Galp First-Quarter Profit Climbs on Brazil Output, Refining

Galp Energia SGPS SA, Portugal’s biggest oil company, said first-quarter profit rose 52 percent as Brazilian production increased and refining margins widened.

Adjusted net income climbed to 75 million euros ($98 million) from 50 million euros a year earlier, the Lisbon-based company said today in a statement. That beat the 67.4 million-euro mean estimate of 12 analysts surveyed by Bloomberg. Profit on that basis excludes one-time items and inventory changes.

Galp is exploring in Brazil’s offshore Santos Basin, where its Lula project is located, to boost access to crude oil supplies and curb dependence on refining and fuel sales in Portugal and Spain. The oil products market contracted by 7 percent in each of those countries last year.

The Portuguese company on March 5 said it will boost investment from next year to increase reserves and output. Annual investment will be 1.4 billion to 1.6 billion euros for 2014 to 2017. Galp plans to invest 1.2 billion to 1.4 billion euros this year.

Galp on March 5 said it’s “on track” to meet its production target of 300,000 barrels of oil equivalent a day in 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.

Production Growth

The Cidade de Paraty floating production, storage and offloading vessel will start production at the Lula field in the beginning of June, “contributing to relevant production growth in the second half,” Galp said in a presentation. The FPSO is expected to produce about 75,000 barrels a day by the end of 2013, it said.

Average working-interest production rose 4.3 percent from a year earlier to 23,500 barrels a day, Galp said. Average net entitlement output, which includes the effect of production-sharing agreements, climbed 21 percent to 20,100 barrels a day. The average selling price fell 15 percent.

Galp targets working-interest production of about 22,000 barrels a day for the second quarter as the Cidade de Angra dos Reis FPSO in Brazil undergoes maintenance work.

Refinery Upgrade

Galp has also invested in refinery upgrades to increase diesel production. The hydrocracker at the Sines plant started commercial production on Jan. 10, marking completion of a 1.4 billion-euro investment on a conversion project at its refineries. The plant in Oporto can process about 110,000 barrels a day, while the Sines refinery has a 220,000-barrel-a-day capacity.

The refineries ran at 73 percent of capacity last quarter and processed 6.3 percent more crude. Refined-product sales volumes dropped 4 percent. The refining margin, a measure of profit from turning oil to fuels, widened to $1.80 a barrel from 80 cents a year earlier.

The company’s refining system is “ready” to increase profitability from the second quarter, “considering the international market dynamics,” Galp said in the presentation.

Natural-gas sales slipped 0.2 percent to 1.72 billion cubic meters in the first quarter. Galp said it sold eight cargoes of liquefied natural gas in the period.

Adjusted earnings before interest, tax, depreciation and amortization rose 24 percent to 253 million euros in the first quarter. Ebitda will rise at a compound annual growth rate of more than 25 percent from 2012 to 2017, Galp said March 5.

Galp shares have advanced 4 percent this year, giving the company a market value of 10 billion euros. The stock added 1.5 percent to 12.22 euros as of 9:02 a.m. local time.

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