Galp Energia, SGPS, S.A.

Good morning, everyone, and welcome to Galp's First Quarter 2026 Q&A session. I'm joined today by our Co-CEOs, Maria Joao Carioca and João Marques da Silva as well as the full executive team.

But before passing the mic for some quick opening remarks, let me start with our usual disclaimer. During today's session, we will be making forward-looking statements that are based on our current estimates.

Actual results could differ due to factors outlined in our cautionary statements within the published materials. Having said this, Joao, would you like to say a few words?

Of course. Thank you, Joao, and good morning, everyone.

Galp had a strong start to 2026 in a quarter marked by higher volatility and geopolitical tensions in the Middle East. Galp has no direct exposure to the region.

Our operations are mainly Atlantic-based. Still, we are closely monitoring developments, and the impact can be felt globally.

Due to disruptions across parts of the value chain, our Midstream team has actively managed crude and refined product supply, well done. This allowed us to so far to secure a healthy position for Galp and for Portugal.

In our Commercial business, we have also reinforced campaigns and discount mechanisms to help our customers to manage the impact of higher fuel prices. And overall, during the quarter, we have continued to run our operations efficiently.

In March, our Upstream and Industrial assets showed strong availability, allowing us to benefit from higher commodity prices. Maria Joao, over to you.

Thank you, Joao. Good morning, everyone.

The quarter's solid operational performance that Joao just highlighted flowed through to the P&L and actually further supported Galp's robust financial position. I would highlight the fact that net debt remained stable quarter-on-quarter despite the balance sheet working capital impact from the sharp increase in commodity prices.

We're focused on managing ongoing market volatility and supply disruptions, but this has not at all hindered our continued execution in the strategic initiatives that are currently underway across our portfolio. We continue to strive for both pace and discipline in our execution.

In Namibia, procurement activities are progressing, and that allows us to remain on track to start drilling activities on the next exploration and appraisal campaign by Q4. At the same time, discussions with NV shareholders regarding the merger of our downstream businesses continue to evolve positively.

So we continue to have a potential agreement still expected by midyear. Overall, 2026 is indeed shaping up to be a challenging but also a rather exciting year for Galp.

Operator, we are now ready to take questions.

I wanted to focus on the Upstream business first. I think you mentioned Bacalhau contributed 10,000 barrels to performance in the quarter, which would make the underlying Brazil performance look extremely strong versus recent history.

So I was just hoping you could give us a bit of color there and any context how that's running versus your full-year guidance, that would be useful. And then I just also wondered price dislocations has been a hot topic for April.

Is there any color you could give us in terms of the realizations that you're achieving on your crude post quarter end? And then I guess, on the other side of the same coin, what Refining margins have done since the quarter end?

That would be useful.

Thanks, Matt. Thanks for the question.

So let me try and tee it off with some comments on Bacalhau and I guess, overall on the performance of our Brazil Upstream business. So overall, rather good performance.

I think it maps out against what we had in terms of the guidance we had given. We've given 125,000 to 130,000 barrels, and we've delivered at the very top end of that guidance.

Bacalhau has indeed been a part of that [ up end ] guidance. I would, nevertheless, stress that we're still ramping up the unit.

So it's good indications. We now -- we've had 2 producers already registering significant flow rates, and the third producer is already connected.

And that has indeed been delivering according to our expectations of a good reservoir. But in any case, we're ramping up.

So it's still commissioning. It's still, I'd call them maybe hiccups to expect.

Plateau is still expected later in 2026. So overall, very good indications, good performance, but I would nevertheless remain conservative and remain within the estimated time frame for plateauing and for the overall ramp-up to take place.

So other than that, our legacy business in Brazil continues to perform rather well. You know that there are ongoing works in Tupi to continue to maintain the current good performance of the wells.

You know that this is still ongoing set of partnerships that have been the cornerstone of our performance. So no major comments there, just general good performance.

On the realizations of our different businesses, but I believe your question referred particularly to equity crude. I think, as you know, about 70% of our exports flow through to China.

We, in any case, normally deliver on index to dated Brent circa 2 months ahead. So the fluctuations that you saw throughout this period did not necessarily capture the full breadth of the impacts we suffered.

In any case, in equity crudes, we registered a discount of approximately $5 per barrel. And this just fundamentally reflected the fact that what we were seeing throughout the period in terms of the costs underlining our activity, particularly when you saw it during the period concerning freight costs was indeed a lot of fluctuation and a lot of volatility.

Thank you.

Allow me to complement on the Refining margins, your question. Of course, when we compare ourselves with the highs of March, we are observing an average of between $10 to $12 per barrel.

On the last couple of days, additional volatility, margins increased up to the [ 20s ]. But more importantly, what we are expecting is to operate at full availability during the next couple of quarters.

Reminding that [ Siemens ] refinery outputs are 45% on mid-distillates. Jet will account for less than 10% of that.

And if we look at the downtrend from March, it reflects a bit of margin squeezing by rising input costs, and I'm speaking about utility, freight cost inflation. But we are also looking at some decrease on the oil product prices, mainly on diesel and jet as pricing is reflecting a probable resolution on the conflict.

And finally, Europe margins declined more versus other regions, again, representing a different higher utility gas prices situation. And I'll stop here.

Congratulations for the strong results. The first question is about the guidance of '26.

You started the year with very conservative guidance. If in the current context of higher energy prices, you are considering some increase in this guidance.

And particularly more important, the implications in terms of shareholder distributions, you're expecting some additional cash flow to shareholders driven by these high energy prices. And the second question is about the Moeve joint ventures in the Iberian downstream.

If you are close to closing these transactions, if you are seeing some releverage opportunities in the joint ventures that you are setting with Moeve?

Alejandro, on the updating of guidance, we acknowledge, obviously, that the macro that was underlying our existing guidance is, to a large extent, no longer directly applicable. It no longer holds.

We've seen significant changes in terms of most commodity prices and most underlying adjacent costs. But in any case, what we are at this stage acknowledging is that the situation continues to be of high volatility, way too many moving pieces.

So we don't feel that this is the time to pin down the new guidance. We will be looking and most likely doing so as we publish our second quarter results.

Right now, sensitivities are for us, the tool that's guiding us through the period. So what we're looking is fundamentally approximately numbers that you've seen in the past for Galp, but it's approximately $160 million for each $5 of Brent impact and a bit under that.

But well, if you take each $5 of Refining margin, I'd say that the sensitivity is approximately $200 million. So we're navigating the volatility using uncertainties, and we're certainly looking into what are the underlying large trends in the market to support this.

And then once we see some more firm ground, we will look to revise the guidance. The second part of your question on distributions, I think it follows through from my initial comments.

So again, we will not be revising distribution. It's really early to assess all the full impact of everything that's going on.

So we do see that our distribution policy, the 1/3 OCF in itself already embeds flexibility to capture part of what is the current circumstance. And I think this will give a great segue for Joao to comment next on Moeve, particularly because this business is in itself rather transformative.

Our expectation is that it will be value accretive, and there will indeed be elements of releveraging that Joao will comment on. But those again speak to our not moving our distribution policy at this stage.

Alejandro, well, just giving you some [ sequence ] from Ms. Joao's words, we've highlighted a number of times that both companies are to be designing as self-funded ring-fencing industrial versus retail businesses differences.

At this point, well, I need to say that we've seen a lot of traction in the market. That's what we've been receiving from the investor side, from the financing side and these companies to be independently run with financial flexibility.

Of course, we will be looking at the optimal finance structure and leverage all the way down. So that's what we are expecting.

That's the flexibility that we need to enhance. And you are absolutely right, the macro scenario will, of course, releverage some opportunities.

Two, please. Just the first one is just on Bacalhau.

If once we get to a full ramp-up phase, how should we think about the Upstream sort of DD&A and OpEx per barrel at the blended rate, given the mix of assets there? And second question is just on the Venture Global offtake that you have.

Could you let us know how much of those volumes you've hedged for 2026 and how much is sort of exposed to the upside and widening spreads?

[Technical Difficulty] the low 2 digits. I'm not sure you picked up my -- the initial part of my answer.

I think there was some technical issue here. So I'll just very quickly repeat through.

On Bacalhau, right now, the numbers you're seeing are fundamentally numbers that reflect the fact that we're still ramping up. Now having said this and going straight to your question, what we're seeing in terms of DD&A expectations is in the low 2 digits, of course, once you plateau.

And this should bring us to operating costs that are not too dissimilar to what we have right now, maybe slightly above what we have right now as we truly perform in the upper 2s, lower 3s right now. And what we expect for Bacalhau is to be fundamentally in the 3 to 4 operating cost figures.

I'll let Joao comment on the hedging numbers for LNG.

And Biraj, really quick one. So consider between 70% to 75% hedged on the venture contracts in 2026.

Just building on the last question, I wanted to ask about the Midstream and the outlook there, just given the widening of gas spreads and your ability to capture that. So just talk about, one, how the business actually performed if you adjust out the time lag?

And two, what you're thinking about the outlook? And secondly, I wanted to ask on Refining because you spoke back about some Refining margin trends.

And based on -- I presume that's based on an indicator. I'm curious as to how do those indicators match with what you're seeing on the ground in terms of Refining profitability.

And with the extreme backwardation we've seen, has that had created any disconnect between like on-the-ground profitability versus the indicators you're looking at? And maybe as part of that, can you can talk about the role of hedges and your hedging position in Refining?

Thank you, Josh. you should consider on our latest guidance to our Midstream above 500 million into 2026.

We still see some supportive but narrower gas spreads. Consider that the trading gas is contributing around 70% of our total performance.

And that largely, as I've just mentioned, a large portion of that is already locked for 2026, around 70%. Of course, we have some flexibility on the portfolio, and we have an increased footprint in Brazil.

And that's basically what we have. On the Refining side, our crude procurement is based on the physical products.

And you know that -- well, we have mainly selling products at the market condition in the Iberian Peninsula. Of course, we are long on the gasoline side, and that's one of the products that we are long in.

But namely, we are counting on a fully operational refinery to capture the market conditions, and I'll stop here.

The first one, thinking about the recent view on onshore wind, I was keen to hear more about the rationale to increase exposure in renewables at the moment, how to think about the long-term positioning in this division? And if we should be expecting more opportunistic deals like this one over the coming quarters?

And then secondly, going to your Commercial segment, I know that in your opening remarks, you commented about campaigns and discount mechanisms to move the impact of higher prices to consumers. I was keen to see if you are seeing some sort of slowdown in sales, even though you have implemented those measures, or not so far?

Thank you, Guilherme. Maybe I'll start on your second one.

And it's true, we are observing different behaviors on the Spanish side and on the Portuguese side. Of course, the different framework that the Spanish market has changing prices on a daily basis, influences demand and pricing in a different way.

On the Portuguese side, on the retail -- namely on the retail, we change -- we have weekly prices. And those discounts and those campaigns are reflecting an additional help that we think our customers need today.

That's why we've launched the recent campaign on the [ Mundo Gulf ]. But more than that, since early this year, we've started a more broader campaign cross-selling oil, gas and power and also in the retail side.

We have observed, namely in March, an increase on the volumes. And it was like a push before the prices going up on the Portuguese side, and that's something very normal.

That will be, of course, neutralized on the April volumes. It was more on the Spanish side, if we compare the two markets, the Spanish market, namely on the March volumes, had a more substantial increase than the Portugal one.

But of course, we are operating in a high prices context, and that's something that will affect the average ticket volumes that we have. Substantial contribution from the nonfuel business also around 22% of the overall Commercial business.

Going back to your first question and on the offshore, on the wind rationale and thinking ahead, I need to tell you that, of course, this recent acquisition allows us to have a much more balanced portfolio. Wind now represents around 25% of our generation mix.

And of course, if we think further, it will enhance eventual long-term strategic optionalities and partnerships that we may have. I need to remind you that we are challenging -- almost every day, we challenge ourselves if we are the best owners of this business and of course, if we have the best structure to manage this business.

But all in all, we are trying to diversify and to optimize our Renewables business, and that's where we stand today. And that's where we will be standing on the next couple of months.

I had two, please. The first was in Refining and getting back to the hedges.

I was just wondering if you could further elaborate on your hedging strategy in Refining. It would be helpful to understand the rationale, the hedge profile for the current year and into 2027 and the type of hedging structures you're using there.

The second one was on Bacalhau and the ramp-up. I was just wondering if you could comment on the cash taxes paid there and the impact that this field has at the group cash tax rate this year and for 2027?

Thank you for your question. So let me maybe complement what João has already shared with us on our hedging strategy.

So we have hedging strategies in place for both Refining and Midstream. I would highlight the fact that there's no hedging in place for Upstream.

But on Refining, in particular, which I believe was your question, the policy we have -- and again, this is a hedging policy that's been syndicated with the Board. It goes through Board oversight.

It goes through all of our risk management and internal control processes. So it's under strict limits and triggers.

Now the limits we have on board right now, the ones we're acting against are for Refining, circa 1/3 of our throughput. So if you look at what we have in place right now for 2026, and that's fundamentally flat throughout 2026.

What we have in place is about 28 million barrels. That's locked at approximately $8 per barrel, again, flat throughout the year.

Into 2027, we don't have any significant positions. We don't have any hedging into 2027 for Refining, again.

Now on Bacalhau, the regime under which Bacalhau is, is still a shared regime. So it's 50-50 between concession and PSC.

So that gives us a relatively benevolent tax regime vis-a-vis the remaining assets we have in Brazil. So we acknowledge that this is overall a lower SPT rate than what we have, for instance, in Tupi, and that is going to be obviously a part of what we believe will be the approximately 400 million of OCF that Bacalhau will be delivering once it plateaus.

Congratulations again for the strong performance. Two questions, if I may.

First, on exploration, it's going to be very exciting in Q4 in Namibia. I was also wondering if you could update us on your thinking about Sao Tome and the attractiveness of that basin.

And secondly, I wanted to come back to the carry that you're getting for -- in Namibia for both exploration and then the Mopane development and how that is likely to be accounted, whether that will be -- effectively, whether your CapEx will be net of that or whether that will be considered as a financing and the gross CapEx will reflect the full spend on Mopane?

Thank you, Michele. So on exploration, I know that exploration is all that the industry is talking about these days, quite a change from a few years ago.

But on exploration, in particular, we are very focused on Namibia right now, as you well put it. So we're trying to make sure that all the conditions are in place and everything is going according to plan to a large extent.

So we do expect to have news towards the end of the year. On Sao Tome, as you know, that's a much earlier-stage basin.

So nothing too significant going on here. So it's still in our forward-looking plans, and there are no major developments in recent days or recent times that I would highlight at this stage.

As for Mopane carry, how will you reflect it, I'm afraid at this stage, that is still being fully assessed with our auditors and our accounting. So of course, we'll be looking for a very clean disclosure.

And so ideally, we would be reporting CapEx just for that component that reflects our responsibilities once the deal is closed. So once that is closed and confirmed, we actually hold 25% of full responsibilities, and that will be what we will be trying to show as explicitly as possible in our financial statements.

The exact way in which we'll be doing that is still under discussion, while the deal isn't fully closed yet. So we're still waiting for Namibian authorities to close that component and then for the GOA to be fully detailed.

So we will get back to you on that, of course. But for now, it's the 25% financial responsibilities, and we will be showing that through our accounts.

Most of mine have been asked. I'll just ask a couple of follow-ups downstream related.

I think you mentioned earlier sort of a near 10% jet fuel yield that Galp can generate at Sines. That's high or sort of high end relative to industry averages.

So I wondered if you could just talk about what enables Galp to generate that kind of jet yield from Sines and whether you see any additional upward flex in the context of almost inevitable tightening in jet supplies in Europe now over the coming weeks? And then secondly, when you sort of think forward, uncertain backdrop, but if we do see a sort of prolonged knock-on effect from Middle East conflict for middle distillate supplies in Europe over the coming months.

To what degree could the combination with Moeve enhance Galp's ability to produce and source middle distillate supply for Iberia and Europe as a whole?

Thank you, Matt. So going back -- and we need to go back in history to understand that.

We've made a couple of investments that allow us to be today as we are producing such a yield. I'll go back to 2012, where we've done a couple of investments on the idle cracker.

And that's why we are getting such a yield on the jet side. Of course, we will be trying eventually to reduce additionally the jet volumes blended into the diesel pool.

We are, of course, also increasing the average inventories, but that's a different thing, managing the whole context that we have from the Middle East. On the Moeve combination, of course, we are getting scale, additional scale.

We are getting complementary assets also, but it's still very early for us to speak about that. Of course, that we were thinking about the SAF and the SAF production units that we have been building through the last years, ourselves and Moeve.

And that's a very important asset to look at on the synergies. But it's still very, very early to say that.

Complementary optimized logistics, supply chains, that's what we are looking at, turnaround efficiencies, higher trading firepower. So that's where we are when we look at the transaction.

Thank you.

I had two questions. Firstly, I just wanted to ask about Namibia.

Is there any update on the drilling campaign? And I wanted to ask about timing of FIDs and development.

Is there any opportunity to accelerate Mopane? The previous plan had been Venus first and Mopane second.

Could there be a world in which that changes and Mopane could be brought forward? And then secondly, I know it's early, and clearly, you have a lot of strategic moving parts at the moment.

But this quarter, you kept net debt flat despite a EUR 200 million working capital build, EUR 160 million at [ year ] out for 2P. So if I ran this forward on the 1Q scenario, your balance sheet is going to materially delever through 2026.

that's even before we get to the world of if Rovuma LNG gets sanctioned, you get cash in from that. So I wanted to ask how you're thinking about the balance sheet at the moment?

And then how you're thinking about allocating capital going forward? Is this -- could you see more M&A?

Is it all back to shareholder? So just kind of get your early thoughts on how to think about it.

Paul, thank you for your questions. So let's start with Namibia.

Maybe just an overall status and next step, so I think it's relevant to say that at this stage, where we are concerning the partnership is, good pace moving forward. I think one of the critical steps that was concerning the preemption rights, that timeline has expired.

No preemption rights were exercised. So right now, we're just looking on to the local authorities to make sure that government approval comes as swiftly as authorities find it viable to come through.

I think that the tone continues to be a very positive one. I think if you're looking into Namibia, just recently, the discussions on the basin, the conference that took place are all very, very positive and very mindful of the current context and the implications that has for a new location such as Namibia.

So once we get that approval, we then will be in a condition where we will be able to discuss the more operational aspects. So the details on the GOA, the operatorship transfer.

So all in all, what we are expecting for Mopane, in particular, is still that we will be able to initiate the next campaign in 2026. If the first drills are positive, we will then look into the DSTs.

So I remind you that the work we're doing -- that we will be doing now in this stage will fundamentally be work towards making sure that we have the optimal development concept. So without that development concept mature, that's clearly too early stage to be discussing any significant changes in what were the underlying time lines both for Mopane but also for Venus, of course.

And I will remind you that for Venus, until the operation is closed, we're not yet in the consortium. So I'm not going to comment extensively.

I think it's public, and we have visibility over the fact that everything is moving and we're working clearly towards having an FID in mid-2026. So that is, of course, well in advance of the current stage that we have for Mopane.

I will again remind you that Venus has always been at least 2 years ahead of Mopane. So these time lines, we may be able to work through some aspects, but it's to have a fundamental turnaround and shift would be a significant departure.

So yes, we'll be looking to accelerate. Yes, once we get everything closed and Total comes in full steam, that is hopefully a fast track towards Mopane.

But at this stage, doesn't fundamentally change the sequential timeline that we had. On the second part of your question, so jumping from Namibia and Upstream to the overall portfolio, as I understand, your question was overall, how do we see the portfolio moving forward?

I think, again, Paul, we have a distribution policy that's been pretty stable and that we cherish as such fundamentally because we believe that our financial strength has been very value accretive in what we've been doing with the portfolio. I think we've demonstrated extensively that we're not sitting on the portfolio.

We're actively managing it, both upstream, downstream and even in the way we're delivering on renewables. That speaks of a portfolio that leverages on our current financial strength, leverages on our balance sheet and fundamentally has allowed us to do what we believe to be a unique case in the sector.

We're delivering growth with a very clear line of sight, and we intend to stay that way. We have a very strong engine in upstream, and that engine is being upholstered as we speak and strengthen.

So that's where we want to be. It's -- if we continue to deliver on this investment case, this is a unique investment case, and that's what's going to drive us forward.

And that's what we're going to be looking at in terms of capital allocation. Thank you.