Galp Profit Rises 58% on Higher Output From Brazil Projects

Galp Energia SGPS SA (GALP), Portugal’s biggest oil company, said third-quarter profit rose 58 percent as output from its Brazilian projects increased.

Adjusted net income climbed to 98 million euros ($127 million) from 62 million euros a year earlier, the Lisbon-based company said today in a regulatory filing. That compares with the 103.9 million-euro mean estimate of 13 analysts in a Bloomberg survey. Profit on this basis excludes one-time items and inventory changes.

“Rising production in Brazil more than offset the falling production in Angola, ” Galp said in the statement.

Galp plans to invest 1.2 billion euros a year from 2013 to 2016 as it explores in Brazil’s offshore Santos Basin, where its Lula project is located, and in Angola. By expanding access to crude supplies, Galp is seeking to curb dependence on refining and sales of fuel in Portugal and Spain.

Average working-interest production rose 25 percent from a year earlier to 25,900 barrels a day. Average net entitlement output climbed 60 percent to 19,500 barrels a day. The company said the average selling price declined 4.5 percent. Galp targets working interest production of about 24,000 barrels a day in the fourth quarter.

Galp plans to exceed 300,000 barrels of oil equivalent a day in working-interest production by 2020. It has stakes in four offshore blocks in the Santos Basin, including 10 percent of Lula, the largest find in the Americas since Mexico’s Cantarell field in 1976.

LNG Trading

Natural-gas sales climbed 27 percent to 1.47 billion cubic meters in the third period, helped by increased trading of liquefied natural gas as demand in Asia and Latin America grew.

The Portuguese oil company is also investing in upgrades at its refineries in Oporto and Sines to increase diesel production. Galp’s refinery in Oporto can process about 90,000 barrels a day, while the Sines plant has a 220,000-barrel-a-day capacity.

Galp said in a presentation today that the commissioning of a new hydrocracker at its Sines refinery is “under way” and it expects “steady” production at the end of the fourth quarter. Chief Executive Officer Manuel Ferreira de Oliveira had said on July 27 that the new hydrocracker would be working at full capacity at the end of September or beginning of October.

The producer used its refineries at 70 percent of capacity in the third quarter and processed 2.6 percent more crude. The volume of refined product sales fell 2.2 percent. The refining margin, a measure of profit from converting oil into fuels, widened to $4.40 a barrel from $0.90 in the third quarter of 2011. Galp faced workers’ strikes in September and this month.

Adjusted earnings before interest, taxes, depreciation and amortization rose 38 percent to 306 million euros in the third quarter. Galp today reaffirmed a forecast for Ebitda to be “close” to 1 billion euros in 2012. It estimates Ebitda will rise at a compound annual growth rate of about 25 percent from 2011 to 2016.

Galp shares have advanced 12 percent this year, giving the company a market value of 10.5 billion euros.

Amorim Energia BV, a holding company controlled by Portuguese investor Americo Amorim, in July completed the purchase of a 5 percent stake in Galp from Eni SpA (ENI) of Italy to increase its holding to 38 percent.

To contact the reporter on this story: Joao Lima in Lisbon at jlima1@bloomberg.net

To contact the editor responsible for this story: Will Kennedy at wkennedy3@bloomberg.net

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