Galp Energia, SGPS, S.A.

Hello everyone. And welcome to the Analyst Q&A session related with Galp’s fourth quarter and full year 2021 results.

I would like to thank you for joining us today. Earlier this morning, we released all relevant materials and this time also included video presentation from all Galp’s executive members, highlighting the key achievements during the year and covering the financial results.

As such this session is expected to be shorter as we will go straight to Q&A, where Andy and the remaining executive team will be available to take your questions. As usual, I would like to remind you that we will be making forward-looking statements, that refer to our estimates and actual results may differ due to factors included in the cautionary statement presented at the beginning of our presentation we released this morning, which we advised you to read.

Andy, do you want to say a few words before we start taking questions?

Thank you, Otelo. Well, it’s been one year since I started a CEO of Galp.

And it’s an exciting year. It’s a year, in which we have a new purpose, let’s regenerate the future together.

And as we look back in the year, we have a robust set of results. Despite some operational difficulties, operational difficulties in those supplying us gas and LNG, some operational difficulties in our own refinery and finish, and some operational difficulties battling with COVID in our non-operated position in upstream.

We also have a very large working capital build, which marks I think the quality of our financial framework and position today. We have a distinctive investment opportunity, one that is grounded on growth.

Growth of our core upstream business, which is extraordinarily cash generative, but also growth in our other renewable and new energy businesses. This gives us an overall decarbonization pace, which I think is distinctive.

But also, given the cash generation, we have a distribution framework, which I think is attractive. And we have a new distribution policy, one that now features buybacks for the discretion or the supplementary element of our distributions.

But also a growing of the base from €0.50 per share at 4% a year, so €0.52 for this year, with the discretionary or the supplementary element up to a third of adjusted operational cash flow. So I think this is an investment opportunity that shows growth shows decarburization and shows a good yield.

I'm looking forward to taking your questions. We've got Filipe, Thore, Teresa, Georgios and Otelo here to receive them.

Thank you.

Hi, thanks for taking my question. First of all, on the some of the gas sourcing issues you had in 2021.

And you talk about the current position right now for ’22 and if anything, the incremental costs are baked into your EBITDA guidance. And the second question is on Brazil.

Andy, you mentioned previously about sort of maintenance catch up, once you can post-pandemic. Just wondering where you are now and how much of that categories left?

And secondly, as it related to that -- for the some of the early FPSOs in Brazil, should we be thinking about structurally lower utilization or some underlying declines coming through? Or are we not there yet?

Thank you.

Thanks, Biraj. I'll start with talking a bit about the gas sourcing.

And I'll mention a few things on Brazil and pass over to Thore. But on the gas sourcing issues, yes, we have suffered particularly in Q4.

We compensated by our own use, particularly in Finnish. There is offset of some of those issues.

We are having targets rescheduled going forwards. But I think we're getting more adapted managing the overall balance of the supplies we get and the demands we have in our own use, but across Iberia.

So this is still an ongoing challenge for us. But I think we're much better equipped to manage it going forward.

When it comes to Brazil, clearly, it's been a difficult couple of years, particularly with COVID and activities not going as fast as they normally would. I think we've got to remember these are declining fields.

These are fields that are more or less all fit drilled up. We've got some infill drill.

So this is a matter of can you keep pace with additional hookups, higher availabilities to compensate from some of the declining production rates. So Thore -- I think this is a situation that's not unusual.

But I'd have to remind everyone on the call, we have backloaded going well and being built and will give us 25% production increase by 2025. So, Thore?

Thank you, Andy. Yes, no -- so just confirming what you just said.

The Tupi and Iracema we have to realize there's now 12 years since first production, so this field has now reached its peak. There is a slight decline on Tupi and Iracema now.

All the work that is now taking place is to try to reduce the decline rates. The decline this are not big actually, we're speaking Tupi and Iracema, below 3% per year.

So it is quite astounding for a field that has already been in production for 12 years. But that is the fact that as Andy said, only when we get back a lot towards the end of 2024, we could expect a sort of a significant uptick in in production.

We will have a positive stock contribution in 2023 from Coral, but that's a lot about the compensating for the decline that we see in the other fields. Maintenance is being carried out according to plan.

We basically have more or less all the units now planned for maintenance this year. And you have to expect that there is a utilization factor of around about 85% when you're factoring in the usage of the FPSO.

So that's for your guidance when it comes to the availability of the units. Thank you.

If I can just supplement here. Yeah.

So I mean, in Q4 you saw around 125,000 barrels a day. But I think there were four units that went into planned shutdowns through the quarter.

So I think you got to realize it was quite a high maintenance activity quarter. Just to reflect back on the energy management, we can see €100 million EBITDA swing from 2021 to 2022 because of regas costs, but also the sourcing issue.

So, Biraj, it's -- I think we are going to get a much better year, much better set of results from our energy management team this year than we had in 2021.

Understood, thank you.

Yes, good afternoon. Thank you very much, everyone.

Yeah, thank you. So it's great to see the new competitive distribution framework.

I think that's going to help a lot going forward. In that, I think you've stuck to the one third of cash flow in terms of total cash return.

It's interesting, because some of your peers are also talking about in today's higher macro environment that, a third or 30% might be suboptimal. So I just wanted to get a sense of it's a third of adjusted CFO, is a heart sailing or could be a soft sailing could be raised if the environment turns out to be higher than you're expecting, or the deleveraging comes in faster.

And then secondly, as relates to some future developments, I'd loved -- I'd like to get a bit more flavor color here on Northvolt deal. I think Georgios was saying, he’s very impressed by this deal when he saw it at the end of last year.

He also spoke about it being the first step in a much larger battery chain for you. So I just wanted to get a sense of what is this total expected capital outlay for you for net to Galp?

And what are the return expectations that you're currently contemplating here? I see Northvolt takes 50% of the offtake, but how do we secure the offtake for the rest, please?

Thank you.

Hi, Oswald, how are you? Look on the distributions.

Yeah, look, I think I'm not going to get anything but it's a third of adjusted operating cash flow. Now I think the exciting thing about Galp is we see our operating cash flows grow.

So that's I think, how we're going to reward our shareholders by growing our cash flows and attractive macro like today. We're fully expecting that that a third of adjusted OCF is going to be distributed.

Northvolt, I'm going to ask Georgios to say a few words in a second. But yeah, I mean, I think we're very excited.

It's a -- Northvolt a very dynamic company. In combination with our industrial experience, this is I think a very good joint venture.

We talked about €700 million, where 50% will project finance it, you can work out some of the numbers. But, we've just come up with call with Northvolt.

I think the teams are working really well together, we've got good momentum behind the creation of that joint venture. So Georgios, do you want to say a few words?

Your first impressions?

Sure, thanks Andy. Oswald, thank you for the question.

Yeah, as Andy said, it’s on the high end, the €700 million investment 50%. project finance.

In terms of, we're now at prefeasibility study so it's early to talk about returns. But in terms of offtake, one thing I can tell you that as soon as we announced it in December, the phone started ringing.

So it's not going to be -- and reputable companies interested in in our offtake. So we don't see an issue in securing offtake for this facility, particularly with what's happening around the globe with lithium hydroxide prices and demand.

So we probably you probably don't track the lithium hydroxide prices, like we said the oil prices and gas prices. But the all raw material spodumene is gone from about $400 a ton to $2,400 a ton.

And the lithium hydroxide product from around I think, $8,000 to $40,000 a ton. So this is extraordinary what's happened in the commodity mark around lithium hydroxide.

A market where European demand is going to grow tenfold for 2030. So this is this a business that's really exciting to us.

And I think we're entering it in exactly the right moment.

That's great. Thank you.

Thank you for your answers.

Good afternoon, all. Thanks for taking my question.

Maybe three small questions, please. First, the discount to growth your oil and gas realized price sale, can $10 below the discount price?

I was wondering myself now that you can increase your gas price -- gas realization price in Brazil. What kind of discount should we expect, should we expect it on remain on 10 thereabout in the coming quarter or year?

Or do you expected to go back to the ones that you were previously providing us which was minus $6 minus $8 per barrel? Second question on the refining.

So, clearly you are benefiting from the relatively high refining margin environment. From what I understand and please confirm, if I am not right, you clearly take advantage of the fact that your gas supply contract is early in your refining business so, this is the kind of helping you against the relatively high gas price.

But I also would like to understand, CO2 costs are increasing quite a lot. How or where can I see that in in the division impacting the cash cost low?

And finally, just on the shareholder remuneration distribution. So you've announced €150 million share buyback.

Should we consider that you will buy roughly 69% of those €150 million in the market, given that Parpública and Amorim Energia requirement you will directly buyback some share. Or should we expect Parpública and Amorim Energia to grow their -- let's say their shareholding interest in Galp Energia and then you realizing €150 million was shy back directly for the market.

Thank you.

Thank you, Medhi. So look on the first point around the discount to Brent.

And you asked the question, will we provide our guidance on the discount to Brent, because we're now managing to market the gas in Brazil at a higher price than the regulated market with fresh breath? The answer to that is, yes, we are.

So we're going to go from an $8 to $10 discount in 2021, to $6 to $8 going forward, because we're actually realizing higher gas prices as we market the gases ourselves in Brazil. So that's really good news, of course.

I will hand over to Thore on refining, perhaps also to reflect that actually one of the measures and I talked about how we're going to reduce our own use of gas because of our sourcing restrictions. And one of the things we've done is we've been firing hydrocracker on NAFTA, which reduces our own gas consumption.

But Thore, I don't know if you want to explain anymore on that.

So Medhi, thank you for your question. So what would you do can expect is that are refining margin is actually including the impact of the CO2 costs, it is actually already in the baked in.

We expect that to be in the order of $2 to $3 per barrel. Now, right now, with the hydrogen prices closer to 3.

As -- and they have said we had a cushion or have a cushion in the refinery with respect to gas prices. And actually, in order to further optimize that, we have found that we can actually run very successfully.

Now our hydrocracker are really on NAFTA, which is sort of helping us with the utilization of it actually seen that we can even lift production to somewhat more than 100% of capacity. So that's how we are hedged on that.

I'm handing back to you on buybacks.

Yeah, I think -- Medhi, I think I understood the question. I mean, so we have no arrangements with Amorim Energia and Parpública on the buyback arrangement, we are going to provide €150 million in the market on the open market.

And we're going to do it in a very measured way. And I think less than 20% or 25% every day of the market.

So very, very slow over the year starting after the AGM after we have to get approval from the AGM to cancel the shares. So we're only going to start the buyback after the AGM.

All right, thank you very much. Maybe just one follow up please.

Can you tell us yesterday, what's your recycling margin, please?

So we have started the year and good on refining, Medhi. And we actually are year-to-date somewhat above 5.

But it's early days, as you know, and it's too early to elaborate more. But -- so our guidance remains 4 to 5.

If I just may add one little thing, on the differential side, Medhi, actually, our performance on oil last year was actually better than the year before. So the qualities that we are delivering from Brazil is continuously being more appreciated in the market.

Our energy management teams are actually doing a very good job also now to optimize on the buying side. We see now a new buyer universe that is also opening up.

So the big drag, and the reason why it looks so when we realize base looks so tough is because gas prices had a big impact on our 2021 results. But as of the January 1, we are handling these volumes ourselves and expected to have a better realization also on the gas side.

Thanks.

On the CO2, the CO2 prices are baked into that refinery margin and operating costs are $2 a barrel. So we have a good margin in today's operating environment.

Thank you very much.

Hi, good afternoon, and thanks for the question. And also the new format much appreciated.

So the two questions, please. First is just on the buybacks, what was it that convinced you to go down this route rather than the variable dividend?

I mean, it was long decision on that. But what was it sort of clinched it for you?

And I just I'm crystal clear on the practicalities of the program. So is the idea that every year at the full year results you announced the share buyback and then for the AGM, and other?

In other words, we're going to get regular updates every quarter, it'll be sort of always announced that the full year results. And then my second question on the renewables capacity targets you put in.

They look to be a bit lower than you put in at the CMD over that sort of ‘23-‘24 time period. So maybe you could talk about what's driving that reduction.

And also why your confidence are still hitting your medium term targets there. Thank you.

Yeah, thanks, Joe. So in terms of the -- yeah, in terms of the why we moved to buybacks from cash.

That was a result of actually very extensive content quotation with shareholders. Since I came in as you know, we went Capital Markets Day in June.

And then, I've been on the road talking to all the shareholders. And the majority were keen on buybacks.

And so I think we spent our time we consulted and came back with that as a decision. And we will calculate this on an annual basis and we won't have to wait necessarily for the AGM to agree to cancel.

I think we'll get an authorization to cancel a certain proportion of the shares over a period of time. But yeah, it will be based on year-end results, to understand how much we'll buy back in the subsequent years or year.

Renewables I'm going to ask Thore talk a little bit about what's happened in a bear market in in renewables and particularly in solar.

Thanks, Andy. Thanks, Joshua for the question.

So yeah, we have seen some slowdown in capacity deployment. Absolutely in 2022, we see 400 megawatts coming online.

But we also see about 800 megawatts to reach ready to build. So that will be let's say our -- that will fill out appetite for 2023.

We have -- we're confident, we have confidence in the portfolio that we have and its executability for the interim target of 2025. But we're also going to look for other opportunities for early stage projects in order to develop more optionality for the execution.

If I can just add. I think it's an Iberian wide how long it's taking to get the permits from the authorities.

And that's because they've got an enormous backlog. I think they something like 330 gigawatts of proposals.

And that actually is leading to a delay to get these projects going. So I think that's why we've seen this slowdown.

Understood. Thank you.

Hi, thanks for taking my questions. Two please.

Just coming back to the policy, the shareholder distribution policy, I just wanted a quick clarification, does the adjusted operational -- operating cash flow on which the distributions are tied to include the cash flow of the renewables on a pro forma basis? Could you talk about the CapEx and the financing costs, interest payments of the renewables business on a pro forma basis as well?

And given that this business is equity accounted, could you provide some guidance on the dividends from this -- from the business in the near and then medium term? The second question was on the production outlook.

I just wanted to check whether the production outlook that you have laid out now includes the new plan of development for Tupi and Iracema within the numbers as well?

Thank you, Sasi. So I'm going to ask Filipe to answer the first one.

And then Thore to answer the second one on production.

Hi, Sasi. The OCF that guides total distributions up to one third is the consolidated OCF.

So it will not catch the cash flows from renewables, it will catch the dividend stream that you'll see under the associate slides in the cash flow. So, it is not the pro forma number that you have.

So for ‘20 -- the guidance we have for 2022 is €2 billion and that is a consolidated number. So we have a lot more cash that is unconsolidated within that number.

On the P&L, what you see, and P&L does not drive the guidance for dividends. On the P&L what you see is the pro rata share of the net income of the solar companies.

Thank you.

And thank you, Sasi. And then with respect to the POD.

Yes, our outlook including the expected input from or effects of the POD. But remember, this is -- the pod has actually a short term and medium term and the long-term element.

The short term is very much infill wells, they will be unveiled in the next few years, two years actually. And then we have more sort of medium term that is then looking into what other sort of development opportunities are there of this field.

And that is of course very much depending on the discussions that we will have with the authorities in Brazil. We see real exciting opportunity for harvesting much more out of this fantastic asset and that is what we are going to continue to do with Tupi and Iracema.

Thank you.

Hi. Good afternoon, and thank you for taking my questions.

The first one is a bit more broader. I think if I look into look at the share price over the last year, only that has not benefited from the rerating of the sector as some of your peers.

And I was wondering what you think the market is missing? And would you be prepared to do something different?

Yeah. Look, so -- and I would agree with you that we have our share price has gone sideways.

And that's with the macro that is and our cash generation that we're delivering at the moment? I think that's -- and that's why patchy buybacks are quite good thing, because we think that the share prices is undervalued.

Look, I think the market -- I think we clearly were a company that was growing had a very aggressive upstream production growth outlook. Clearly, with the LNG in Mozambique being delayed, we've had to moderate some of those production targets, but still for any upstream business, as you all know, that 25% increase in three years’ time is an enormous growth for an upstream business.

So, I think that's still -- I think that will come as we get closer to that moment of startup. I think the market will really appreciate that.

But what they, I don't think fully appreciate it is the scale of our investment, the relative scale of our investment in the new energies businesses, and also the transformation of our commercial business. These are going to deliver real significant cash flows certainly in the second half of the decade.

So, I think the market will appreciate that. We're not going to change track, we have a very clear plan.

We clearly are enjoying the macro at the moment. We have a great upstream position.

Our energy management business, as I alluded to is I think, going to come into its own, particularly when we start receiving the LNG volumes from venture LNG. So, I think there are a number of catalysts that we have going forward.

And I think once you do the numbers, and you look at 2025 you'll see that this is a growing business that is able to yield and decarbonize at the same time. So I don't think there's anything else that you really want from a business like ours to have those three things captured,

I was thinking maybe whether it's time to make more radical choices. And as I mentioned, we have a greater green energy business, whether the time to take opportunity or the oil price and start monetizing the upstream to accelerate the development of the of the green energy business.

I think, you'll be surprised if we weren't continue to look at options where the value of our assets were. But, this is not a point to give any guidance on that.

We have a very experienced gentleman around the table here that can point us to all sorts of opportunities in that renewable energy space. And yeah, we will look forward to continuing to deliver a good growth business that decarbonizes yields.

And we have a quite an organic strategy today, but we continue to look at what inorganic opportunities there may be.

Okay, thank you. Maybe second one on the dividend.

Your progressive dividend, I believe you indicated 4% growth. How do you manage to come up with that number?

And what are the inputs that went into the calculation into the guidance for 4% growth in dividend? Thank you.

I think this was -- we reflected on wanting to show that we've got a progressive dividend policy to that shows that our base will grow in whatever macro environment. And recognizing if you payback shares will have more capacity in order to reward or increase the base.

So this is a balance between understanding how much -- how many shares we were going to take out of circulation, how much we could grow the base and what overall dividend kind of contribution that we can afford from our from our financial framework.

Thank you.

Yes, good afternoon. Thank you for taking my question.

It's only one. On one of your slides of sources of uses of cash, you're showing as you leveraging for 2022 of somewhere in between €700 million and €800 million roughly.

So the question is, with all those opportunities that you were mentioning organic, inorganic, project financing on the Northvolt deal and so on. What is the kind of optimal leverage for a company like Galp going forward?

Thank you, Alejandro. I'm going to ask Filipe to answer that one.

Alejandro, so the target is onetime net debt to EBITDA, that's where we would like to be. And distributions will be sized in such a way that we're always up close to onetime net debt to EBITDA.

Now the leverage that you see for 2022 in great part is also to make up for the increase in indebtedness that we have in 2021, with the cash margins related to derivatives. So you would expect us to compensate that miss in net debt in 2021 that should be covered in 2022.

Now, the business plan is based on 75 Brent. So there could be OCF would go up with a higher Brent.

So distributions would go up to one third of OCF. So that is quite mechanical.

Thank you.

Okay. As a follow up, so when you get to the end of 2022 with those numbers that you're providing, you're going to be well below that onetime net debt to EBITDA.

Because also your EBITDA is going up. Yeah.

Correct. That is the expectations, in which case it will be one third of the FFO that will drive distributions of --- OCF that will drive distributions.

Okay, great. Thank you.

Hello, yes. Thank you very much for taking my questions.

Two please. The first one is a follow up on the FPSO utilization rate.

You mentioned earlier that we should aim for 70 -- sorry, 85% utilization rate this year? What will you guide us for beyond 2022 assuming let's hope so that the COVID situation does not impact us too much anymore, that you have caught up on your backlog of maintenance, that will be my first question.

And then a second one on renewable power. Assuming the €150 per megawatt hour that you use in your short term outlook, and the deployment plan that you have.

Can we expect Galp to receive a dividend from this business? And if you could maybe tell us a bit more about the amount that we should be considering?

Thank you very much.

Okay, on utilization. So we talked about 85%.

As you know, these are aging FPSOs in this environment. We're not the operators.

So, I have to say that one of the things we're working on is working very closely with Petrobras on how to improve it. But sorry, we don't give any guidance on this.

But I think these are -- clearly there are a number of things going on these FPSOs. One is, we were having to maintain them and make sure that we keep the asset in good conditions.

We have talked about issues with the risers. And that's an ongoing inspection and replacement program, as seen fit.

So all these things are multiyear things that go forward. So we're not in a position, I think to give any guidance, but what we are doing is working very closely.

Actually, we're bringing technology into Petrobras to help them with some of the inspection regimes. But I don't think we want to give any further guidance.

I don't know if Thore you can?

Correct. Andy that we will not be.

But 85 utilization rate, what we have guided you for 2022 I think is also fair going forward, that you use that as the key assumption base. We see -- we work as I said a lot with the operator in order to find continuous opportunities to debottleneck and improve the efficiency of the unit.

And we continue to see interesting infill opportunities, which is also then being pursued in order to maximize the recovery of the field. Thanks.

So Filipe is going to talk a little bit about the absent pro forma OCF, we might see this year and then OIBDA and then do we get any dividends?

So the mechanics are the following. So we -- our projects are project financed.

If cash flows are very strong then we have cash sweep, so we can accelerate deleveraging of those projects. And there is a dividends been upstream to the shareholders.

So yes, on the associates lines, in the cash flow statement, there will be a dividend income. What you don't see here is how quickly we're delivering the asset base.

We also as we do project finance, at the time when the projects are mostly de risked. So we actually fund 100% of the equity upfront.

When project finance arrives, a lot of that money comes back to the shareholders, so reimbursement of shareholder loans into the project companies. And that funding is used not for dividends, but to fund the next project.

Thank you.

I see. Can I Can I ask a very quick other one?

Please.

Yes, thank you. Just maybe in the commercial business, we seen your old products volumes, there are not yet a 2019 level?

Can you maybe give us some idea of how things are evolving year-to-date in this business? And could we eventually see all product volumes back to 2019 level?

Teresa, do you want to answer this one?

Yes. Thanks for the question.

We do still expect 2022 to have volumes that are not at the levels of 2019. In the last week or so, and the year-end January do show encouraging growth in volumes in key B2B sectors, namely aviation, marine and ground transportation, but not yet at the levels of 2019 and to 2022 will still be a year of recovery in volumes.

Great, thank you.

Thank you very much. And two questions, if I may.

The first one relates to the most recent auction in Brazil, where other companies bid for -- is taking Sepia and Atapu and you decided effectively not to increase your stake there. And I was just wondering if you could perhaps comment on how you thought that auction went and some of your reasons behind it.

And then secondly, if you could give us some ideas of how the progress is going with the Bacalhau development? I believe the operator Equinor was talking about the being 50% complete?

And what are the key milestones from here? Thank you.

Thank you, Michele. So I'll answer on the on the Brazil bid round.

It was very tempting, it was very attractive asset. We know exactly it very well as the only other partner in that with Petrobras.

So we understood the potential of this of this resource. It was a very competitive tender in the end.

And I think well above the minimum bid rate. But I think our assessment was we have a very clear strategy.

We have a strategy where half our capital, over a period of time is going towards these zero and low carbon sources of energies and products. And therefore, although attractive in our balance of our strategy, we really felt that this was not a moment to deepen our position in that asset.

But obviously, to put the cash towards basically a very future looking portfolio. And, clearly it was not an easy decision for us to make, but I think one that reflects that we are very serious about our strategy going forward.

If I can ask -- because actually, we have a strategy that actually has upstream growth. So it already in the funnel, we have 50 years of 2P and 2C resources of the current production rates.

So we have we have plenty in the hopper and one of the big that’s there hopper is Bacalhau -- sorry, talk about how the progress is going.

Thank you, Andy. So Bacalhau is actually progressing well.

The next big milestone for this project is now to start the drilling and completion campaign in the second half of this year, that's going to be an important milestone for us in order to make sure that we have sufficient production and injection capacity available at the start of the field. As you know, you might know, on Bacalhau, that will be full gas injection from day one that is not the field where we're exporting the gas, but actually injecting it straight back into the field.

So to have the necessary injection capacity will also be important. And therefore, so far the product is developing well, thanks.

Supplementary on [Indiscernible] plus. Sepia clearly has an FPSO is now online and performing really well.

The next step there is another FPSO to be built. And actually, when you look at those cash flows going forward, you don't get your money back until well into the next decade.

So, this is a real decision where is Galp going to be in the 2030s and 2040s? And was this a strategically a good move for us to make or is this the moment for us to be to be putting our capital elsewhere?

Yes. Good afternoon.

Thank you for taking my questions. My first question is on Namibia, following the recent discoveries of Graff 1 basin that we can do for block PEL 83 in Namibia.

And maybe if you could give us some color on any potential drilling campaign, and if it proved to be successful, do you plan to develop this block? Or would you be looking to potential business here?

And my second question on apologies to come back on gas realization prices. As you mentioned before the opportunity to improve the differentials in gas field, following the gas market realization.

So perhaps you could elaborate on what level of gas price and for that they are achieving and what would be the tenure of these contracts? What is the benchmark?

And maybe what is the percentage of the gas you produced which is being impacted? Thank you.

Ignacio, I think I got the second question. And but let's go through Namibia first.

And yeah, we're very excited about what's going on around our PEL 83 block. But Thore perhaps can give a bit of color to that.

Thank you, Andy. And thank you, Ignacio for the question.

Yes, we are really of course excited. This has been a position that we've been holding for a while.

We have had big faith in Namibia and actually see some very interesting structures. The Graff well, and the Venus well is next door neighbors.

And for us, this is taking away one of the key risks that was actually working petroleum system. This fact that these discoveries are made, it's very good proven for that the petroleum system is working.

And it's actually leading us as we speak to upgrade our probability of success quite significantly on these two fields. So yes, I can tell you that there's a lot of happy faces in our aspiration department these days.

And as you perhaps noticed from my presentation, we have also two other very interesting shots in the exploration magazine this year. We have drilling as we speak in the Campos basin in Brazil, so called Block [ph] prospect.

And later this year, we'll also be drilling in São Tomé e Príncipe something that we actually think is quite interesting. Both of them with quite significant Gulf positions.

And in São Tomé e Príncipe, we actually hold 45%. And in Namibia, we actually have 80%, of validators.

So it's an interesting position to have right now. Thanks.

And I think you were talking about the gas contracts we have in Brazil. Actually, we've done six different deals already.

And we're only seven weeks into the year. And we're marketing our own gas.

We're not committing at all, we're only committing between a third and two thirds of our gas production into those markets. But we're also marketing on behalf of others.

And we're getting as you might imagine, we're getting really attractive -- well, much more attractive than the past gas prices. There are seven companies marketing gas in Brazil.

And we're one of them. And we're I think very proud that we've set up that capability.

I think you will see those numbers coming to the bottom line. So I'm through the upstream results, but I don't want to reveal really the length of those contracts or the price lines.

But what I can say is, this is a reasonable amount of cash that we're generating from these new contracts.

Very clear. Thank you.

Hi, good afternoon. My question is on renewables.

Just a quick refresh on what should we expect from Galp in terms of inorganic movements? We have seen last week the news that ACS is legally seeking a buyer for Zero-E the renewable subsidiary where you hold a 75% stake.

So could you please comment on this on your intentions to this company? And also in terms of on the acquisition side?

What -- I mean, should we assume that your inorganic moves will be mostly early stage portfolios like you mentioned? Or perhaps more aggressively to scale up your portfolio?

Would you perhaps consider merging for instance, these JV with ACS with other Spanish listed player? Could this be a possibility for M&A or would you rather do a corporate move outside Iberia?

Thank you.

Thank you, Petro. Let me start that, and then I'll hand over to Georgios.

I think the first thing to say is we have 4.7 gigawatts now in our funnel. And, we've got a line of sight to build out their capacity.

And as you know, we've added Brazil this year to that portfolio, but also deepened also in Iberia. Now we get into these projects early so we can get the biggest return from those projects.

Clearly, we will continue to look at in inorganic, but we're not giving any kind of guidance on that today. I have to say, I think we've got a strong portfolio and we've got one that gives us some visibility to our 2025 targets.

I don't know, Georgios, you want to you want to add to that. I mean, we do continue to look and we will look to rotate our own assets, as we've said in order to maximize the equity value, but also perhaps mentioned a little bit about ACS and Zero-E and what we understand from that announcement.

Thanks, Andy. So on the organic versus inorganic, we are growing and buying early stage portfolios, I mean, I consider that mostly organic.

So this is something that we will selectively continue to do as I was saying before. Because it adds optionality to our deployment through the years.

On ACS, we don't want to comment on announcements of others. But we don't see any let's say impact on our portfolio in our relationship with them.

Thank you.

Great. Thanks for taking the questions.

Two follow up, if I could please. First, just on capital allocation.

It sort of felt to me based on the sort of the earlier answers around how Galp looked at the Brazil bid round. In recent months, there was perhaps sort of some degree of constraint in terms of how that was assessed from a capital allocation perspective, given the degree of allocation that you're putting towards the low carbon piece over the medium term.

So I wonder if you could talk a bit about how you think about the company's ability to be agile or nimble around capital allocation over the medium term, and particularly if oil and gas prices and the upcycle around that sustains over the medium term, the extent to which you can respond to that. And then secondly, we've obviously seen sort of signs in some segments of cost inflation reemerging in the industry in recent months back allows obviously, a very important project for the medium term for Galp.

Can you just talk about sort of post the FID not just the sort of the drilling and completion side, but the extent to which the contracting is locked in around that project for the next couple of years? Thanks.

Yeah, thank you. And so -- can I just -- to the point of agility, I think what we want to do is keep up and to try.

And say we've got 50 years of 2P and 2C resources, a current production rates. We're growing our Upstream production, we're committing quite a lot of capital towards that.

We didn't see any reason to spend quite a bit of money on getting more resources in that funnel that we're not even deliver cash flows or get our money back until well into the 2030s. And, okay, the price is high today, but we can't predict what the prices are going to be at the end of this decade.

So I think that that was really us signaling that, yeah, Galp is a company that is determined to decarbonize its portfolio over time. We have to make some hard choices.

And we made a hard choice so that we could actually, reserve a say the firepower for things that are lower carbon, in due course. Now cost inflation on Bacalhau, I think, Thore, perhaps an update on how we see costs in the Bacalhau project.

Thank you, Andy. And if I may just add to the first resource, so that.

We have a very, very competitive upstream portfolio. Remember, or breakeven is actually below $25 per barrel.

So anything that wants to get in has to be really damn good. So there's also a lot of competition to get into the Galp portfolio.

When it comes to Bacalhau. We believe that Bacalhau is actually in a very good position.

We have TPCs [ph] locked in. And therefore we have very limited exposure versus cost inflation on Bacalhau, which is of course is very important view for us.

And the same goes both for the FPSO and also for the SURF contract. So as we see it as of today, we are in a quite the good and robust situation when it comes to Bacalhau.

Thank you.

Super. Thanks, gents.

Yes. Good afternoon, everyone.

Just two quick questions on my side. The first one is related to the production costs on upstream.

It has declined by roughly $0.2 year-on-year. And I was wondering where you can tell us how you are expecting that to move in the next year -- for this year, particularly, but also probably you are able to give it little bit addition going forward and even when Bacalhau starts that will be great.

And the second question, I'm sorry for coming back to this is on operational cash flow. And I want to understand the guidance for this year, the €2 billion.

Is that that reported figure i.e. that's a figure that exclude any kind of working capital inflow to be recovered from the losses that you have had in 2021.

Because I might recall that the you have been highlighted that part of the working capital impact should be recover as soon as the gas contracts are finally delivered on physical terms. So I wanted to understand that €2 billion basically assumes any work separate capital inflow or not?

Thank you, Pablo. Can I ask Thore to talk a bit about the production cost guidance and Filipe on the OCF guide?

Thank you, Andy. And thank you, Pablo.

When it comes to production costs, actually our production costs in the fourth quarter was unusually good. There's a one-off effect in the fourth quarter that is related to the fact that we're transferring assets from our Dutch BV to Brazil that helped it.

So going forward, where we are guiding you is that we continue to say that you should expect it to be below $3 per barrel. That is the guidance we have.

And when Bacalhau that will clearly also sustain this level. So continued very competitive OpEx from the side of our Brazilian business, thanks.

Pablo, the best ways to go to our Slide 29 on sources and uses of cash, you'll see the €2 billion is the clean OCF. And we're guiding no for OCF because it is clean.

So we're taking out every variation in one-offs our working capital inventory affects. So €2 billion is a clean number.

And yes, on top of that, there will be a significant cash inflow from the 2021 fiscal year, but that will not drive. So only OCF will drive the distribution policy.

Thank you.

Hi. Thanks for taking again my question.

A few follow up questions. First and can you please make sure I understood well, you said earlier or regarding the share buyback, that you will realize whether the market that you will do it slowly.

But you also said that it will be 20% to 25% of the daily traded volume. Did I understood -- did I understand well or no?

First question. Second question.

So you have been impacted by the €605 million working capital outflow due to gas derivative in 2021. And how much are you confident?

How are we confident that we'll get back the €605 million yours in 2022? Have you been approached by some of your customer telling you he can't pay it, because it's too expensive?

We can't pay for the gas? We want to renegotiate the gas deal EBITDA because too expensive?

Or do you consider that the demand is pretty nice and you will get back to your €605 million. And finally, so you can make it quite relatively on your utilization rate of 85% for ’22.

But I probably missed it. What was the average utilization rate in 2021?

Thank you.

So Medhi, let me start with the first. I don't think we caught the last question.

But firstly, on the buybacks. So let me -- yeah, so we were actually looking at about €1 million a day, which will be about 3% to 4%.

So well below what I what I mentioned before, so only 3% to 4% of share acquisitions in the market on a daily basis. Filipe, can you talk a bit about the working capital outflows

Yeah I guess maybe -- so we're highly confident that we're getting the money from the clients throughout the year. And if I understood your question.

So I'm putting in an extreme scenario, if clients were to stop buying the gas from us, then we could place the gas in the spot market. So financially, this is not going to be a risk for Galp in 2022.

And I just ---

Can you ask your third question?

Yeah. Just you said that, your upstream or your FPSO utilization rate in Brazil should be around 85% in 2022.

Can you please remind me what was your FPSO utilization rate in Brazil in 2021? Thank you.

Thore, can you help us with that?

So the effective rate for last year was in that order? It was actually around 83% Medhi.

So that's where as we expected to come up somewhat. But 85% is what we are guiding you for next year.

Thanks.

Thanks a lot.

Hi, thank you for taking my last question. Regarding 2P oil reserve, you mentioned were up 11%.

However, 2P plus 2C reserves are down 8% percent year-on-year. So I was just wondering why this reserve have dropped?

And maybe if you could tell us what would be the recovery factor assumed at Tupi and Iracema? Thank you.

Ignacio, can you please repeat your question please?

Yes. You mentioned 2P oil reserves were up 11%.

However, 2P plus 2C have dropped 8% year-on-year. So I was wondering why this has dropped?

And then my second question would be on the current recovery pattern assumed at Tupi and Iracema.

Okay, I think Thore the question is about the reserves and adjustment with reserves and the recovery factor we're expecting from Tupi and Iracema.

So we are not publishing in details reserves and resources and what we have been the changes with the singular the different fields we do that on a portfolio basis. But as you correctly pointed out, so the oil reserves 2P has increased in Galp with 16% last year.

There was a decline on the natural gas reserves. That is really due to the fact that there is -- we have the [Indiscernible] that is doing the auditing of our reserves.

The fact that we now have a gas contract in place in Brazil, requires or stand to book the reserves according to what the gas sales contracts are stipulating and that led to a reduction on the reserve side. So on overall the 2P increase in Galp last year with 2% versus when you looked on gas and oil in totality.

When it comes to the recovery factor, I'm not 100% sure what I got your question. We continue to work on improving the recovery factor on 2P.

And that is a very important reason for this new plan of operation and the development that was delivered by the end of last year, which actually sort of really targets to continue to improve it short term by more infill wells, longer term by looking into further development on the field. And even more than that, also looking potentially field life extension.

That is no discussions that we have with the authorities in in Brazil. Thank you.

Thank you for the update. So a couple of quick ones for me on the finance Sines HVO project, so targeting FID in 2023 are still looking at startup in 2025.

And can you comment on the progress you're making on the waste feedstock sourcing strategy? Thank you.

Thore, can you help us without?

Thank you, Henry, for your question. Yes, we are very excited about this HVO advanced biofuels project that we already currently doing the feasibility studies for as we speak.

This is going to be one of the elements in our portfolio to turn Sines from a gray refinery into a green energy park. Waste feedstock sourcing is going to be a key element and we are actually as we speak in direct negotiations with partners that we are looking to join into this this product to make sure that we do the sourcing in the most optimal way.

I cannot disclose more of this at this stage. But take it for granted that feedstock sourcing is an important part of this project.

Thanks.

Thank you. I was wondering what are the main fields or FPSOs in Brazil that are declined.

And which ones are still at plateau? And then following on that what is the average decline rate across your business in Brazil?

And then I had a second question, in terms of your refining margin, what is included in terms of energy costs? And you have your guidance for $2 per BOE for refining cash costs in 2022.

Could you break down the components of that? And do you still have a long-term target of $1.07 per BOE for refining cash costs?

Thank you.

So, if I can first -- I'll just look -- firstly, as you might imagine, with our Brazil assets of essentially showing roughly flat production going forward. Because what we're wrapping up a few fields like Sepia and the Ara Fields [ph], and clearly with Tupi and Iracema, we're seeing some declines.

So overall, this is a mixture of some of your ramp ups, some infill drilling, and some decline keeping overall flat. So I don't really want to get into the details of each individual field.

But we see our Brazil assets delivering, as I say. Flat until Bacalhau comes online when we see the 25% increase.

Anything to add on refinery margins, Thore.

No, I think we have said what we want to be. We are not wanting to discuss the details and how our OpEx is really is composed, Michael.

That's not the sort of the level that we are disclosing at this level. However, what you can expect is that the $2 per barrel is a robust target.

We are working of course, to continue to optimize it. But as Andy said in his opening remarks, we did have operational challenges at the refinery last year.

So a very important part of our recovery is to make sure that we are now doing the maintenance and that it was long overdue in the refinery. And that's why we are looking for $2 to be a very robust guidance for you going forward as well.

Thank you.

Thank you.

Can I just want -- because some may be confused on what I said about the buybacks. And so the 20%-25% there's -- you have to be below that for the safe harbor regulations.

So that's why I mentioned that number, but the actual number is between 3% or 4%. It’s well below where the regulations were stipulate.

So I just want to make sure you all were clear about that. I tell him

Thank you for clarify, Andy. I think he sends the session for today.

Thank you for participating. Hope to see you all soon.

Bye-bye.