Galp targets 25pc output growth to 2025: Update

Updates throughout

Portugal's integrated Galp expects to grow its working interest oil and gas production by 25pc to 2025 while over the same period cutting capital expenditure (capex) and generating over €6bn of operating cash flow at its upstream division.

Galp's forecast, to increase production to 156,000-167,000 b/d of oil equivalent (boe/d) in 2025 from an expected 125,000-135,000 boe/d this year, implies growth of 5-6pc/yr. This is a substantial cut from the firm's previous forecast in 2020 for a 10pc/yr increase in output to 2030.

The firm has cut annual capex by 20pc compared with its previous plan, and now sees investment of €800mn-€1.0bn/yr ($978mn-$1.2bn) in 2021-25. Its upstream division will account for 40pc of this, compared with 50pc previously, with Galp planning a shift to becoming more of a low-carbon energy supplier, in line with many of its European peers. Galp will this year maintain the planned capex ceiling of €500mn-700mn that it introduced in 2020 in response to the Covid-19 pandemic. Longer term, it plans to make upstream savings by abandoning frontier exploration once it has drilled wells in Sao Tome and Principe this year and onshore Brazil in 2022.

The firm's production growth will be centred in Brazil, where Galp has just taken a final investment decision (FID) with its partners to develop the offshore Bacalhau project. It expects first oil there in 2024 and 40,000 boe/d net when production reaches plateau. The firm said today that it is not ruling out participating in Brazil's transfer-of-rights auction due later this year.

Growth engine

Galp expects its downstream business to continue to be a major growth engine to 2025, with expected refining margins of around $4.0-5.0/bl during the period compared with the $2.0/bl it reported in the first quarter of this year, and earnings before interest, taxes, depreciation and amortisation (Ebitda) at the business increasing to €400mn in 2025 from an expected €100mn in 2021.

The firm expects its overall Ebitda to grow to more than €3.0bn in 2025 from the more-than €2.0bn it expects to generate this year, with upstream accounting for a third of this. It expects cash flow from businesses unrelated to oil and gas to double over the period.

By Jonathan Gleave