Galp Boosts Investment to Add Reserves, Meet Production Target
Galp Energia SGPS SA (GALP), Portugal’s biggest oil company, will boost investment from next year to increase its reserves and meet a production target for 2020.
Annual investment will be 1.4 billion euros ($1.8 billion) to 1.6 billion euros for 2014 to 2017, it said in a statement. Galp also plans 1.2 billion to 1.4 billion euros in 2013. A year ago, it forecast an annual 1.2 billion euros from 2013 to 2016.
“The upward revision in capex was mainly driven by the recent exploration successes,” Lisbon-based Galp said today in the statement. The company will invest the money in developing the Carcara, Jupiter and Iara fields in Brazil, Angola’s Block 32 and a liquefied natural gas project in Mozambique, it said.
Galp is exploring in Brazil’s offshore Santos Basin, where its Lula project is located, and in Angola to boost access to crude oil supplies and curb dependence on refining and sales of fuel in Portugal and Spain. The oil products market contracted by 7 percent in each of those countries last year.
The Portuguese company said it’s “on track” to meet its production target of 300,000 barrels of oil equivalent a day in 2020. Galp plans to drill as many as 10 “key” wells in 2013 in Brazil, Mozambique and Namibia. The producer’s reserves rose 10 percent to 783 million barrels of oil equivalent last year.
Galp 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. The site, formerly known as Tupi, holds an estimated 6.5 billion barrels of recoverable oil and equivalents.
China Petrochemical Corp., Asia’s biggest refiner, in 2011 agreed to buy a 30 percent stake in Galp’s Brazilian unit.
Earnings before interest, taxes, depreciation and amortization will rise at a compound annual growth rate of more than 25 percent from 2012 to 2017, Galp said. The upstream unit, mainly involved in exploration and production, will represent about 70 percent of Ebitda by 2017, compared with 37 percent in 2012. Adjusted Ebitda expanded 27 percent to 1.01 billion euros in 2012 and Galp expects it to reach 1.1 billion to 1.3 billion euros in 2013, helped by a refinery upgrade.
The company in January completed a 1.4 billion-euro refinery conversion project to increase diesel production. Its plant in Oporto can process about 90,000 barrels a day, while the Sines refinery has a 220,000-barrel-a-day capacity.
The company is “addressing” the issue of extending debt maturing this year and in 2014, according to the statement. Galp will also pay a dividend of 24 euro cents from 2012 earnings.
Galp advanced 1.4 percent to 11.815 euros by 2:45 p.m. in Lisbon trading, valuing the company at 9.8 billion euros.
Eni SpA of Italy on Nov. 27 cut its holding in Galp to 24 percent after selling 4 percent of the Portuguese company to institutional investors at 11.48 euros a share.
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