By Adam Whittaker
TotalEnergies struck a deal to take a 40% stake in Galp Energia's offshore Namibia discovery, sending the Portuguese energy company's shares lower with investors disappointed by the lack of an upfront cash payment
In exchange for the stake, TotalEnergies will give Galp a 10% interest in a field which houses its Venus discovery, and a 9.4% interest in another field.
The news sent Galp shares lower as investors were let down by the asset swap. In midday trade, shares were down 11.8% to 15.29 euros.
The deal ends speculation over which suitor would participate in one of the most significant discoveries in recent years.
TotalEnergies will be liable for half of Galp's capital expenditure for the exploration of the Mopane discovery, which will be repaid through half of Galp's future cash flows from the project, the company said.
Galp had been looking for an experienced partner to help derisk the project after some of its peers struggled to commercialize finds the region. The two companies plan to drill three wells over the next two years as part of the appraisal program.
The deal does meet Galp's ambitions for operatorship credibility and development prioritization, but the initial pullback of its shares shows it has failed to meet elevated market expectations, J.P. Morgan analysts Matthew Lofting and Tianyu Wu wrote in a note to clients.
Investors would have liked to see an upfront cash payment and some read-through on how excess cash would be returned to shareholders, they added.
"Relative to investor expectations, we see this deal as more constructive for TotalEnergies than Galp, with no upfront cash payment likely to be seen as negative," analysts at RBC Capital Markets, Biraj Borkhataria and Adnan Dhanani said.
Market watchers have found putting a value on the mopane discovery challenging. Earlier this year, analysts at UBS said initial data shows it has the markings of large commercial discovery that had the potential to nearly double Galp's share price over the next five years.
Despite this, the initial agreement has failed to be the positive catalyst expected by analysts.
Galp had set a goal of reaching an agreement by year-end, and the deal is expected to complete in 2026. After the deal, Galp will retain a 40% stake in the field.
It has also previously said that the field could hold 10 billion oil equivalent barrels or more.
Write to Adam Whittaker at adam.whittaker@wsj.com
(END) Dow Jones Newswires
12-09-25 0745ET
