Galp Profit Climbs 10% on Brazil Output, Refining

Galp Energia SGPS SA, Portugal’s biggest oil company, said fourth-quarter profit rose 10 percent as Brazilian production increased and refining margins widened.

Adjusted net income climbed to 83 million euros ($111 million) from 75 million euros a year earlier, the Lisbon-based company said today in a statement. That beat the 81.7 million-euro mean estimate of 10 analysts surveyed by Bloomberg. Profit on that basis excludes one-time items and inventory changes.

Galp is investing in exploration off Brazil in the Santos Basin, where its Lula project is located, as well as in Angola. By expanding access to crude supplies, the company is seeking to curb dependence on refining and fuel sales in Portugal and Spain, which dipped last year as demand fluctuated.

Average working-interest production rose 8.5 percent from a year earlier to 23,400 barrels a day, Galp said. Average net entitlement output, which includes the effect of production-sharing agreements, jumped 36 percent to 17,600 barrels a day. The average selling price fell 9.9 percent.

Galp rose as much as 0.9 percent to 11.80 euros in Lisbon, and traded unchanged at 11.70 euros as of 9:46 a.m. local time.

Galp targets working-interest production of about 24,000 barrels a day this quarter, and more than 300,000 barrels a day by 2020. It plans to invest 1.2 billion euros a year from 2013 to 2016 as it explores the Santos Basin, where it has stakes in four offshore blocks including 10 percent of Lula, the largest find in the Americas since Mexico’s Cantarell field in 1976.

Lula Boost

“The production growth profile will be reinforced in 2013 with the startup of the Lula NE project,” Galp said today.

The company has invested in refinery upgrades in Oporto and Sines to increase diesel production. The hydrocracker at Sines started commercial output on Jan. 10, marking completion of a 1.4 billion-euro refinery conversion project, Galp said Jan. 16.

“The refining margin will benefit from production ramp-up of the hydrocracker complex throughout the first quarter,” Galp said in a presentation. It expects the new units at Sines to run at maximum capacity in the period.

Galp refineries ran at 62 percent of capacity last quarter and processed 10 percent less crude amid a strike and planned shutdowns. Refined-product sales volumes fell 5.5 percent. The refining margin, a measure of profit from turning oil to fuels, was 90 U.S. cents a barrel, compared with zero a year earlier.

Adjusted earnings before interest, taxes, depreciation and amortization rose 27 percent to 1.01 billion euros for the full year, meeting an October forecast. Ebitda will rise about 25 percent a year from 2011 to 2016, according to Galp projections.

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