Galp Energia SGPS SA Q3 2024 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Biraj Borkhataria - Royal Bank of Canada - Analyst : Hi, thanks for taking my question then Otelo thanks for the help for over recent years and best of luck with the new role. So the first one is just on the midstream it's been a recurring theme this year that very strong contribution from that division and obviously rising gas prices help. I was wondering how we should think about the medium term particularly into 2025 where you should get the additional volumes from Venture Global at some point, is that incorporated into your guidance going forward? And how should we think about that, with a bigger portfolio? And then the second question is just on one of the areas where it looks like you won't maybe hit your guidance, which is on CapEx, the less than EUR1 billion per annum on average. Even if I was to assume a big step up in Namibia spend in the second half of '25, it still looks quite challenging to actually get to that number with the divestment proceeds, agreed. So could you just talk a bit about, you know, capex and the moving parts into 2025? And what we should expect there on a growth basis? Thank you. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 28, 2024 / 11:00AM, GALP.LS - Q3 2024 Galp Energia SGPS SA Earnings Call

Question: Biraj Borkhataria - Royal Bank of Canada - Analyst : Okay, thank you all.

Question: Matt Smith - Bank of America - Analyst : Hi there. Good morning. Thanks for taking my questions. I had a couple as well, please. And the first one would be on Namibia of course, the first appraisal well underway now, and in the second, in the summer, can you just give us now a bit more detail, a bit more colour in terms of the location of those two wells, now that they're defined, what specifically you're looking to achieve with those wells and just whether there's any is it simply due to rig availability, the gap between the first and the second of this upcoming campaign or is there any strategic reason behind that? So it would be the first around Namibia. And then my second question, I mean to come back to CapEx again, perhaps I could ask it a slightly different way, perhaps you could help us bridge sort of growth CapEx expectations into next year, perhaps you could remind us of, how much expenditure there is on back allow. In 2024 it might be helpful to pull out once again and then also to consider, are you able to give us any detail on the rig rates and the ultimate expenditure for these first two of the four Namibia campaign, please? Thank you. Filipe Quintin Silva - Galp Energia SGPS SA - Chief Executive Officer, Vice Chairman, Chief Financial Officer, Executive Director Hi Matt, on Namibia well location. So we're not currently drilling few kilometres from the two, first wells but we're really targeting, it is an appraisal well targeting primarily but not exclusively AVO-1 and as I said, this is going to be a keeper and the reason why we're not drilling back-to-back is because we shot high resolution seismic last year and we're still processing some of this type. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 28, 2024 / 11:00AM, GALP.LS - Q3 2024 Galp Energia SGPS SA Earnings Call So the information is being processed as we speak and we're not going to drill this the next well until we have completed the seismic analysis. So that is why you have a hiatus between now and June 2024. So no relation to rig availability we seem to be pretty comfortable on hardware availability for Namibia. Thank you.

Question: Matt Smith - Bank of America - Analyst : Thank you very much.

Question: Joshua Stone - UBS - Analyst : Yeah, thanks. Hi morning everyone. And Otelo thanks for the help over the years and best of luck on your new role. Two questions, please. One, there was some news earlier this quarter about the lithium joint venture with Aurora that was previously targeting FID in late 2024, late 2024, looks like the project has been delayed to just talk about that and the reason for the delay is it just regulatory in nature or are there some technical issues as well? And what you think the likely timeline of this project is now. And the second question I just want to follow up on Namibia again, on the CapEx. Are you able to give a sort of the associated appraisal costs for these next two wells or what, CapEx you're budgeting for 2025? I think I might -- I don't think I heard that. Thanks. Filipe Quintin Silva - Galp Energia SGPS SA - Chief Executive Officer, Vice Chairman, Chief Financial Officer, Executive Director Oh, thank you, Joshua. On Aurora, we're going through the final phases of details engineering. We're having discussions about the incentives. So a lot of work is, has been done and is still ongoing fair to say the market is very, very challenging as we speak. So we are in no rush to take an FID until we see an appropriate return for the project. And we don't seem to be there as we speak. We're also concerned that this project could become compellation in case there's no mining of lithium in Portugal that seems to be late as well we're not going to take the risk to FID a conversion unit, until we see mining and Portuguese spodumene being part of the of the equation. On CapEx clearly falling down so our cost per well are south of EUR75 million per well, it's coming down, we know the location better. We have a lot of new capacity has become available in the media, a lot more competition from service providers so it is becoming within our knowledge of our understanding of the geology and more competition. Our unit CapEx is coming down quite quickly. Thank you. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 28, 2024 / 11:00AM, GALP.LS - Q3 2024 Galp Energia SGPS SA Earnings Call

Question: Alejandro Vigil - Santander - Analyst : Yes. Thank you for taking my question and best of luck to Otelo in the new challenges. And the first question is about Mozambique, the investment process, if you can give us an update on, that considering also the recent elections there in Mozambique, the up the possibility of the other projects going ahead in the country. And the second question is about Brazil, and we have seen some news about the project of increasing the production in Tupi in the coming years, if you can give us some colour on this project. Thank you. Filipe Quintin Silva - Galp Energia SGPS SA - Chief Executive Officer, Vice Chairman, Chief Financial Officer, Executive Director Thank you, Alejandro. So in Mozambique, and you see that we're still accounting for significant CapEx in our numbers for Mozambique. So until we close all the CapEx that is happening, it's been dispersed and then that's part of our transaction price some of this will come back to us as we close. But you have the Coral North FLNG that is progressing well, and FID is expected late this year. And you have the Rovuma LNG project, the entrepreneur for which feed work is ongoing that is public information to consortia are working on feed for the onshore the train project. So I guess that is your question so on the completion procedures, it's all going according to plan, we've had ticked a number of boxes clearly there has been no pre-emption by our partners. We are going through the motions with the lending banks of Coral South, the project finance, if you recall, we need a number of approvals and we will have the MIREME. So the Ministry of Natural Resources and Energy in Maputo signing off on this transaction but to be conservative, we're booking expecting to book the proceeds in Q1 next year. On Tupi, I guess you're referring to the field life expansion and the revised PoD that we lodged with ANP a few years ago. We're still expecting feedback from ANP that project entails an additional FPSO so that will recover more barrels, and it would be a very significant extension in the number of years for the concession. No more news other than we're having discussions with our consortium, and with ANP. Thank you.

Question: Giacomo Romeo - Jefferies International - Analyst : Yes. Good morning. Thank you and best of luck Otelo and looking forward to continuing working with Joao and the rest of the IR team. Two questions. One on Namibia. I'd like to go back to the timing of the wells just wanted to check if this was always your assumptions in terms of timing of that anything has changed there in the way you're looking at targets and timing of wells. The other question I have and it's again, I'll stick to Namibia, but it's some of your peers in the area have continued to talk about gas being -- gas content, being an issue on the their discoveries and affecting project economics. Just wanting to check whether you're still comfortable with the gas content and the impact it might have on economics in Mopane and whether there's anything you are looking to get more details on in the upcoming wells or if the gas content is not something you will be looking to get additional information on in the upcoming drilling campaigns. Filipe Quintin Silva - Galp Energia SGPS SA - Chief Executive Officer, Vice Chairman, Chief Financial Officer, Executive Director Thank you, Giacomo. No, if anything in Namibia, it's going faster than what we had in mind. So availability of service providers is better than expected. So no change in plans other than marginally faster we had indicated end of Q4 for this ongoing well, and it's -- we're still in October. In Namibia, we have no news and effectively since we last spoke this is a gas rich con condensate, very-very low oil viscosity, good porosities, high permeabilities, high pressures, everything we said before stands. So we're getting confirmations of everything that we have said minimum CO2, no H2S concentrations. So it's looks as if what we have is different from what we hear on some of what our neighbours are looking at. So nothing at this stage, clearly the next few months is for us and for our neighbours, a lot more news is coming. On GOR as we said before we don't expect this to affect our production first all given that, we can reinject the cast at least during the initial few years. Thank you.

Question: Sasikanth Chilukuru - Morgan Stanley - Analyst : Hi. Thanks for taking my questions. I had two please. The first was on Namibia again, I was wondering, shift some light on how close you are to take FID for a potential development. Do you believe you could take an FID on a potential development, if the first two wells were to meet the objectives or would it require the third and the fourth well to be drilled as well to take a decision there. The second was on the midstream business. The contribution of this segment has been solid exceeding your own guidance consistently so in your view what are the key factors that contributed to the beat? If you could -- I was wondering if you could perhaps highlight any sensitivities that we could use to forecast the earnings better for next year? Filipe Quintin Silva - Galp Energia SGPS SA - Chief Executive Officer, Vice Chairman, Chief Financial Officer, Executive Director Hi, Sasi, base case we should be able to have a very good deal on FID. Yes, with these first two wells, even if this first well - the well that we're currently drilling call it well number three, we have drilled two wells before we drill number three and well number four are in very different locations. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 28, 2024 / 11:00AM, GALP.LS - Q3 2024 Galp Energia SGPS SA Earnings Call So well number three is AVO-1 as we've discussed well number four is going to the southeast of where we are so different block and that in itself will likely trigger a number of other wells in the region. It will be a separate development. Rodrigo?

Question: Kate O'Sullivan - Citigroup - Analyst : Hello. Thank you, for taking my questions and congrats Otelo on the new role. And two on Namibia. So firstly, you mentioned the current well has been drilled two kilometres from the previous wells. It seems to be quite close by, we think normal appraisal wells tend to be a bit further out test the flanks of the field so wondering if you could provide some colour on the decision to drill so close by. And secondly, on the farm down, I think you mentioned in your opening remarks that you're keen to hold on to the 80% stake until at least the two wells are done the next two. So are you able to provide just further colour on the momentum in this process or are you in a pens down phase? Filipe Quintin Silva - Galp Energia SGPS SA - Chief Executive Officer, Vice Chairman, Chief Financial Officer, Executive Director Hi, Kate. It's actually some 10 kilometres. So I'm not sure if I mentioned two it's my mistake, it's some 10 kilometres, so it's not that close. On the farm down process as we said before, we have the financial ability so we can avoid rushing into a transaction. The plan is to continue with our current 80% and the risk as much as we can what we have in our hands. True to say that we've had a number of discussions, and we do have a short list, call it that way of super credible parties that are keen on Namibia. What is the right time to partner? Well, clearly, not before we complete at least the next two of the four campaign that we have in mind. So we will wait until most likely end of 2025, and also, to learn from what other players around us are going to find some of the people we're talking to for our project are also themselves drilling in the region. So again, as I said before, exciting times, lots of information this is not the time to tie up with anyone. Thank you.

Question: Lydia Rainforth - Barclays Capital - Analyst : Hello there. My name is Lydia from Barclays Capital. I have two questions if I could and congratulations again to Otelo. But firstly, on the refining side, can you just talk us through the, you had a good operational performance? But can you talk us through kind of what you're thinking about the market into next year? And then secondly, if I could come back to Namibia and actually thank you for your answer to Kate's question that was really interesting but how, whilst you're waiting for a partner or that's probably the wrong phrasing for it. But as you're thinking about, look at progressing Namibia, how do you think about progressing things like the FPSO that you're going to need and actually moving ahead with that side of it. Thanks.

Question: Michele Vigna - Goldman Sachs - Analyst : Thank you very much and congratulations on the strong results and Otelo really thank you for all of your help over the years. Two questions if I may. On the scene, as I was wondering if you could update us on your green hydrogen plans and especially on when you think that Portugal may implement the RED three directive that I think is so important to foster green hydrogen demand in Europe. And then secondly, on refining. We've clearly seen weaker margins in the third quarter they've recovered a little bit as we get into Q4 but I'm just wondering as the Dangote refinery starts to ramp up in the Atlantic, you perhaps fear that more pressure may come through next year? or if you think that as demand starts to recover in some parts globally, especially China, we could actually head into a more attractive environment for refining margins. Thank you. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 28, 2024 / 11:00AM, GALP.LS - Q3 2024 Galp Energia SGPS SA Earnings Call

Question: Michele Vigna - Goldman Sachs - Analyst : Thank you.

Question: Paul Redman - BNP Paribas - Analyst : Yes, thank you very much. And just two questions from me. And the first question is just to confirm that the four wells that were originally spoken about will be drilled before the end of next year because I guess the fact that you were delaying the second one to a late summer, it seems a little bit longer than I was expecting and then just on those wells in terms of a communication plan. When do you think we'll hear about the first well, do you need to drill the well, how long does that take and then how long will it take to analyse the data? And will we get updates on size gas, that stuff or is this just -- will it just be a small update driven by the first well? Thank you very much. Filipe Quintin Silva - Galp Energia SGPS SA - Chief Executive Officer, Vice Chairman, Chief Financial Officer, Executive Director Yeah, we should be drilling the first, the entire four wells within 2025. So one this year, three next year during the second half, given how sensitive Namibia is to our share price, which tends to communicate very, very quickly, even if we don't have full visibility. So you should expect to have more news this year on the -- on well number three, the one that we're drawing out are currently. We have no DST plan for this. Well, the DST campaign will likely be at the end of '25 or '26 well, we might do multiple DSTs on the wells that we have drilled by them. Thank you.

Question: Ignacio DomTnech - JB Capital Markets - Analyst : Hi. Thank you for taking my questions. Just a quick one on renewables in Brazil. It seems that the outlook there has improved so just wanted to get your view in terms of the willingness now to develop the part of the pipeline you have there in Brazil. Thank you. Georgios Papadimitriou - Galp Energia SGPS SA - Executive Director, Chief Operating Officer - Renewables and New Business Good morning, Ignacio. This is Georgios, we have -- the pipeline that we had is almost right now in inactive. We do have a couple of projects that are still in our pipeline that we were considering, but they have very tight deadlines to be built, and they would require strong commitments that even the outlook that you're saying that is correct, that is improving is not enough for us to consider right now reactivating these options. So for now, we remain with the very bearish for Brazil. Thank you. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 28, 2024 / 11:00AM, GALP.LS - Q3 2024 Galp Energia SGPS SA Earnings Call

Question: Alessandro Pozzi - Mediobanca - Analyst : Hi there. Thank you for taking my questions. I have a two on Namibia. So the first one is just to confirm that in the successful case for well number three you will be willing to move ahead and take FID. With regards to FID are you thinking about a modular approach? I mean, when you say FID, I guess is likely to be phase one and then maybe could you give us a bit more colour of what you think phase one of the development could look like in terms of number of wells, for example. Also, you mentioned that you are still processing the seismic and I was wondering would not be maybe more useful to drill when the process all the seismic. Filipe Quintin Silva - Galp Energia SGPS SA - Chief Executive Officer, Vice Chairman, Chief Financial Officer, Executive Director Alessandro can you repeat the last bit about waiting?

Question: Alessandro Pozzi - Mediobanca - Analyst : What was the reason for not testing well number three, given that is quite important for the FID potentially. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 28, 2024 / 11:00AM, GALP.LS - Q3 2024 Galp Energia SGPS SA Earnings Call Filipe Quintin Silva - Galp Energia SGPS SA - Chief Executive Officer, Vice Chairman, Chief Financial Officer, Executive Director We will be carrying out a what we call a mini DST, so we will have ample information about the fluid composition. Again, we expect this to be the continuation of the other two wells in AVO-1. So this should be enough to take decisions. Thank you.

Question: Sadnan Ali - HSBC - Analyst : Hi there. Thanks for taking my questions. And congratulations Otelo. Two please, first on Namibia your press release in April when you first announced that there were 10 billion barrels of hydrocarbons in place, just wanted to clarify does that include well three and four that are currently underway. And also has that number changed since then and do you have any expectations on how that will change going forward that you can give a little more colour on? And secondly, could you give a little more colour as to when we can expect a more indication on a more forward-looking guidance overall? Currently, you don't have much guidance across divisions or financials for the rest of this decade so when we could, we expect to get some more clarity on the outlook.? Thank you. Filipe Quintin Silva - Galp Energia SGPS SA - Chief Executive Officer, Vice Chairman, Chief Financial Officer, Executive Director Thank you. Sadnan so the 10 billion BOEs that we have disclosed. So we don't have any indication that there's any change on that estimate and this is for the entirety of the Mopane complex. So these wells three, four and then five and six will give you know proof that this number is likely to be hydrocarbons in place for the entire Mopane complex. Thank you.

Question: Matthew Lofting - J.P. Morgan Cazenove - Analyst : Hi all. Thanks for taking the questions. Two questions. If I could, please. Apologies. I missed the middle section of the call. So sorry if there's any duplication. But on Namibia, can I just ask are you able to share any predrill expectations on wells three and four and did anything change in terms of your initial interpretation of the seismic that you're working through at the moment in terms of the activity phasing around wells for and beyond perhaps being later than was previously indicated. And then secondly, I wanted to just come back on CapEx and ask you about excluding moving parts on Namibia, how you see the mix of Galp's CapEx 2025 plus between hydrocarbons versus low carbon it does seem on the low carbon side of the equation like some areas including the HVO projects are moving ahead quite swiftly. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 28, 2024 / 11:00AM, GALP.LS - Q3 2024 Galp Energia SGPS SA Earnings Call On the other hand, renewables and other parts of the complex appear to be slower in the context of returns and some of the other points that you've made. So just be interested to hear your thoughts on how the low carbon CapEx in aggregate is expected now to evolve as you move through the next few years? Thank you. Filipe Quintin Silva - Galp Energia SGPS SA - Chief Executive Officer, Vice Chairman, Chief Financial Officer, Executive Director And that yeah, we did cover some of your questions on previous answers. In a nutshell first, we don't give you predrill expectations. Well by well the announcement we post on a EUR10 billion BOE for Mopane this is what we're working on. We're de risking and not just the end place volumes, but we need to go work through the composition of the fluids in the different locations. Maria?

Question: Matthew Lofting - J.P. Morgan Cazenove - Analyst : Thanks both.