 2016. Note: Parpública’s 7% stake underlies exchangeable bonds. Investor Presentation | September 2017 Qualifying hold

  36. Slide 36: Adding value to shareholders

    36 Adding value to shareholders Share performance (%) Annualised TSR since Galp IPO2 (%) YTD1 2016 44% 42% 32% 29% 28% 23% 11% 20% 6% 9% 2% 2% -2% -11% -10% -5% -12% European European European European SXEP European European European European Integrated Majors Refiners E&P Integrated Majors Refiners

  37. Slide 37: A committed and experienced team

    37 A committed and experienced team Over 21 years of experience in Oil & Gas. Board executive for more than 12 years in the beverage and energy industries. Galp Board member since 2007. Chief Executive Officer Carlos Gomes da Silva Chief Financial COO Exploration & COO Supply, COO Iberian Oil COO Ga

  38. Slide 38: Galp’s corporate sustainability internationally recognised

    38 Galp’s corporate sustainability internationally recognised Investor Presentation | September 2017

  39. Slide 39: Galp key takeaways: Key Data

    39 Galp key takeaways Upstream Downstream Financials Shareholders and Governance Key Data Investor Presentation | September 2017

  40. Slide 40: Business plan macro assumptions and sensitivities

    40 Business plan macro assumptions and sensitivities Galp assumptions (@CMD Feb-17) 2017E 2018E 2019E 2020E 2021E Brent price ($/bbl) 50 55 60 65 70 Benchmark refining margin ($/bbl)1 2.5 2.4 2.4 2.3 2.2 EUR:USD 1.10 1.10 1.10 1.10 1.10 Ebitda sensitivities Change 2017E 2021E Brent price $5.0/bbl €1

  41. Slide 41: Key operational indicators

    41 Key operational indicators 2016 YoY 2Q17 YoY 1H17 YoY Exploration & Production1 Average working interest production2 (kboepd) 67.6 48% 89.9 64% 88.9 60% Oil production (kbpd) 62.3 46% 78.0 51% 77.4 48% Average net entitlement production2 (kboepd) 65.1 51% 88.1 69% 87.2 65% Angola 7.3 1% 6.2 (13%)

  42. Slide 42: Committed to a solid capital structure

    42 Committed to a solid capital structure Profit & Loss (€m) Balance sheet (€m) 2016 2Q17 YoY 1H17 YoY Jun.17 vs. Dec.16 YoY Jun.17 Dec.16 Ebitda 1,411 473 40% 892 41% Net fixed assets 7,721 (171) 7,458 (263) E&P 494 188 n.m. 391 n.m. Work in progress 2,650 573 2,460 (190) R&M 576 233 63% 420 45% G&

  43. Slide 43: 2017 showing strong cash flow generation

    43 2017 showing strong cash flow generation 1H17 Change in net debt (€m)  Cashflow supported by upstream production growth and downstream environment 987 71 237  Net debt reduction during H1 despite dividend payment of €215 m in 2Q17 390 215 73 59 14 Ebitda Working Net interest Net Dividends Post-

  44. Slide 44: Key indicators on Galp’s debt

    44 Key indicators on Galp’s debt Debt indicators Reimbursement profile (€m) 2016 Jun.17 800 Gross debt €2.9 bn €2.9 bn Cash and equivalents €1.0 bn €1.0 bn 600 Net Debt €1.9 bn €1.9 bn Net Debt considering loan to €1.3 bn €1.3 bn 400 Sinopec as cash Net Debt to Ebitda Ratio1 1.0x 0.9x 200 Available

  45. Slide 45: Galp’s reserves and resources portfolio

    45 Galp’s reserves and resources portfolio Reserves and resources (mmboe)1 Reserves 2015 2016 % Chg. 1P 276 274 (1%) 2P 701 673 (4%) 3P 960 927 (3%) Contingent resources 2015 2016 % Chg. 1C 307 300 (2%) 2C 1,342 1,320 (2%) 3C 3,025 2,993 (1%) Prospective resources 2015 2016 % Chg. Unrisked 1,493 2,6

  46. Slide 46: Acronyms

    46 Acronyms # Number Chg. Change mmbpd Million barrels of oil per day $ (or USD) Dollar CMD Capital Markets Day MoU Memorandum of Understanding % Percentage CO2 Carbon dioxide mtpa Million tonnes per annum & And COO Chief Operating Officer N North @ At D&C Drilling and Completion NE Northeast € (or

  47. Slide 47: Investor Relations team

    47 Investor Relations team Pedro Dias, Head Otelo Ruivo, IRO Cátia Lopes João G. Pereira João P. Pereira Teresa Rodrigues +351 21 724 08 66 investor.relations@galp.com For further information on Galp, please go to: www.galp.com Investor Presentation | September 2017

Galp Energia, SGPS — Investor Presentation (September 2017) on 6ix