GALP ENERGIA (+) : A growth company

Research evidence excerpt

GALP ENERGIA (+) : A growth company

Refinitiv

Investment case, valuation and risks

GALP Energia (Outperform, Target Price EUR26)

Investment case

Since the Mopane deal, we see more catalysts for Galp's performance in 2026

including 1) Updates (financial and operational) on the Moeve deal 2) an update to

the distribution programme (post Moeve deal approval) with a stronger macro outlook

3) A continuation of the exploration campaign on Namibia (including the Mopane

extension) 4) $400m of cash in from the FID of Rovouma LNG. Add to this peer-

leading upstream NPV growth from a clean portfolio made up of a Brazilian position

that will see an inflection in production volume as Bacalhau ramps-up this year. We

reiterate Outperform with a EUR26 price target (from EUR20 previously).

Valuation methodology

We use an average FCFY (FY 2025-27) to value the major oil companies, with a

premium or discount adjustment made reflecting: 1) Momentum on cash flow and FCF

2) Dividend and cash returns yields, as well as scope for increases; 3) Relative

valuation indicators on DACF multiples; and 4) Positioning on de-carbonisation and

other related ESG measures. For GALP, we apply a target yield of 10.0%, reflecting

the de-risking of Bacalhau but the negative of normalizing oil prices for an oil weighted

name. To this we then add our risked valuation of the Galp's Mopane asset. With an

NPV10 of >$10bn we risk the Mopane valuation by 40% to generate a risked value to

Galp of €4.2 per share. Note that our base valuation of GALP excludes the cash costs

of exploration when estimating free cash flow, as this is effectively covered in our

estimate of Mopane NPV.

Risks

To the upside:

Upside risks include a more favourable macro-outlook (oil price and refining margins);