Galp Energia Profit Doubles on Higher Oil Prices, Gas Sales

Galp Energia SGPS SA, Portugal’s biggest oil company, said fourth-quarter profit doubled on higher crude prices and natural-gas sales.

Adjusted net income rose to 79 million euros ($105 million) from 40 million euros a year earlier, the Lisbon-based company said today in a regulatory filing. That compares with the 69 million-euro mean estimate in a Bloomberg survey. Profit on this basis excludes one-time items and inventory changes.

Galp is expanding exploration in regions such as Brazil’s offshore Santos Basin, where the Lula project is located, and Angola to improve access to crude supplies and lessen dependence on refining and sales of fuel in Portugal and Spain. The development of Lula is “ahead of expectations,” Galp said in a presentation.

The average dated Brent price was 26 percent higher in the fourth quarter of 2011 than a year earlier. The volume of natural-gas sales rose 5.6 percent.

Adjusted earnings before interest, taxes, depreciation and amortization rose 20 percent to 212 million euros in the fourth quarter. Galp forecasts average annual growth in Ebitda of about 15 percent from 2010 to 2015.

Galp on July 29 raised its 2020 output target in light of “exceptional” progress in Brazil. The company expects working interest production of more than 300,000 barrels of oil equivalent a day by the end of the decade.

China Petrochemical Corp., Asia’s biggest refiner, on Nov. 11 said it agreed to buy a 30 percent stake in Galp’s Brazilian unit. Sinopec Group, as the Beijing-based company is known, will invest a total of $5.2 billion in Galp’s Brazil unit, including a subscription for new shares and a shareholder loan.

Biggest Discovery

Galp has stakes in four offshore blocks in Brazil’s Santos Basin, including a 10 percent share in Lula, the largest crude discovery in the Americas since Mexico’s Cantarell field in 1976. Lula, formerly known as Tupi, holds an estimated 6.5 billion barrels of recoverable oil and equivalents. The company is also a partner with Brazilian state-controlled oil producer Petroleo Brasileiro SA in Cernambi, which holds 1.8 billion barrels of estimated reserves.

Average working interest production climbed 7.5 percent from a year earlier to 21,600 barrels a day, helped by Brazil. Average net entitlement production fell 8.9 percent to 13,000 barrels a day. Galp is targeting working interest output of about 22,000 barrels a day for the first quarter.

Galp plans to invest about 3.5 billion euros from 2012 to 2015, with exploration and production representing 70 percent of the total.

Refining Margin

The producer used its refineries at 69 percent of capacity in the fourth quarter and processed 16.6 percent more crude, while refined-product sales volumes fell 0.8 percent. The refining margin, a measure of profit from converting oil into fuels, narrowed to zero from $2.30 a barrel in the fourth quarter of 2010.

The Portuguese oil company is investing 1.4 billion euros 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.

The company expects to have “stable” production at its Sines refinery at the end of the second quarter after it completes the upgrade project.

Galp fell 0.9 percent to 12.87 euros as of 8:18 a.m. in Lisbon. The stock has climbed 12.5 percent this year, giving the company a market value of 10.6 billion euros. Eni SpA, Italy’s biggest oil company, and Portuguese holding company Amorim Energia BV each control a third of Galp.

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