Galp Energia, Sgps S.a. Class B · EURONEXT:GALP
Galp Energia, Sgps S.a. Class B — Galp Energia — Investor Day (March 2016)
79 slides from Galp Energia, Sgps S.a. Class B's investor day presentation, Mar 15, 2016
Slide 1: Capital Markets Day 2016
Capital Markets Day 2016 London, 15 March
Slide 2: Cautionary Statement
Cautionary Statement 2 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
Slide 3: Strategy overview
Strategy overview Capital Markets Day 2016
Slide 4: Key messages
Key messages 4 Unique growth profile within the industry Competitive world class portfolio and projects Resilient integrated business model Financial discipline Commitment to shareholder value Capital Markets Day | 15 March 2016
Slide 5: Agenda
Agenda 5 Integrated energy player Downstream and gas optimisation Upstream execution and value maximisation Sustainable value creation Capital Markets Day | 15 March 2016
Slide 6: 2015: Commitments delivered
2015: Commitments delivered 6 2015 target 2015 actual Ebitda (€bn) 1.1 - 1.3 1.56 Capex (€bn) 1.3 - 1.5 1.28 Production growth 30% to 35% 50% NG/LNG sales (bcm) 5-7 7.7 R&M efficiency (€m)1 100 (@2019) 80 1€100m R&M efficiency refers to annual savings by 2019 vs. 2013. Capital Markets Day
Slide 7: Integrated model and growth profile supporting results
Integrated model and growth profile supporting results 7 2014 vs. 2015 Ebitda (€m) 1,564 1,314 Ebitda Brent Production Refining Other Ebitda 2014 price growth margin 2015 Note: Other includes all businesses and corporate. Capital Markets Day | 15 March 2016
Slide 8: Galp's resilience reflected in share price performance
Galp’s resilience reflected in share price performance 8 Last 12 months performance (%) Sectors vs. Galp Indexes Commodities 19% 12% -3% -7% -18% -14% -30% -37% -37% European European European European SXEP MSCI Brent NBP Refiners Integrated Majors E&P Source: Bloomberg and Platts. Note: MSCI, refer
Slide 9: Cyclical volatility, long-term trends
Cyclical volatility, long-term trends 9 Commodities prices (100 base = Jan 2000) Global energy demand mix (bntoe) 5.0 0.4% 0.4% 1.4% 750 2.2% 450 2.5 2.3% 150 -150 0.0 2000 2003 2006 2009 2012 2015 Coal Oil Gas Renewables Nuclear 2013 2040 Brent NWE refining margin NBP CAGR 2013-2040 (%) Source: Blo
Slide 10: Well positioned for the future
Well positioned for the future 10 Financial discipline Low breakeven producer Lean operations Integrated Balanced profile oil & gas portfolio Capital Markets Day | 15 March 2016
Slide 11: An integrated energy player: the 3E's approach
An integrated energy player: the 3E's approach 11 Execute Extract Explore Focus on delivery Unlock more value Screening new and profitability from current opportunities and portfolio portfolio management Capital Markets Day | 15 March 2016
Slide 12: Agenda
Agenda 12 Integrated energy player Downstream and gas optimisation Upstream execution and value maximisation Sustainable value creation Capital Markets Day | 15 March 2016
Slide 13: 3E's strategy for R&M – value accretive
3E’s strategy for R&M – value acreative 13 Higher Client Energy and conversion centric Optimisation process of costs and efficiency Integrated Explore new capital margin markets employed Capital Markets Day | 15 March 2016
Slide 14: 3E's strategy for G&P – natural gas business growth
3E’s strategy for G&P – natural gas business growth 14 NG and LNG portfolio breakdown (bcm) Portfolio Expand and leverage client base ambition Other Diversify and increase sourcing Spot Network trading Grow medium-term structured Medium-term sales Contracted 2015 volumes structured sales pipel
Slide 15: Agenda
Agenda 15 Integrated energy player Downstream and gas optimisation Upstream execution and value maximisation Sustainable value creation Capital Markets Day | 15 March 2016
Slide 16: Galp upstream assets amongst the best
Galp upstream assets amongst the best 16 2020 world production breakeven curve ($/bbl) 90 Galp sanctioned projects breakeven <$30/bbl 60 CMD 2015 30 CMD 2016 0 0 20 40 60 80 100 World 2020 liquid production (mmboepd) Galp sanctioned projects breakeven Source: Rystad Energy 2015. Note: Breakeven NPV1
Slide 17: Significant resource base
Significant resource base 17 2P reserves and 2C resources (mmboe) 2P+2C of 2,050 mmboe at YE 2015 Moving contingent resources to reserves Mozambique to balance reserves mix Brazil Angola Mozambique Oil Gas Note: Net entitlement reserves and working interest resources. Source: All figures are bas
Slide 18: Execute: Deliver world-class projects
Execute: Deliver world-class projects 18 Production units execution timeline Today 2020 Operating 7 Lula West Atapu North Lula 4 Carcará Iara 2 Júpiter Coral FLNG Sépia 1 Mamba LNG Block 32 18 2 16 production units by 2020 Capital Markets Day | 15 March 2016
Slide 19: Developing outstanding pre-salt project
Developing outstanding pre-salt project 19 Lula/Iracema - Brazil 50 kboepd 2015 exit production >30 kboepd Well produtivity 6 FPSOs producing by YE 2016 Capital Markets Day | 15 March 2016
Slide 20: Working towards a competitive project
Working towards a competitive project 20 Area 4 - Mozambique 85 Tcf Gas initially in place >50 Mtpa potential development project >30 Years of steady gas production Capital Markets Day | 15 March 2016
Slide 21: Extract: Develop upside opportunities
Extract: Develop upside opportunities 21 Improve Maximise Further cost contractual recovery factor optimisation terms Reservoir management Reduce development cost Extend life of licenses Enhanced oil recovery Minimise downtime Increase oil and gas sales/ export alternatives Second phas
Slide 22: Explore: Secure resource addition
Explore: Secure resource addition 22 Strategic Purpose Actions guidelines Feed project Regional focus Disciplined E&A funnel targeting oil & gas spending Maximise value Leverage hub Portfolio creation potential management Capital Markets Day | 15 March 2016
Slide 23: Unique growth profile within the industry
Unique growth profile within the industry 23 Annual average working interest production (kboepd) Execute Execute Extract + Explore 2015-20 CAGR 25-30% Operating & sanctioned Lula/Iracema, Iara, B32, B14/14k Extract 46 Further upside in 2020+ Explore Production Operating Pre Upside Risked Portfolio F
Slide 24: Agenda
Agenda 24 Integrated energy player Downstream and gas optimisation Upstream execution and value maximisation Sustainable value creation Capital Markets Day | 15 March 2016
Slide 25: Commitment to shareholder remuneration
Commitment to shareholder remuneration 25 Galp DPS (€/share) 0.50 20% p.a. dividend growth until 0.41 2016 0.35 Business plan assumes 0.29 €0.50/sh flat from 2017 0.24 onwards 2012 2013 2014 2015E 2016E Capital Markets Day | 15 March 2016
Slide 26: Ensuring long-term sustainability
Ensuring long-term sustainability 26 Technology & HSE People partnerships Develop unique Safety at the core of our Performance driven capabilities operations culture Capital Markets Day | 15 March 2016
Slide 27: Positioned for future growth
Positioned for future growth 27 Competitive Unique growth Financial position profile discipline Projects Production Capex <$30/bbl 25-30% 15% breakeven CAGR 2015-20 reduction Integrated Ebitda Net debt/ Resilient ≈15% ≈1.0x profile CAGR 2015-20 Ebitda@2020 During 2018 ROACE to shareholder FCF>0 ≈15%
Slide 28: Upstream growth
Upstream growth Capital Markets Day 2016
Slide 29: Agenda
Agenda 29 Upstream focused strategy Execute: Deliver world-class projects Extract: Develop upside opportunities Explore: Secure resource addition Concluding remarks Appendix Capital Markets Day | 15 March 2016
Slide 30: The E&P strategy
The E&P strategy 30 E&P STRATEGY Execute Extract Explore Build operating capabilities R&D to promote E&P growth People Stakeholder Management Capital Markets Day | 15 March 2016
Slide 31: 2015: Ambitions delivered
2015: Ambitions delivered 31 WI production YoY +50% D&C time1 YoY -19% Production Cost growth reduction WI exit production c.60 kboepd Unit opex YoY -29% RRR (3-year average) 380% LTIF2 0.48 Reserves Safety replacement Reserve life (years) 17.5 priority LTIF YoY -48% 1Drilling & Completion in Lula/I
Slide 32: Upstream projects around the world
Upstream projects around the world 32 Portugal Brazil 7 exploration licenses 6 sanctioned projects 4 non-sanctioned projects 17 exploration licenses East Timor 1 exploration license São Tomé and Príncipe 1 exploration license Mozambique 2 non-sanctioned projects Namibia Angola 2 exploration licenses
Slide 33: Agenda
Agenda 33 Upstream focused strategy Execute: Deliver world-class projects Extract: Develop upside opportunities Explore: Secure resource addition Concluding remarks Appendix Capital Markets Day | 15 March 2016
Slide 34: Robust resource base to support production growth
Robust resource base to support production growth 34 1P NE reserves (mmboe) 2P NE reserves (mmboe) +10% 701 638 +19% 276 232 2014 Production Revision/ 2015 2014 Production Revisions/ 2015 Additions Additions Brazil Angola Brazil Angola Source: All figures are based on DeGolyer and MacNaughton report
Slide 35: Executing world-class projects…
Executing world-class projects… 35 1999 2006 2009 2010 2013 2014 2015 2016 South America FPSO #1 (CAR) FPSO #2 (CPY) FPSO #3 (CMB) FPSO #4 (CIT) FPSO #5 (CMR) Lula Pilot Lula NE Iracema South Iracema North Lula Alto (100 kbopd) (120 kbopd) (150 kbopd) (150 kbopd) (150 kbopd) Santos NG Rout
Slide 36: … and further to be delivered
… and further to be delivered 36 2016 2017 2018 2019 2020 2020+ Lula Central Lula South Lula North Sépia Lula West Leased FPSO Replicant FPSO Replicant FPSO Leased FPSO 150 kbopd 150 kbopd 150 kbopd Atapu North South America Replicant FPSO Lula Ext South Atapu South 150 kbopd Replicant FPSO Replican
Slide 37: Reducing execution risk
Reducing execution risk 37 Key mitigation measures New contracts for gas and CO2 modules awarded to COSCO (China) and BJC (Thailand) Hulls construction partially transferred to COSCO shipyard (China) Implementation of escrow accounts Integration activities transferred from Integra to COOEC s
Slide 38: Lula/Iracema: World-class development project underway
Lula/Iracema: World-class development project underway 38 BM-S-11: Lula/Iracema Six out of 10 FPSOs producing in 2016 82 wells drilled out of 152 planned Consortium technical skills and experience supporting the development of this key asset Capital Markets Day | 15 March 2016
Slide 39: Lula/Iracema: Outstanding productivity
Lula/Iracema: Outstanding productivity 39 Top pre-salt producer wells1 Ramp-up period of Lula/Iracema FPSO #1 production (2010- (kboepd) FPSOs (#months) 2020 in kbopd) Iracema 45.1 Sapinhoá 44.2 100 Plateau ≈7 years Iracema 42.6 Iracema 41.9 18 Jubarte 41.3 15 Iracema 41.1 13 Lula 12 39.0 Iracema 37
Slide 40: Greater Iara: A multistage development plan
Greater Iara: A multistage development plan 40 BM-S-11: Berbigão | Sururu | Atapu Production in Atapu South and Berbigão/Sururu expected by 2018 3rd FPSO location pending on further technical evaluation Seismic triazimutal process ongoing to improve knowledge on Sururu area Capital Markets Day
Slide 41: De-risking pre-salt projects
De-risking pre-salt projects 41 BM-S-24: Júpiter | Sépia East BM-S-8: Carcará Sépia East DoC submitted and unitisation DST in Carcará North proved excellent reservoir negotiations initiated productivity Sépia development plan expected to be submitted DoC expected to be submitted in 2018 in 2
Slide 42: Angola: Optimising development projects
Angola: Optimising development projects 42 Blocks 14/14k Block 32 Four producing areas and two CPT platforms Drilling campaign started and PSA fiscal terms renegotiated during 2015 Lianzi production started during 2015 Two FPSO (2×125 kbopd) expected for 2017 and Implementation of cost red
Slide 43: Mozambique: Optimising initial development solutions
Mozambique: Optimising initial development solutions 43 Mamba onshore LNG - 2x5 mtpa LNG trains (1st phase) Coral FLNG - 1 FLNG (3.0-3.7 mtpa) Unitisation process concluded in 2015 EPCIC contract under negotiation Finalising framework for common facilities LNG long-term offtake agreement bei
Slide 44: Agenda
Agenda 44 Upstream focused strategy Execute: Deliver world-class projects Extract: Develop upside opportunities Explore: Secure resource addition Concluding remarks Appendix Capital Markets Day | 15 March 2016
Slide 45: Reducing drilling costs in Lula/Iracema
Reducing drilling costs in Lula/Iracema 45 Drilling and completion (#days) 239 Benefiting from learning curve -19% Optimising well designs 135 110 Negotiating rig and subsea contracts 75 2010 2014 2015 Best performance and LT ambition Capital Markets Day | 15 March 2016
Slide 46: Focused on recovery factor upside in Lula/Iracema
Focused on recovery factor upside in Lula/Iracema 46 Oil recovery factor (%) 40% 28% Current recovery factor Ambition Each 1 p.p. increase in oil recovery results in incremental c.200 mmbbl gross Note: Galp view. Capital Markets Day | 15 March 2016
Slide 47: Extracting full value
Extracting full value 47 WAG 4D seismic Subsea processing Infill drilling WAG cycling expanded 4D seismic acquisition Evaluating subsea Adding new wells from one to three successfully completed processing within the original well production units in 2015 with results technologies aiming to p
Slide 48: Agenda
Agenda 48 Upstream focused strategy Execute: Deliver world-class projects Extract: Develop upside opportunities Explore: Secure resource addition Concluding remarks Appendix Capital Markets Day | 15 March 2016
Slide 49: Regional focused exploration strategy
Regional focused exploration strategy 49 North Atlantic Margin South Atlantic Margin East Timor South-East Africa Area of interest Galp’s presence Capital Markets Day | 15 March 2016
Slide 50: Ongoing exploration activities
Ongoing exploration activities 50 Potiguar basin (Brazil) Alentejo basin (Portugal) São Tomé and Príncipe Pitu discovery appraised during First ever deepwater exploration First operatorship in deepwaters 2015 well in Portugal Planning for broadband seismic 3D Broadband 3D seismic across fi
Slide 51: Agenda
Agenda 51 Upstream focused strategy Execute: Deliver world-class projects Extract: Develop upside opportunities Explore: Secure resource addition Concluding remarks Appendix Capital Markets Day | 15 March 2016
Slide 52: Delivering production growth
Delivering production growth 52 Working Interest production (kboepd) Execute + Extract Execute + Extract + Explore CAGR 2015-20 25-30% 35-40% 50% 46 2014 2015 2016E 2020E Pre-sanctioned Upside/ Potential Exploration 2020+ Capital Markets Day | 15 March 2016
Slide 53: Concluding remarks
Concluding remarks 53 Safety first Delivering production growth Focus on execution of Lula/Iracema Develop pre-sanctioned projects and extract full value of assets Committed to efficiency and cost optimisation Disciplined exploration activity to secure additional resources Capital Market
Slide 54: Agenda
Agenda 54 Upstream focused strategy Execute: Deliver world-class projects Extract: Develop upside opportunities Explore: Secure resource addition Concluding remarks Appendix Capital Markets Day | 15 March 2016
Slide 55: Galp's reserves and resources portfolio
Galp’s reserves and resources portfolio 55 Reserves and resources (mmboe)1 Reserves 2014 2015 % Chg. 1P 232 276 19% 2P 638 701 10% 3P 833 960 15% Contingent resources 2014 2015 % Chg. 1C 332 307 (8%) 2C 1,672 1,343 (20%) 3C 3,496 3,025 (13%) Exploration resources 2014 2015 % Chg. Unrisked 1,605 1,49
Slide 56: Financial outlook
Financial outlook Capital Markets Day 2016
Slide 57: Agenda
Agenda 57 Revised macro assumptions Disciplined capital allocation Profitable growth Financial position Concluding remarks Appendix Capital Markets Day | 15 March 2016
Slide 58: Revised macro assumptions
Revised macro assumptions 58 Brent price ($/bbl) Benchmark refining margin ($/bbl) 5.2 80 75 70 70 65 65 3.6 52 55 3.3 45 45 2.9 2.6 2.5 35 2.6 2.5 2.4 2.2 2015 2016E 2017E 2018E 2019E 2020E 2015 2016E 2017E 2018E 2019E 2020E Base case Brent flat @ $45/bbl Previous plan Base case Previous plan Note:
Slide 59: Agenda
Agenda 59 Revised macro assumptions Disciplined capital allocation Profitable growth Financial position Concluding remarks Appendix Capital Markets Day | 15 March 2016
Slide 60: Capex revised downwards
Capex revised downwards 60 Annual capex Capex profile (€bn) ≈15% reduction 1.5 Group capex €1.2 - €1.4 bn €1.0 - €1.2 bn E&P Brazil development E&P Mozambique 0.0 Previous plan Plan 2016-2020 2015 2016E 2017E 2018E 2019E 2020E Lower capex from efficiency gains and pre-sanctioned More than half o
Slide 61: Capex flexibility
Capex flexibility 61 Capex allocation 2016-2020 Around 60% of E&P capex already committed and E&P focused on Brazil and Angola developments uncommitted E&P uncommitted capex relates to non-sanctioned projects with production to start after 2020 E&A1 capex accounting for 15% of E&P investment a
Slide 62: Agenda
Agenda 62 Revised macro assumptions Disciplined capital allocation Profitable growth Financial position Concluding remarks Appendix Capital Markets Day | 15 March 2016
Slide 63: Investing in competitive upstream projects
Investing in competitive upstream projects 63 Technical costs1 ($/boe) Reservoir characteristics and project scale driving Brazil technical costs 27 close to $15/boe Potential from further capex and cost 22 < 20 optimisation Lifting costs expected to be under $5/boe by 2020 2014 2015 2020E Lif
Slide 64: Downstream efficiency and margin optimisation
Downstream efficiency and margin optimisation 64 R&M cost reduction (€m) Galp refining margin ($/bbl) +50 150 6.0 100 +1.0 80 5.2 2.5 2.5 Previous target 2015 Further New target 2015 2020 before Improvements 2020E by 2019 delivered efficiency by 2020 improvements impact efficiency Benchmark refining
Slide 65: Group Ebitda CAGR 2015-20 of 15%
Group Ebitda CAGR 2015-20 of 15% 65 E&P Ebitda (€m) D&G Ebitda (€m) R&M G&P 2,250 1,500 Ebitda CAGR >40% 1,500 1,000 750 500 0 0 2015 2016E 2017E 2018E 2019E 2020E 2015 2016E 2017E 2018E 2019E 2020E 2016 Group Ebitda expected at €1.2 - €1.3 bn Capital Markets Day | 15 March 2016
Slide 66: Free cash flow breakeven during 2018
Free cash flow breakeven during 2018 66 Galp free cash flow1 (€m) 600 FCF positive during 2018, assuming committed and uncommitted capex Testing at $45/bbl, FCF positive one year later, assuming no further capex reduction 0 Brazil FCF positive during 2017 at $45/bbl Further upsides expected
Slide 67: Agenda
Agenda 67 Revised macro assumptions Disciplined capital allocation Profitable growth Financial position Concluding remarks Appendix Capital Markets Day | 15 March 2016
Slide 68: Balanced debt profile
Balanced debt profile 68 Debt breakdown YE2015 (€bn) Reimbursement profile (€m) Current profile Profile @ YE2014 3.6 1.1 900 Public bonds 0.7 600 Private placements 1.7 Multilaterals 300 Bank loans 0 Gross debt Cash Loan to Net debt 2015 2016 2017 2018 2019 2020 2021+ Sinopec c.75% Maintaining div
Slide 69: Galp fully funded
Galp fully funded 69 Sources and uses 2016-2020 (€bn) Net Debt to Ebitda3 Base case Brent flat @ $45/bbl 12 3.0x Liquidity1 Not committed 8 2.0x Capex CFFO 4 post-tax Dividends2 1.0x Debt service 0 0.0x Sources Uses 2014 2015 2016E 2017E 2018E 2019E 2020E 1Liquidity as of December 2015, including ca
Slide 70: Agenda
Agenda 70 Revised macro assumptions Disciplined capital allocation Profitable growth Financial position Concluding remarks Appendix Capital Markets Day | 15 March 2016
Slide 71: Pursuing growth with financial discipline
Pursuing growth with financial discipline 71 Integrated model supports cash generation Continuing to invest in competitive portfolio Ebitda CAGR 2015-20 of 15% driven by upstream production from sanctioned projects FCF positive during 2018 Further upsides leading to FCF improvements Capita
Slide 72: Agenda
Agenda 72 Revised macro assumptions Disciplined capital allocation Profitable growth Financial position Concluding remarks Appendix Capital Markets Day | 15 March 2016
Slide 73: Outlook and business plan sensitivities
Outlook and business plan sensitivities 73 Galp assumptions 2016E 2017E 2018E 2019E 2020E Brent price ($/bbl) 35 45 55 65 70 Refining margin benchmark1 3.6 3.3 2.9 2.6 2.5 EUR:USD 1.12 1.12 1.12 1.12 1.12 Ebitda sensitivities Change 2016E 2020E Brent price $5.0/bbl €90 m €210 m Refining margin bench
Slide 74: Key indicators on Galp's debt
Key indicators on Galp’s debt 74 2014 2015 Gross debt €3.7 bn €3.6 bn Cash and equivalents €1.1 bn €1.1 bn Net Debt €2.5 bn €2.4 bn Net Debt considering loan to Sinopec as cash €1.6 bn €1.7 bn Net Debt to Ebitda Ratio1 1.2x 1.2x Available credit lines €1.2 bn €1.1 bn Average life of debt 3.7 3.1 Ave
Slide 75: Closing remarks
Closing remarks Capital Markets Day 2016
Slide 76: Key messages
Key messages 76 Unique growth profile within the industry Competitive world class portfolio and projects Resilient integrated business model Financial discipline Commitment to shareholder value Capital Markets Day | 15 March 2016
Slide 77: Slide 77
Slide 78: Acronyms
Acronyms 78 # Number CMD Capital Markets Day m Millions $ (or USD) Dollars CMR Cidade de Maricá MLT Medium long-term % Percentage CO2 Carbon dioxide mmbbl Million barrels & And COO Chief Operating Officer mmboe Million barrels of oil equivalent @ At COOEC China Offshore Oil Engineering Co., Ltd mmbo
Slide 79: A focused and experienced team
A focused and experienced team Over 25 years of experience in different industries, including oil & gas, energy and beverages. Member of Board of Directors of Galp since 2007 Chief Executive Officer Carlos Gomes da Silva Chief Financial COO Exploration COO Supply, COO Iberian Oil COO Gas & Power Chi