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Galp will set off Big Oil dealmaking with its Namibian find

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Galp is going to need a rebranding. How about Gulp?

The midsized Portuguese oil company — now worth $15bn — has a good problem. It has discovered billions of barrels of oil offshore of Namibia.

That is a lot. Galp reported about 620mn barrels of oil reserves in 2023. Its favourable results after testing its biggest Namibian find has sent the shares soaring to a record high. The increase added $2.5bn to its market value on Monday.

Expect further oil discoveries. Galp should know Namibia, having drilled in those waters for more than a decade. Its find proves that despite rumours to the contrary, oil exploration is not dead yet. Other Big Oil names will be interested in sharing in that success.

So far the explorer estimates 10bn barrels of oil equivalent is in place, but it will drill more wells this year. Until now Galp had shied away from offering any estimates since a discovery in January, notes Jefferies.

Line chart of Share prices rebased in € terms showing Portuguese explorer gallops away

Namibia should radically boost Galp’s value. Of the 10bn barrels, not all will be oil; some will be less valuable natural gas. Even then, Galp will probably only extract a third of that available oil. Haircut the total by these factors and Galp could sit on more than 2bn barrels. After costs, each is worth about $5 (based on $65 a barrel oil prices) says energy consultants Wood Mackenzie. Lex puts the total so far at over $9bn, adjusting for Galp’s 80 per cent ownership.

This is not a one-asset explorer. Galp already has oil production in Brazil, with a new project starting up at Bacalhau. It has stakes in projects in Mozambique (gas) and offshore São Tomé (near Nigeria). It made more than $1bn in after-tax profits last year. Then again, after a 43 per cent stock price rally this year, the company is no longer cheap. On an enterprise value to forward ebitda ratio of over 5 times, it trades at a premium to all its regional peers.

Galp will certainly need help. Bringing this oil to market will cost billions of dollars. It may well sell down its stake to an international oil company. Candidates include Shell, Total and Chevron, which are all drilling, or planning to drill, in the same Orange oil basin. Galp’s success will attract interest from larger peers who, regardless of any climate pledges, still seek oil growth.


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