Portuguese oil company Galp swings to profit but COVID still weighs

(Reuters) – Portuguese oil and gas company Galp Energia (GALP.LS) swung to a net profit in the second quarter thanks to higher crude prices and refining margins, but cautioned on the continued impact of the COVID-19 pandemic.

In a statement accompanying the figures on Monday Chief Executive Andy Brown said Galp’s financial performance in the first half of the year had been robust, adding: “However, COVID restrictions are still impacting operational performance, refinery margins and commercial sales volumes.”

Its shares were down 0.5% at 8.304 euros by 0903 GMT, not far from a five-month low of 8.16 euros set a week ago.

Galp posted an adjusted net profit of 140 million euros ($165 million) compared with a 52 million euro net loss in the same period a year ago. Analysts had expected 118 million, according to an average of 21 forecasts compiled by the company.

Adjusted earnings before interest, taxes, depreciation and amortisation (EBITDA) almost doubled to 571 million euros, the company said, versus an average forecast of 587 million.

Its upstream adjusted EBITDA more than doubled to 467 million euros, reflecting higher oil prices which more than offset lower production and the depreciation of the dollar against the euro, it said.

Galp’s share of oil and gas production from the projects in which it has a stake, mainly in Brazil, fell 3% in the quarter to 128,400 barrels of oil equivalent per day.

With investors expecting demand to remain strong and the market to be supported by falling oil inventories and faster COVID-19 vaccination rollouts, Brent oil prices rose to an average of $69 a barrel in the second quarter from $29.6 a year ago.

Galp, which extracts and refines oil and gas and runs renewable energy plants, said sales of refined products to direct clients rose 41% to 1.5 million tonnes as demand recovered from lockdowns imposed in the second quarter of 2020.

The company’s refining margin also rose to $2.2 a barrel in the second quarter, from $1.80 in the same period last year.

Capital expenditure increased 65% to 224 million euros during the quarter, with the upstream absorbing 135 million euros mostly related to projects in the Brazilian pre-salt, namely the Tupi/Iracema and Bacalhau fields.

Net profit and EBITDA were adjusted to reflect changes in the company’s crude stocks.

($1 = 0.8490 euros)

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