Galp Energia's Strong Q2 Performance Amid Oil Market Dynamics

Portugal's Galp Energia reported a 16% rise in Q2 net profit, surpassing expectations, due to higher oil prices and lower production costs. The company is preparing for a second drilling phase in Namibia's Mopane field and is in talks with potential partners. Galp shares have risen over 40% this year.

Portugal's Galp Energia reported a 16% rise in second-quarter net profit on Monday, exceeding expectations due to higher oil prices and reduced production costs. The company's refining margin remained steady despite reduced output. Galp is preparing for a second drilling phase in Namibia's Mopane field, where it holds an 80% stake, set to start in the fourth quarter. Preliminary discussions with potential partners are ongoing.

Galp shares, which have surged more than 40% this year, rose by over 1% on the announcement. The firm recorded an adjusted net profit of 299 million euros ($325.34 million), surpassing the 236 million euros projected by 18 analysts polled by the company.

Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) decreased by 7% to 849 million euros, versus the 821-million consensus. Galp estimates that Mopane could contain at least 10 billion barrels of oil, positioning it as a substantial discovery in the emerging basin, with successful exploration by TotalEnergies and Shell.

Reuters previously reported that more than 12 oil companies, including Exxon, Shell, and Brazil's Petrobras, had shown interest in purchasing a 40% stake in Mopane. Chief Executive Filipe Silva confirmed preliminary discussions with potential partners during a conference call with analysts. Silva emphasized the importance of finding a partner committed to rapid development and providing the necessary capital expenditure.

Following asset sales in Angola and Mozambique, Galp is in a strong financial position to sustain its long-term growth through high-return projects. The company maintains its guidance for average annual net capex of 1 billion euros over 2023-25.

Galp's oil and gas production from upstream projects in Brazil fell by 5% year-on-year to 106,000 barrels of oil equivalent per day. The company did not book production in Mozambique this quarter, after recording 5,000 boepd a year ago. ($1 = 0.9190 euros)