Agreement that caused Galp shares to plummet no longer causes concern. Share price has recovered

Galp shares closed on Tuesday at €17.56, a level not seen since early December, i.e. about two months ago. December was the month that saw the biggest drop in the share price since the Covid-19 pandemic. This sharp decline came after the announcement of a partnership with TotalEnergies for oil exploration in Namibia. The return to the same prices is seen by analysts consulted by ECO/Capital Verde as a new way of looking at the agreement in the African country, but also as a consequence of the negotiations with Moeve, which were announced later.

“It is always complex to isolate the variables that justify movements in prices, since multiple factors weigh simultaneously”, points out Vítor Madeira, an analyst at XTB. However, “the recovery in prices shows a significant change in investors’ perception of Galp’s partnership strategy for the future”.

João Queiroz, head of trading at Banco Carregosa, speaks of “a more informed and balanced market reading after the initial impact of the announcement”. “The market has moved from an initial emotional reaction to a more rational and strategic assessment of both agreements, recognising the potential for medium to long-term value creation”, he says.

Underpinning the positive performance of Galp shares is, first and foremost, the “significant recovery” in oil prices. “This factor is decisive for the valuation of oil company shares”, points out Vítor Madeira. However, he also sees the synergies recently announced by the Portuguese oil company as contributing factors.

The secret lies in risk management

The XTB analyst believes that “investors’ expectations regarding the company’s future results have improved substantially”. In his view, there has been a reassessment of the agreement with TotalEnergies, the company with which Galp decided to share its project in Namibia. The French company took 40% of this Galp asset, committing to bear half of the investment costs for exploration. In addition, the agreement also provides for the exchange of shares in other TotalEnergies discoveries in the region.

Initially, the markets reacted negatively to the agreement between the two companies, with a drop of more than 15% on the day of the announcement, the company’s biggest “plunge” since the pandemic. The head of trading at Banco Carregosa believes that, initially, there was a focus on the implicit valuation of the agreement, the size of the resources, the potential magnitude of the investment, the pace of development and the risk of the Mopane project falling behind others in the capital decision hierarchy. He says that questions also arose as to whether Galp had “sold too early”.

On the day of the announcement, in a call with journalists, Galp co-CEO João Diogo Marques da Silva conceded that, on the market side, there was an expectation of “an agreement with more short-term benefits, with obvious cash up front”, and that in this sense some investors may have been “less enthusiastic”. However, he added: “We are clearly enthusiastic about the long-term vision that these assets bring us and that they gain with this partner”. He also explained that there were a number of indicators that would have to be digested by the market, which he said he believed could lead to a different view on the part of investors.

Two months after the announcement, Vítor Madeira believes that the agreement is being understood from a more strategic perspective, involving risk sharing and investment costs, while maintaining exposure to promising projects. In his view, this option “demonstrates prudent management of the company’s resources”. For João Queiroz, as management framed the decision as an exercise in active risk management — rather than price maximisation — “the perception that the agreement preserves risk-adjusted value gained strength”. João Queiroz highlights, as achievements, that the agreement protects the balance sheet, smooths the capex profile and avoids additional financial pressure.

In addition, the XTB analyst identifies “a clear technical correction after an excessively aggressive selling movement”. In his view, the “sharp fall” on the 9th created an entry opportunity for institutional and medium to long-term investors, who identified an “unjustified devaluation in view of the company’s fundamentals”.

On 8 January, Galp made a new announcement. This time, it was somewhat less definitive, as it concerns opening negotiations with Spain’s Moeve, considering a partial merger between the two companies. “The recovery in the share price also reflects the constructive way in which the market has been interpreting the negotiations between Galp and Moeve”, believes the head of trading at Banco Carregosa.

The new structure, which would divide Galp’s downstream business into RetailCo and IndustrialCo, “allows for greater strategic focus, better capital allocation and the capture of synergies in a sector where scale and efficiency are increasingly decisive”, he points out. This announcement “reinforced investor confidence in the company’s value creation strategy”, says Vítor Madeira.

The combination of assets creates a network of around 3,500 stations in the Iberian Peninsula and consolidates three refineries, bringing the new platform closer to the size of peers such as Repsol and strengthening its Iberian positioning with European ambition, highlights the same representative from Banco Carregosa.

Shares should rise, but without euphoria

As for the stock’s performance throughout the year, “the most likely scenario points to constructive behaviour, albeit without euphoria”, argues Queiroz. According to the analyst, the share price should benefit as the announced agreements are implemented, and also when there are any additional clarifications on structure, governance and return on invested capital.

The final investment decision on the Venus project (expected in 2026) and progress on the three planned drilling wells in Mopane will be important milestones, adds Vítor Madeira. At the same time, the regulatory approval process and the implementation of operational synergies, with regard to the agreement with Moeve, will be in the spotlight. Negative factors include the volatility of energy prices, the macroeconomic environment and regulatory scrutiny, which “remain significant risk factors”, says João Queiroz.

In Vítor Madeira’s view, the price of oil will continue to be the main driver, and the current trend of recovery in crude prices favours the outlook, but geopolitical volatility and the decisions of OPEC+ (cartel of producers and allies) will be decisive. In terms of operating results, Galp’s oil production increased by 2% in the fourth quarter of 2025, “signalling a positive trajectory”.

“Galp now appears to be a more readable and balanced story, which tends to support a consolidation trajectory with a slightly positive bias, provided that execution keeps pace with strategic ambition”, concludes João Queiroz.