Galp refining margin up 75% in Q4
The rise in margin resulted from the "more favourable market environment", with the figure recorded in the fourth quarter expected to have "an estimated impact of €80 million on EBITDA.
Galp’s refining margin rose 75% to US$13.50 per barrel in the fourth quarter of 2022 from the previous quarter, with oil production remaining stable, the oil company announced on Monday.
The refining margin is the difference between the value of petroleum products, such as petrol and diesel, when they leave the refinery and the value of the crude oil entering the refinery.
According to the trading update sent today to the Portuguese Securities and Exchange Commission (CMVM), Galp’s refining margin of US$13.50 per barrel between October and December was 75% above the US$7.70 in the previous quarter and more than double the US$5.60 per barrel in the fourth quarter of 2021.
According to Galp, the rise in margin resulted from the “more favourable market environment”, with the figure recorded in the fourth quarter expected to have “an estimated impact of €80 million on EBITDA [earnings before tax, interest, depreciation and amortisation]”.
Still, the refining margin for the last quarter of 2022 falls well short of the $22.3 per barrel reached in the second quarter of 2022, achieved after oil prices soared following Russia’s invasion of Ukraine.
From October to December, refining activity fell 10% quarter-on-quarter, “following planned maintenance work”, but was 51% above the same quarter a year earlier.
In the period, Galp reports impacts on the supply and marketing of natural gas and LNG (liquefied natural gas), due to “additional supply constraints and the challenging European environment in natural gas”.
In the last quarter of last year, Galp’s oil production was 115.3 thousand barrels per day, slightly up from 114.8 thousand barrels in the third quarter and 4% more than the 111.2 thousand barrels in Q4 2021.
The oil company’s sales retreated 9% quarter-on-quarter and 1% year-on-year in the oil products segment and fell 4% quarter-on-quarter and 16% year-on-year in electricity, having progressed 2% compared to the third quarter in natural gas, although with a 5% year-on-year drop.
Galp attributed the drop in sales of oil products to “lower demand in Iberia, especially in the B2B [‘business to business’] segment”, while sales of gas and electricity “were impacted by reduced activity, especially in the B2B segment, as well as by lower consumption in the B2C [‘business to consumer’] segment, due to warmer temperatures”.
In the quarter under review, Galp’s installed capacity in renewables increased 7% compared to the previous quarter, to 1.4 Gigawatts (GW), but generation fell more than 50% “due to the seasonal reduction in the number of hours of sunlight”.
In the trading update released today – which anticipates the publication of Galp’s fourth quarter results, scheduled for 13 February, before the market opens – the company forecasts a reduction in net debt to €1.6 billion at the end of the quarter, stating that it is “still evaluating the impact of windfall taxes in Portugal and Spain”.
It also said that the results for the fourth quarter will include a 100 million euro impairment on the retail network assets and said it had set up a €60 million provision related to the project in the former Matosinhos refinery.
