Galp Energia, Sgps S.a. Class B · EURONEXT:GALP
Galp Energia, Sgps S.a. Class B — Investor Day (February 2017)
70 slides from Galp Energia, Sgps S.a. Class B's investor day presentation, Feb 21, 2017
Slide 1: Capital Markets Day 2017
CAPITAL MARKETS DAY 2017 L o n d o n , Fe b r u a r y 2 1 1 | Capital Markets Day | February 21, 2017
Slide 2: Cautionary statement
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 up
Slide 3: Strategy Overview
ee STRATEGY OVERVIEW
Slide 4: Key takeaways
Key takeaways Competitive Unique growth Strong financial Building Commitment world-class profile within position entering optionality and to shareholder assets the industry a new cash cycle flexibility in an value creation uncertain world 4 | Capital Markets Day | February 21, 2017
Slide 5: Growth momentum building up
Growth momentum building up Execute and extract focus Explore and build optionality Concluding remarks 5 | Capital Markets Day | February 21, 2017
Slide 6: 2016: A year of strong execution
2016: A year of strong execution Operational Financial Portfolio Partnership Performance Performance Management Development Solid upstream Benefiting from Sale of stake Petrobras strategic delivery integrated profile in gas infrastructure alliance reinforced High availability Resilient cash flow São
Slide 7: Delivering on our commitments
Delivering on our commitments WI production (kboepd) Ebitda RCA (€m) Capex (€m) Net debt to Ebitda CMD 2016 guidance 2016 actual 68 1,411 1,300 2.0x 1,218 1.0x 1,300 64 62 1,200 1,100 7 | Capital Markets Day | February 21, 2017
Slide 8: Galp's 3E's approach
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 8 | Capital Markets Day | February 21, 2017
Slide 9: Execute and extract focus
Growth momentum building up Execute and extract focus Explore and build optionality Concluding remarks 9 | Capital Markets Day | February 21, 2017
Slide 10: Supportive outlook for oil and LNG
Supportive outlook for oil and LNG Liquids supply gap (mmbpd) LNG supply gap (mtpa) 120 500 0 0 Demand Producing Under Supply gap Demand Onstream Under Supply gap 2025 fields development 2025 2025 projects construction 2025 fields projects 10 | Capital Markets Day | February 21, 2017 Source: IEA Wor
Slide 11: World-class upstream portfolio
World-class upstream portfolio Upstream ROIC vs. portfolio breakeven (%, $/bbl) Average Peer company 20% <$25/bbl 15% ROIC 2020 (%) 10% European Majors U.S. E&P European E&P U.S. Majors Competitive portfolio within the industry European 5% Integrated Resilient to low oil price scenarios 0% 0 20 40 6
Slide 12: Focus on current portfolio execution
Focus on current portfolio execution 6 Lula/Iracema 3 Lula/Iracema Coral / Mamba Lula West 2 Block 14/14k 2 Block 32 Atapu 2 2 Berbigão, Atapu 1 Carcará 1 Sépia Júpiter In Production 2017-21 Deployment 2021+ Deployment Ensure safe operations Deliver projects on Ensure the best and high availability
Slide 13: Delivering and improving Lula/Iracema project
Delivering and improving Lula/Iracema project Seven installed FPSOs, five in plateau Solid Overall project capex c.70% realised execution 2016 exit production of c.80 kboepd Economics Significant reduction in D&C time improvement Capture opportunities from market deflation Focus on value maximisatio
Slide 14: Mozambique: One of the most competitive LNG regions
Mozambique: One of the most competitive LNG regions LNG net present landed cost to Asia ($/ton)1 Quality and scalability 2,200 U.S. of resource base Favourable time to market to meet LNG demand 1,600 Mozambique Increase gas share in production and reserves 2,700 Australia Stable long-term cash flow
Slide 15: Delivering growth from execution and extraction
Delivering growth from execution and extraction Working interest production from current portfolio (kboepd) 15-20% 2016-21 CAGR 23% 2010-16 CAGR 68 20 2010 2016 2021 2021+ 15 | Capital Markets Day | February 21, 2017
Slide 16: Challenging times for the European refining industry
Challenging times for the European refining industry European refining capacity (mmbpd, %) Crude runs Excess capacity Utilisation rate (RHS) 18 90% Global demand growth shift to Asia/LatAm/Africa Lighter crude and 12 60% feedstock supply Excess refining capacity 6 30% New sulphur specifications 0 0%
Slide 17: Solid contribution expected from downstream businesses
Solid contribution expected from downstream businesses Refining & Marketing Gas & Power Ensure high reliability Build up NG & LNG supply portfolio of refining system Downstream Ebitda target Focus on higher efficiency Increase customer base and conversion ≈€1 bn Establish differentiated offers Offer
Slide 18: New cash cycle provides future optionality
New cash cycle provides future optionality Free cash flow and cash breakeven (€m, $/bbl) Free cash flow Avg. cash breakeven (RHS) 1,000 100 2016-18 ≈$65/bbl 500 50 2019-21 <$35/bbl Company cash breakeven 0 0 expected during 2018 Well positioned to capture future opportunities -500 -50 2016 2017 2018
Slide 19: Explore and build optionality
Growth momentum building up Execute and extract focus Explore and build optionality Concluding remarks 19 | Capital Markets Day | February 21, 2017
Slide 20: Key takeaways from scenario planning
Key takeaways from scenario planning Oil & Gas Transition to a Energy demand Smart and Technology Increasing maintaining low carbon growth in Africa, connected innovation and electrification important role, economy LatAm and Asia customer digitalisation and renewables solutions decentralisation grow
Slide 21: Resilience in a complex and uncertain world
Resilience in a complex and uncertain world Maintaining Adapt and integrate Innovative New culture: a competitive downstream and differentiated Adapt to a upstream portfolio businesses business new normal Feed upstream funnel New consumer behaviour Low carbon business Agile and innovative and specs
Slide 22: Concluding remarks
Growth momentum building up Execute and extract focus Explore and build optionality Concluding remarks 22 | Capital Markets Day | February 21, 2017
Slide 23: Focus on capital allocation diversification and competitive TSR
Focus on capital allocation diversification and competitive TSR Long-term capital allocation New business models and low carbon solutions Oil & Gas businesses to remain core activities Oil & Gas businesses Start diversifying into lower carbon solutions Dividends Committed to shareholder remuneration
Slide 24: Positioned to capture future growth opportunities
Positioned to capture future growth opportunities Growth & value story Optionality & flexibility Financial priorities 15-20% Production CAGR 2016-21 FCF>0 During 2018 @$55/bbl Disciplined Capex allocation ≈20% Ebitda CAGR 2016-21 Start to Diversify capital allocation <2.0x Net debt / Ebitda ≈15% ROA
Slide 25: Financial Outlook
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Slide 26: 2016 in review
2016 in review Executing a disciplined growth plan Concluding remarks 26 | Capital Markets Day | February 21, 2017
Slide 27: Strengthening financial position
Strengthening financial position 2016 Change in net debt (€m) 1,500 21 243 1,000 389 1,449 387 500 449 773 806 0 (357) 134 -500 Ebit (IFRS) Working Net interest Pre-expansion Dividends Pre-expansion Expansion FCF Sinopec loan GGND 1 + DD&A capital + Taxes capex paid FCF capex reimbursement effect +
Slide 28: 2016 results supported by strong upstream performance
2016 results supported by strong upstream performance Profit & Loss RCA (€m) Balance Sheet (€m) 2016 YoY 2016 YoY Turnover 13,119 (15%) Net fixed assets 7,721 (171) Ebitda 1,411 (8%) Work in progress 2,650 573 E&P 494 40% R&M 576 (26%) Working capital 492 (18) G&P 313 (18%) Loan to Sinopec 610 (113)
Slide 29: Executing a disciplined growth plan
2016 in review Executing a disciplined growth plan Concluding remarks 29 | Capital Markets Day | February 21, 2017
Slide 30: Macro assumptions
Macro assumptions Brent price ($/bbl) Benchmark refining margin ($/bbl) 2016-20 plan 2017-21 plan 70 55 65 50 60 3.1 44 2.5 2.4 2.4 2.3 2.2 2016 2017E 2018E 2019E 2020E 2021E 2016 2017E 2018E 2019E 2020E 2021E 30 | Capital Markets Day | February 21, 2017 Note: 2017-21 plan assumes a flat EUR:USD exc
Slide 31: Disciplined capital allocation
Disciplined capital allocation Annual average capex (€bn) Upstream Downstream c.(20%) €1.1 bn €0.8-€1.0 bn Last 5 years 2017-21 plan 2017 Capex guidance: €1.0-€1.2 bn 31 | Capital Markets Day | February 21, 2017
Slide 32: Project roll-over and efficiencies to reduce upstream capex
Project roll-over and efficiencies to reduce upstream capex Change in upstream capex (€bn) Upstream 2017-21 capex breakdown Brazil Mozambique Angola E&A c.(30%) c.€5 bn c.60% committed 2016-20 Efficiency + Project Exchange Other 2017-21 plan Cost deflation execution rate plan 32 | Capital Markets Da
Slide 33: Sustainable growth with Group Ebitda CAGR 2016-21 of c.20%
Sustainable growth with Group Ebitda CAGR 2016-21 of c.20% Contribution per business RCA (€m) Upstream Ebitda Downstream Ebitda Associates 3,500 Upstream technical costs expected to be below $20/boe after 2020 Spread over benchmark refining margin expected 1,750 1,496 to improve by up to $1/boe afte
Slide 34: 2018+: Entering a new cash cycle
2018+: Entering a new cash cycle Post dividend free cash flow1 (€m) Brent flat @ $55/bbl 1,500 Assumes a €0.50/sh flat dividend during the period 500 FCF positive during 2018 at $55/bbl, with Brazil turning positive during 2017 0 Further upside expected from upstream efficiency gains -500 2016 2017E
Slide 35: Concluding remarks
2016 in review Executing a disciplined growth plan Concluding remarks 35 | Capital Markets Day | February 21, 2017
Slide 36: Ensuring growth while maintaining a strong balance sheet
Ensuring growth while maintaining a strong balance sheet Solid financial Optimising cost Significant Continue Cash flow position structure and growth from disciplined inflection supported by improving profitable capital allocation during 2018 competitive efficiency projects, with will allow portfoli
Slide 37: Upstream Growth
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Slide 38: A clear upstream strategy
A clear upstream strategy Upstream strategy Execute Extract Explore Build operating capabilities R&D to promote upstream growth People Stakeholder management 38 | Capital Markets Day | February 21, 2017
Slide 39: 2016 key achievements
2016 key achievements Focus on execution and value extraction Selective exploration strategy Sustaining profitable growth 39 | Capital Markets Day | February 21, 2017
Slide 40: Key 2016 milestones achieved
Key 2016 milestones achieved Production 48% higher YoY Production growth Two new FPSOs deployed in Brazil 26 wells drilled Cost 23% decrease YoY in D&C average time reduction Normalised unit opex at $6.3/boe, lower 14% YoY LTIFR of 0.98 with operated assets LTIFR of 0.00 HSE Low carbon operations wi
Slide 41: Delivering transformational growth
Delivering transformational growth TODAY 90 11 129 2281 WI production # Sanctioned Net installed Upstream (kboepd) projects capacity (kbpd) staff 2007 17 3 29 62 41 | Capital Markets Day | February 21, 2017 1Plus c.150 corporate staff dedicated to the upstream activity.
Slide 42: Focus on execution and value extraction
2016 key achievements Focus on execution and value extraction Selective exploration strategy Sustaining profitable growth 42 | Capital Markets Day | February 21, 2017
Slide 43: Expected production growth based on robust resource base
Expected production growth based on robust resource base 2016 2P reserves (mmboe) 2016 2C resources (mmboe) Angola Brazil Mozambique 673 1,320 43 | Capital Markets Day | February 21, 2017 Source: All figures are based on DeGolyer and MacNaughton report as of 31.12.2016.
Slide 44: Projects execution on track
Projects execution on track Iracema Júpiter N. (2015) SOUTH AMERICA Iracema Carcará S. (2014) Lula NE Lula Lula Berbigão/ Atapu 2 (2013) Central North Sururu Lula Pilot Lula Lula Lula Ext. Atapu 1 Sépia Lula (2010) Alto South South East West 2010-15 2016 2017 2018 2019 2020 2021+ BBLT/Lianzi/ Kaombo
Slide 45: De-risking replicant FPSO execution
De-risking replicant FPSO execution Hulls Topsides & Integration Construction works partially Leveraging best performing transferred to Asia shipyards in Brazil Maintaining estimated Consortium assuming direct Partial scope of works cost management of key ongoing transferred to Asian shipyards works
Slide 46: Lula/Iracema: Strong productivity supporting project ramp-up
Lula/Iracema: Strong productivity supporting project ramp-up Average production per well (kboepd)1 FPSO ramp-up period (# months) 18 30 15 23 13 13 10 Brazilian pre-salt Lula/Iracema FPSO#1 FPSO#2 FPSO#3 FPSO#4 FPSO#5 Outstanding productivity within the industry Shorter ramp-up periods supported by
Slide 47: Lula/Iracema: Increasing operational efficiency to maximise returns
Lula/Iracema: Increasing operational efficiency to maximise returns D&C average time (# days) D&C spread rate ($m/day) Plateau period (# years) (64%) c.(15%) 7 239 1.00 0.85 c.20% 3 85 75 2010 2016 LT ambition Current Target (2018+) PoD 2016-20 Current FPSO#1 plan view expected Logistics and well de
Slide 48: Lula/Iracema: Working towards 40% recovery factor
Lula/Iracema: Working towards 40% recovery factor Expected oil recovery factor (%) 40% Reservoir Infill drilling 30% 28% Seismic 4D WAG CO2 Subsea Separation Boosting Seawater treatment Topsides CO2 handling Processing specifications Previous Current LT ambition 48 | Capital Markets Day | February 2
Slide 49: Greater Iara: Enhancing development of key pre-salt project
Greater Iara: Enhancing development of key pre-salt project BM-S-11 | Berbigão/Sururu/Atapu Optimising PoD for three different accumulations Unitisation negotiations ongoing Production to start in 2018 Further appraisal in Sururu to support future development activities 49 | Capital Markets Day | Fe
Slide 50: Preparing next wave of pre-salt developments
Preparing next wave of pre-salt developments BM-S-8 | Carcará BM-S-24 | Sépia East/Júpiter Statoil as new operator of the block Sépia unitisation agreement expected to be submitted in 2017 Bid round for open area expected during 2017 Ongoing studies to improve technical feasibility of Júpiter 50 | C
Slide 51: Mozambique: A large scale integrated project
Mozambique: A large scale integrated project Mamba onshore Coral offshore 2x5 mtpa LNG trains (1st phase) 1 FLNG (>3.3 mtpa) World-class LNG project due to quality Accelerating time to market and scalability of resource base Geographical location to support Internal approval of Coral project’s compe
Slide 52: Angola: Production increase with Kaombo start-up
Angola: Production increase with Kaombo start-up Block 32 and Block 14/14k Two FPSOs expected to start production in 2018 Drilling campaign proceeding in Kaombo, Block 32, with 14 out of 59 wells drilled Kaombo start-up more than offsets mature projects in Block 14 Block 14 cost reduction achieved t
Slide 53: Selective exploration strategy
2016 key achievements Focus on execution and value extraction Selective exploration strategy Sustaining profitable growth 53 | Capital Markets Day | February 21, 2017
Slide 54: Regional focused exploration strategy
Regional focused exploration strategy Galp current exploration projects PORTUGAL 7 Atlantic margin focus S. TOMÉ AND PRÍNCIPE 4 Leverage competitive 2 NAMIBIA advantages and synergies with current portfolio BRAZIL 16 5 ANGOLA Screening opportunities with focus on DROs 54 | Capital Markets Day | Febr
Slide 55: Planned exploration activities
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 to Expanded presence to be drilled in Portugal across all blocks expected be drilled in 2017 through fa
Slide 56: Sustaining profitable growth
2016 key achievements Focus on execution and value extraction Selective exploration strategy Sustaining profitable growth 56 | Capital Markets Day | February 21, 2017
Slide 57: 3E's strategy paying off
3E’s strategy paying off Working interest production (kboepd) CAGR 2016-21 15%-20% (sanctioned projects) 48% 90-95 68 46 17 2007 2015 2016 Net incremental Maintenance 2017E 2021E production activities Note: Sanctioned projects include Lula/Iracema and Iara in Brazil, and Block 32 and 14/14k in Angol
Slide 58: Key levers for profitability
Key levers for profitability Delivering production CAGR 2016-21 of 15%-20% from BM-S-11 and Block 32 Execute Developing Coral and maturing Mamba and Carcará for FID Enhance project development through operational and cost optimisation Extract Improve Lula/Iracema recovery factor Leveraging on strate
Slide 59: Closing Remarks
a — ‘| CLOSING REMARKS ~
Slide 60: Positioned to capture future growth opportunities
Positioned to capture future growth opportunities Growth & value story Optionality & flexibility Financial priorities 15-20% Production CAGR 2016-21 FCF>0 During 2018 @$55/bbl Disciplined Capex allocation ≈20% Ebitda CAGR 2016-21 Start to Diversify capital allocation <2.0x Net debt / Ebitda ≈15% ROA
Slide 61: Appendix
APPENDIX |
Slide 62: Ebitda sensitivity to macro variables
Ebitda sensitivity to macro variables Galp assumptions 2017E 2018E 2019E 2020E 2021E Brent price ($/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 €125 m €220 m Benchmark refinin
Slide 63: Key indicators on Galp's debt
Key indicators on Galp’s debt Debt indicators Debt reimbursement (€m) Profile @ YE2016 Profile @ YE2015 2015 2016 900 Gross debt €3.6 bn €2.9 bn c.70% Cash and equivalents €1.1 bn €1.0 bn Net debt €2.4 bn €1.9 bn 600 Net debt considering loan to Sinopec as cash €1.7 bn €1.3 bn Net debt to Ebitda rat
Slide 64: Galp's reserves and resources
Galp’s reserves and resources 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 2,658 78% Risked
Slide 65: Galp's shareholding structure
Galp’s shareholding structure Free Float Amorim Energia Parpública North America RoW Europe 33% 40% FREE FLOAT 53% 60% 7% 7% 65 | Capital Markets Day | February 21, 2017 Note: Parpública’s 7% stake placed through exchangeable bonds maturing in September 2017.
Slide 66: A committed and experienced team
A committed and experienced team Chief Executive Officer Carlos Gomes da Silva 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 Financial COO Exploration COO Supply, COO Iberian COO Gas Chief C
Slide 67: Galp's corporate sustainability internationally recognised
Galp’s corporate sustainability internationally recognised 67 | Capital Markets Day | February 21, 2017
Slide 68: Acronyms
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 EUR
Slide 69: Capital Markets Day | February 21, 2017
69 | Capital Markets Day | February 21, 2017
Slide 70: www.galp.com investor.relations@galp.com
www.galp.com investor.relations@galp.com 70 | Capital Markets Day | February 21, 2017