Strategy overview Manuel Ferreira De Oliveira Chief Executive Officer 2 Capital Markets Day 10 March 2015
An integrated energy player focused on E&P Focus on executing sanctioned projects in a challenging market environment Explore project upsides and shift resources into reserves Cash improvements and integrated profile to…
Setting the scene for value growth strategy Focusing on project execution and upstream sustainability Optimising downstream and gas businesses Galp Energia today, tomorrow and beyond 4 Capital Markets Day 10 March 2015
2014: Achieving upstream projects milestones Production ramp-up and Executing sanctioned Working to sanction new plateau extension projects projects Lula FPSO 1 producing at Start-up of Lula FPSO 3 Iara DoC submitted to ANP at…
while increasing reserves from a significant resource base 2014 2P and 3P reserves 2014 2C and 3C contingent resources (mmboe) (mmboe) +10% YoY +18% YoY -10% YoY -11% YoY 3,496 1,672 833 638 2P 3P 2C 3C Brazil Angola…
2014: Optimising downstream and gas businesses and corporate structure Refining & Marketing Gas & Power Corporate Ongoing refining energy NG & LNG sales hit record Redesign of corporate centre by efficiency optimisation level of…
Volatility has returned to the oil market Volatility of Brent vs. Galp Energia share price (monthly logarithmic returns) Brent annualised volatility 22% 11% 57% 30% 20% 10% 0% -10% -20% -30% Jan-10 Jul-10 Jan-11…
but Galp Energia is well positioned to deliver growth Fundamentals Integrated player Profitable assets Unique features Volatility is inherent Integrated profile High quality Distinctive to the Oil & Gas represents a natural…
Market dynamics will lead to industry rebase Recent developments What is happening Oil price hit near six year lows caused by Retreat of US tight oil supply in the oversupply short/medium term US unconventional production growth…
Positive long-term outlook for oil and LNG, but refining environment challenging Global oil market Global LNG market European refining industry (mmbopd) (mtpa) (mmbopd) 100 400 15 10 50 200 5 0 0 0 2014 Decline Supply…
Integrated profile mitigates exposure to Brent across the value chain Galp Energia volumes in 2014 Key takeaways (kboepd) 335 Unbalanced volumes allow for the compensation 265 between downstream margins versus upstream Managing…
Galp Energias projects are highly competitive compared to other upstream plays Break even oil prices by different oil plays (/bbl) 120 Oil sands Deep water 100 North America Extra heavy oil shale 80 80 61 54 54 57 60…
Leverage on Galp Energias distinctiveness National flag Reputable Enduring Integrated carrier status partner partnerships position Like for like Knowledge and Access to network of Expertise across the Oil conversations with NOCs…
Focused on E&P project execution, whilst optimising downstream and gas activities Upstream business Downstream and gas businesses Execute sanctioned Reinforce active Improve R&M Sustain LNG trading and de-risk pre- partner role and…
Setting the scene for value growth strategy Focusing on project execution and upstream sustainability Optimising downstream and gas businesses Galp Energia today, tomorrow and beyond 16 Capital Markets Day 10 March 2015
Protect value by focusing on sanctioned projects execution Net installed capacity (operating & sanctioned) Execution risk (kboepd) 250 Operating + + Sanctioned 4 replicant FPSO 200 for Lula/Iracema 150 2 FPSO for Kaombo 3 leased…
Production growth impacted by current context but potential upside remains Working interest production Portfolio highlights (kboepd) 400 Operating & sanctioned projects production CAGR 2014-20 25% Pre-sanctioned projects Iara…
Consolidate role as an active partner and strengthen operatorship capabilities Active partner on non-operated projects Reinforce operatorship position Good partnership management with experienced Leverage on know-how acquired from…
Exploration strategy in place Ongoing exploration activities in accordance with the Companys profile and priorities Focus on basins and geographies where Galp Energia has competitive advantages Reinforce in-house exploration…
Setting the scene for value growth strategy Focusing on project execution and upstream sustainability Optimising downstream and gas businesses Galp Energia today, tomorrow and beyond 21 Capital Markets Day 10 March 2015
Improve competitiveness and integration of R&M activities 2020 mid-cycle refining net cash margin 2014 marketing sales by geography (/bbl) Margin relative position vs. sales volume (%) 4x 1st Quartile Africa Galp Energia…
to enhance returns of the business R&M efficiency delivery Actions being taken (m) 100 Increasing refineries energy efficiency Stepping up cost reduction program Leveraging refineries logistics flexibility 50 Improving refining…
Iberian demand and flexible sourcing contracts support LNG trading activity NG and LNG portfolio in 2014 Evolution of NG & LNG sales (bcm) 4.6 4.0 4.1 3.8 3.7 3.0 2.2 0.7 2011 2012 2013 2014 Iberian sales LNG…
Building a sustainable NG and LNG portfolio Iberian NG Diversified and Access to High value stable outlet competitive sourcing infrastructure LNG sales Maintain a client Guarantee long-term Manage transport Guarantee scale of portfolio…
Setting the scene for value growth strategy Focusing on project execution and upstream sustainability Optimising downstream and gas businesses Galp Energia today, tomorrow and beyond 26 Capital Markets Day 10 March 2015
Galp Energia corporate sustainability recognised internationally Acknowledgment DJSI benchmark score Room to improve (2014 points) 87 Ranked in the 93rd percentile in 77 Oil & Gas industry 3rd consecutive year at DJSI HSE…
Investing in Research & Technology to make the most out of our assets E&P priority Close cooperation with Human capital distinctive programmes reputable universities development Production from fields with high CO2 content…
Strict corporate guidelines to support strategy in place Lower capex and optimisation of operational cost base Reducing break even under current environment Clear set of financial guidelines to support growth Maintain solid…
Galp Energia today, tomorrow and beyond ROACE target (Consolidated ROACE vs. % capital employed in E&P) 25% Galp ambition 20% Consolidated ROACE (%) 15% Galp 2020+ 10% Peers average 5% Galp 2014 0% 0% 20% 40% 60% 80%…
Upstream growth Thore E. Kristiansen Executive Director, E&P 31 Capital Markets Day 10 March 2015
Focused strategy in place Execute world class projects and secure profitable production growth De-risk pre-sanctioned projects and develop upside opportunities Disciplined capital allocation and managed exploration…
Focused strategy in place Sanctioned projects being developed Pre-sanctioned projects activities underway Selective 2015 exploration campaign Concluding remarks 33 Capital Markets Day 10 March 2015
Strong portfolio pipeline Exploration Appraisal Pre-development Development Production Namibia Guanxuma Jpiter Tango Iara 1 to 3 Block 32 New Kaombo Lula/ Block Amazonas Iara ventures Iracema 2 14/14K Lula/ Pit Coral Iracema…
with a large resource base in place 2014 2P reserves1 2014 2C resources1 (mmboe) (mmboe) Mozambique Angola Angola 638 1,672 Brazil Brazil 100% sanctioned projects 22% from sanctioned projects 1Working interest…
3-year average RRR of 334% 1P reserves1 Reserve Replacement Ratio (RRR) (mmboe) (%) 232 551% 178 154 3-year average RRR of 334% 2012 2013 2014 2012 2013 2014 1Net entitlement reserves. 36 Capital Markets Day 10 March…
Yielding significant production growth Working interest production (kboepd) Developing existing portfolio IOR/EOR CAGR 2014-20 Exploration 25%-30% +24% +30%-35% 2013 2014 2015E 2020E Upside 2020+ Angola Brazil…
Developing E&P team Increasing capabilities Evolution ( E&P professionals) 255 197 82 56 2006 2010 Jan-15 2015E 16 different nationalities Hiring, attracting and retaining highly qualified professionals Ensure the…
Developing operating capabilities Successful operation in offshore Morocco Zero Lost Time Incidents On budget 39 Capital Markets Day 10 March 2015
Focused strategy in place Sanctioned projects being developed Pre-sanctioned projects activities underway Selective 2015 exploration campaign Concluding remarks 40 Capital Markets Day 10 March 2015
Lula/Iracema: Solid track-record above initial expectations Production ramp-up FPSO Cid. de Paraty Lula NE (120 kbopd) Full capacity since Sep-14 Average availability of c.95% FPSO Cid. de Mangaratiba FPSO Cid. de Angra dos…
Unitisation process underway Lula/Iracema Unitisation negotiations underway with South of Tupi and an open area (PPSA) Working interest to be defined for the unitised areas with redetermination clauses Past costs and production…
Execution of a world-class project On track Executing mitigation measures Replicant Units2: 150 kbopd On track FPSO Cid. de Itagua 150 kbopd P-66 Lula South Iracema North First oil: 2017 First oil: 2H15 P-67 FPSO Cid. de…
Cost optimisation to support Lula/Iracema project profitability Drilling and completion ( days) 239 -21% YoY 170 135 125 92 2010 2013 2014 Target Best performance Benefitting from learning curve and Negotiating new rig…
Significant oil recovery upside in Lula/Iracema project Recovery factor (oil) (%) + 12 p.p. 40% Water injection/Gas injection 28% 4D seismic Additional production units Infill drilling WAG Subsea separation Technology…
Angola: Mature block 14 being complemented by Lianzi start-up Block 14/14K Current producing fields (Kuito, BBLT and Tmbua-Landana) in declining phase Lianzi production expected to start in 2H15 through a tie-back to BBLT platform…
Angola: Sanction of Kaombo project in 2014 Block 32 Kaombo FID made in 2014 after an effective technical and contracting strategy revision allowing a capex reduction of c.20% Kaombo project being developed with 2 FPSO (2x125…
Focused strategy in place Sanctioned projects being developed Pre-sanctioned projects activities underway Selective 2015 exploration campaign Concluding remarks 48 Capital Markets Day 10 March 2015
Mozambique: World-class gas project being materialised Area 4 Over 85 tcf GIIP identified Potential for economies of scale in onshore LNG project Focus on fit for purpose solutions and potential to reduce costs under current…
Initial development phase being executed Coral FLNG Project 1 FLNG (2.5-3 mtpa) Competitive FEED and EPCIC proposals expected to be submitted by the end of 2Q15 LNG offtake agreements under negotiation FID planned for 2015 Mamba…
Greater Iara: A multistage development for three separate accumulations Berbigo/Sururu/Atap Significant resource base in a challenging heterogeneous reservoir Continuous appraisal campaign Sururu development plan to be optimised…
BM-S-8: De-risking development and potential upside Carcar High pressure and temperature reservoir in a high quality rock identified Current appraisal to test productivity and resource potential DoC submission extended until…
BM-S-24: Ongoing appraisal campaign for large base of resources Jpiter/Bracuhy Significant resource base of oil, condensates and gas mixed with CO2 Appraisal activity expected to de-risk reservoir and development concept…
Focused strategy in place Sanctioned projects being developed Pre-sanctioned projects activities underway Selective 2015 exploration campaign Concluding remarks 54 Capital Markets Day 10 March 2015
Potiguar: Pit discovery to be appraised in 2015 with upside potential Potiguar basin DST on oil accumulation confirmed good permeability and porosity Evaluation plan approved and one appraisal well and DST expected by 2015 One…
Managed 2015 exploration drilling activity Brazil: BM-S-8 Angola: Block 32 - CNE Portugal: Alentejo basin Guanxuma exploration well Colorau-3 well expected to be Partnership established with expected to be spudded by drilled in…
Focused strategy in place Sanctioned projects being developed Pre-sanctioned projects activities underway Selective 2015 exploration campaign Concluding remarks 57 Capital Markets Day 10 March 2015
Committed to execute today and to deliver significant production growth Execution of world class projects Maximising value during development and production stages Maturing pre-sanctioned projects Focus on fit for purpose and…
2015 exploration and appraisal drilling campaign Area Target E/A Interest Spud date Brazil1 BM-S-11 Iara RDA-4 A 10% 1Q15 BM-S-8 Carcar Extension-2 A 14% 1Q15 BM-S-8 Carcar Extension-1 A 14% 3Q15 BM-S-8 Guanxuma E 14% 4Q15 BM-S-24…
Financial outlook Filipe Silva Chief Financial Officer 62 Capital Markets Day 10 March 2015
Resilient free cash flow amidst volatile market conditions Cash flow generation benefitting from integrated business model Lower capex and focus on world class upstream developments Committed to a robust financial position…
Lower capex and focus on higher margin projects Resilient free cash flow amidst lower oil prices Keeping a strong financial position Concluding remarks 64 Capital Markets Day 10 March 2015
Reducing capex plan by 1.5 bn over the 2015-19 period Annual capex guidance 20% reduction Lower capex by adjusting pipeline of 1.5 bn - 1.7 bn development projects and improving D&G operations efficiency E&A 1.2 bn - 1.4 bn…
E&P capex flexibility E&P: Committed vs. uncommitted capex E&P capex profile Committed Lula/Iracema Angola Total upstream capex E&A 2015 Lula/Iracema Uncommitted Other development projects Other projects E&A 2016-19 2014…
Lower capex and focus on higher margin projects Resilient free cash flow amidst lower oil prices Keeping a strong financial position Concluding remarks 67 Capital Markets Day 10 March 2015
Upstream providing significant Ebitda growth even with lower oil price assumption Upstream Ebitda1 (m) CAGR 2014-2019 35% 2015 upstream Ebitda expected to decrease YoY assuming Brent at 55/bbl Production ramp-up driving upstream…
Technical costs driven by high margin projects Technical Costs1 (/boe) Large scale of projects drives lower unit costs 27 High quality assets reduce capex 22 requirements Lifting costs in 2019 expected to be below 6/bbl…
Steady contribution from downstream and gas activities R&M Ebitda1 G&P Ebitda (m) (m) Power Infrastructure Natural Gas 500 800 250 400 0 0 2014 2015E 2016E 2017E 2018E 2019E 2014 2015E 2016E 2017E 2018E 2019E R&M…
2014-19 Ebitda CAGR of c.20% under new oil price assumptions Group Ebitda1 (m) CAGR 20% 1,314 2014 2015E 2016E 2017E 2018E 2019E 2015 Ebitda guidance of 1.1 bn - 1.3 bn, with integration providing a cushion to current…
Resilient cash flow from integrated business model Free Cash Flow1 (m) Integrated model stabilising free cash flow in a lower oil price environment 500 Group expected to turn free cash flow 0 positive during 2018 and Brazil in…
Lower capex and focus on higher margin projects Resilient free cash flow amidst lower oil prices Keeping a strong financial position Concluding remarks 73 Capital Markets Day 10 March 2015
Extending reimbursement profile to match expected cash flow generation Current debt reimbursement profile (m) 1,000 500 0 2014 2015 2016 2017 2018 2019 2020 2021+ Bank Loans Private Placements Public Bonds Profile…
Current liquidity sufficient for the next three years Sources and uses 2015-2017 (bn) 8 Net debt to Ebitda2 peaking at c.2x throughout 2016, and falling quickly thereafter Available liquidity1 Brazil fully funded with own…
Lower capex and focus on higher margin projects Resilient free cash flow amidst lower oil prices Keeping a strong financial position Concluding remarks 76 Capital Markets Day 10 March 2015
Galp Energia: well supported growth strategy Annual capex down 20% to 1.2 bn - 1.4 bn during 2015-19 period Selective capital allocation Focused on the development of highest margin projects Ebitda CAGR 2014-19 of c.20% Resilient…
2015-19 business plan sensitivities Ebitda sensitivities Approximate impact in Approximate annual Change 2015 medium/long term impact Brent price 10/bbl 100 m 350 m Refining margin benchmark1 1/bbl 90 m 80 m EUR:USD 0.10 (70…
Key indicators on Galp Energias debt YE2013 YE2014 Gross debt 3.7 bn 3.7 bn Cash and equivalents 1.5 bn 1.1 bn Net debt 2.2 bn 2.5 bn Net debt considering loan to Sinopec 1.3 bn 1.6 bn Net debt to Ebitda ratio1 1.1x 1.2x Available…
Closing remarks Manuel Ferreira De Oliveira Chiel Executive Officer 82 Capital Markets Day 10 March 2015
An integrated player well positioned to manage volatility and deliver growth Executing profitable upstream projects in current challenging environment Unlocking additional resources to create value and sustain production…
A focused and experienced management team Chief Executive Officer Manuel Ferreira Over 40 years of international De Oliveira and oil industry experience Deputy CEO & COO COO Gas & Power / COO Exploration & Chief Corporate…
Acronyms Number DJSI Dow Jones Sustainability Indices m Millions Approximately DoC Declaration of Commerciality mmbpd Million barrels per day % Percentage DST Drill Stem Test mmboepd Million barrels of oil equivalent per day & And E…
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