Galp Raises Spending Plan in Focus on Brazil, Mozambique

Galp Energia SGPS SA, Portugal’s biggest oil company, raised its investment forecast as exploration and production in Brazil and Mozambique expand.

Galp will spend on average 1.5 billion euros ($2.1 billion) to 1.7 billion euros a year through 2018, the company said today in a statement. That compares with a March 2013 projection of 1.4 billion euros to 1.6 billion euros a year for 2014 to 2017.

The oil producer is exploring in Mozambique’s Rovuma basin and Brazil’s offshore Santos basin, where the Lula project is located, to expand access to crude and gas and curb dependence on refining and fuel sales in Portugal and Spain, where the oil-products market contracted by 5 percent last year.

“The upstream business shall be the main driver of the company’s future profitable growth and cash-flow generation,” the Lisbon-based company said. “Galp will continue to pursue active portfolio management, which should be seen as an additional funding source.”

Investment this year is estimated at 1.3 billion euros to 1.5 billion euros, the statement shows.

Output will rise at a compound annual growth rate of about 40 percent in the 2013-2020 period, Galp said, forecasting seven to nine exploration and appraisal wells this year. The company targets working-interest production of 28,000 to 30,000 barrels a day in 2014, up from 25,000 barrels a day last year.

Earnings Outlook

Earnings before interest, taxes, depreciation and amortization will rise at a compound annual rate of more than 25 percent from 2013 to 2018, Galp said. That’s the same pace as it forecast last March for 2012 to 2017. Galp expects 2014 Ebitda of 1.1 billion euros to 1.3 billion euros, compared with 1.1 billion euros in 2013.

While Galp plans to reduce its reliance on oil-product sales in Portugal and Spain, the company has invested in refinery upgrades to increase diesel production. It targets a refinery utilization rate of 70 percent to 75 percent in 2014, compared with 73 percent in 2013, assuming refining margins expand to about $2.40 a barrel from $1.20.

Sales of natural gas will be 5 billion to 7 billion cubic meters in 2014, compared with 7.1 billion cubic meters in 2013.

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