Galp flipped from profits to losses of 22 million euros

Galp Energia went from profits to losses. After gaining 29 million in the first three months of the year, it lost 52 million in Q2, showing a negative result in the first half of the year because of “weak market conditions.”

“RCA net income was negative by 22 million euros [in the first half], while IFRS net income was negative by 410 million with non-recurring events of 26 million, and material stock effect of 362 million euros,” says the company led by Carlos Gomes da Silva in a communiqué sent to the Securities Market Commission (CMVM).

RCA EBITDA decreased 31% year-on-year to 760 million, impacted by weak market conditions in the period”, the company points out, adding that RCA EBIT decreased 76% to 161 million, reflecting a weaker operating performance and including the impairments recorded in the second quarter”. Galp Energia’s revenues fell 31% in the first half to 5.6 billion euros.

“Sales of oil products to direct customers fell by 28% compared to the first half of 2019 to 2.9 million tonnes, reflecting the drop in demand caused by restrictions aimed at combating the Covid-19 outbreak. And “volumes of natural gas sold to direct customers decreased by 31%, impacted by the decrease in the corporate segment”.

The oil exploration and production business has a large weight in the company’s accounts. Production during the first half of 2020 was 131.8 thousand barrels per day, an increase of 17%, “supported mainly by the development of the Lula, Iracema and Berbigão/Sururu projects, as well as by the greater contribution of the Kaombo project in Angola,” says Galp Energia. However, with oil prices falling sharply in the markets, the value of the stock sank. And refining margins have fallen.

Weighing in the accounts was also the foreign exchange market. Galp Energia says that “the financial results were negative by 70 million, reflecting exchange differences of -88 million resulting from the depreciation of the Brazilian Real against the US Dollar in Petrogal Brazil”.

Also, the company notes that despite the accounts was also the “negative change in the market-to-market of -78 million” which is “mainly related to hedging derivatives in the price of natural gas and includes the loss recorded in the second quarter related to derivatives of CO2 licenses”. It should be recalled that the company had already warned that it had identified transactions, not authorised by the company, of derivatives on CO2 emission licences, which resulted in a loss of around 60 million euros.