By Sergio Goncalves
LISBON -Portugal’s Galp Energia on Tuesday reported a six-fold rise in adjusted first-quarter profit on soaring global crude prices and higher production, but its shares slipped as the result still fell short of market expectations.
The oil and gas group said in a statement adjusted net profit rose to 155 million euros ($162.8 million) from 26 million a year earlier, below the 185 million euros expected on average by 19 analysts polled by the company.
Its shares were down 2.7% at 10.99 euros in afternoon trading in Lisbon.
Adjusted earnings before interest, tax, depreciation and amortization (EBITDA) increased 74% to 869 million euros, in line with predictions. The adjustments are to reflect changes in the company’s crude stock.
Oil companies have been benefiting from global crude prices surging to their highest in nearly 14 years during the first quarter as sanctions on major oil exporter Russia over its invasion of Ukraine fuelled concerns about tight supplies.
The company said it “successfully captured the stronger macro conditions, namely in the upstream and industrial segments”, despite high commodity price volatility putting pressure on downstream activities as it doesn’t immediately pass these higher prices on to its end clients.
In a research note, RBC Capital Markets said that at the operating level, “results were better in the upstream while weaker than expectations in both refining and midstream, as well as commercial”, with logistical issues weighing on operations.
Galp’s share of oil and gas production from projects in which it has a stake, mainly in Brazil, rose 5% to 129,500 barrels of oil equivalent per day.
On the decision to eliminate direct or indirect exposure to petroleum products from Russia, Chief Executive Andy Brown told analysts on a conference call that Galp had been “successful in securing alternative vacuum gas oil (VGO) supplies”, used to make diesel, through April in Europe and the Middle East.
“Some diesel exports may be impacted if we don’t get those VGO supplies (after April). However, the supply to the Portuguese market is not at risk,” he said.
Russia produces 50% of the world’s VGO.
Brown said that, due to high volatility, Galp had already locked in part of its refining margins, hedging 25-30% of its refining production at $8-$9 dollars a barrel. Galp’s refining margin rose to $6.8 a barrel in the first quarter from $1.9 a year earlier and from $5.50 in the preceding three months.
($1 = 0.9523 euros)
(Reporting by Sergio Goncalves; Editing by Louise Heavens, Jan Harvey and Emelia Sithole-Matarise)
