Galp Energia SGPS S A : Report and Accounts - 1Q - 2021

RESULTS

1st QUARTER 2021

APRIL 26, 2021

INDEX

Cautionary Statement

This document may include forward-looking statements, including, without limitation, regarding future results, namely cash flows, dividends, and shareholder returns; liquidity; capital and operating expenditures; performance levels, operational or environmental goals, targets or commitments and project plans, timing, and outcomes; production rates; developments of Galp's markets; and impacts of the COVID-19 pandemic on Galp's businesses and results; any of which may significantly differ depending on a number of factors, including supply and demand for oil, gas, petroleum products, power and other market factors affecting them; the outcome of government policies and actions, including actions taken to address COVID-19 and to maintain the functioning of national and international economies and markets; the impacts of the COVID-19 pandemic on people and economies; the impact of Galp's actions to protect the health and safety of its employees, customers, suppliers and communities; actions of Galp's competitors and commercial counterparties; the ability to access short- and long-term debt markets on a timely and affordable basis; the actions of consumers; other legal and political factors, including changes in law and regulations and obtaining necessary permits; unexpected operating events or technical difficulties; the outcome of commercial negotiations, including negotiations with governments and private entities; and other factors discussed in Galp's Management Report & Accounts filed with the Portuguese Securities Market Commission (CMVM) for the year ended December 31, 2020 and available on our website at galp.com. This document may also contain statements regarding the perspectives, objectives, and goals of Galp, including with respect to energy transition, carbon intensity reduction or carbon neutrality. An ambition expresses an outcome desired or intended by Galp, it being specified that the means to be deployed may not depend solely on Galp. All statements other than statements of historical facts are, or may be deemed to be, forward-looking statements. Forward-looking statements express future expectations that are based on management's expectations and assumptions as of the date they are disclosed and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in such those statements. Forward- looking statements include, among other things, statements concerning the potential exposure of Galp to market risks and statements expressing management's expectations, beliefs, estimates, forecasts, projections, and assumptions. These forward-looking statements may generally be identified by the use of the future or conditional tense or the use of terms and phrases such as "aim", "ambition", "anticipate", "believe", "consider", "could", "envision", "estimate", "expect", "goals", "intend", "may'', "objectives", "outlook", "plan", "probably", "project", "risks", "schedule", "seek", "should", "target", "think", "will" or the negative of these terms and similar terminology.

Financial information by business segment is reported in accordance with the Galp's management reporting policies and shows internal segment information that is used to manage and measure the Group's performance. In addition to IFRS measures, certain alternative performance measures are presented, such as performance measures adjusted for special items (adjusted earnings before interest, taxes, depreciation and amortisation, adjusted earnings before interest and taxes, and adjusted net income), return on equity (ROE), return on average capital employed (ROACE), gearing ratio, cash flow from operations and free cash flow. These indicators are meant to facilitate the analysis of the financial performance of Galp and comparison of results and cash flow among periods. In addition, the results are also measured in accordance with the replacement cost method, adjusted for special items. This method is used to assess the performance of each business segment and facilitate the comparability of the segments' performance with those of its competitors. This document also contains non-financial performance indicators, including a carbon intensity indicator for energy products sold by Galp, that measures the amount of greenhouse gas emissions of those products, from their production to their end use, per unit of energy delivered. This indicator covers the direct GHG emissions of production and processing facilities (scope 1) and their indirect emissions associated with energy purchased (scope 2), as well as the emissions associated with the use of products by Galp's costumers (scope 3). The same emissions are considered for products purchased from third parties and sold or transformed by Galp. For a complete definition of scopes 1, 2 and 3 and the methodology used by Galp for this indicator please refer to Galp's website at galp.com.

Galp and its respective representatives, agents, employees or advisers do not intend to, and expressly disclaim any duty, undertaking or obligation to, make or disseminate any supplement, amendment, update or revision to any of the information, opinions or forward-looking statements contained in this document to reflect any change in events, conditions or circumstances. This document does not constitute investment advice nor forms part of and should not be construed as an offer to sell or issue or the solicitation of an offer to buy or otherwise acquire securities of Galp or any of its subsidiaries or affiliates in any jurisdiction or an inducement to engage in any investment activity in any jurisdiction.

INDEX

Table of Contents

1. Results highlights _________________________________________________________________________________________________________ 4
2. Upstream_________________________________________________________________________________________________________________8
3. Commercial ______________________________________________________________________________________________________________ 11
4. Refining & Midstream_______________________________________________________________________________________________________ 13
5. Renewables & New Businesses ________________________________________________________________________________________________ 16
6. Financial Data ____________________________________________________________________________________________________________ 19

1. Income Statement ________________________________________________________________________________________________________ 20
2. Capital Expenditure_________________________________________________________________________________________________________ 22
3. Cash flow ________________________________________________________________________________________________________________ 23
4. Financial position __________________________________________________________________________________________________________ 25
5. Financial debt _____________________________________________________________________________________________________________26
6. IFRS consolidated income statement ____________________________________________________________________________________________ 29
7. Consolidated financial position _______________________________________________________________________________________________ 30

1. Basis of reporting _________________________________________________________________________________________________________32
2. Appendices _____________________________________________________________________________________________________________ 40
3. Definitions _______________________________________________________________________________________________________________ 72

5

FIRST QUARTER 2021 RESULTS

April 2021

1. RESULTS HIGHLIGHTS

First quarter 2021

Galp's adjusted operating cash flow1 reached Ɯ445 m, up 46% YoY, driven by an improved Upstream macro context, which more than offset the weaker downstream environment. CFFO was up 54% YoY, to Ɯ377 m including changes in working capital and inventory effect, as well as special items registered during the period.

FCF generation reached Ɯ175 m, or Ɯ518 m including proceeds of Ɯ343 m from the GGND (Galp Gás Natural Distribuição, S.A.) stake sale, which was completed during the quarter.

Net debt at the end of the period was Ɯ1,552 m, leading to a net debt to RCA Ebitda ratio of 1.1x.

RCA Ebitda was Ɯ499 m, with the following highlights:

• Upstream: RCA Ebitda was Ɯ438 m, a 53% increase YoY, reflecting higher oil prices, which offset the lower production and the depreciation of the USD against the Euro.
  Working Interest (WI) production was down 5% YoY to 125 kboepd, impacted by offshore operational and logistics constraints.
• Commercial: RCA Ebitda of Ɯ69 m, down 23% YoY, driven by the decline in oil products and natural gas sales during the quarter, reflecting the weak Iberian demand conditions resulting from the continuing lockdowns.

• Refining & Midstream: RCA Ebitda was -Ɯ6 m, a Ɯ96 m decrease YoY, impacted by a negative Refining contribution, reflecting the pressured refining margins environment, and a weak Midstream contribution, impacted by gas sourcing restrictions, a negative swing in pricing lag effects and higher regasification costs in Portugal.
• Renewables & New Businesses: All solar plants have resumed normal operations by the end of the quarter, with no relevant Ebitda in the quarter

RCA Ebit was up 30% YoY to Ɯ284 m, supported by the stronger operational contribution and lower DD&A.

RCA net income was Ɯ26 m. IFRS net income was Ɯ161 m, with an inventory effect of Ɯ101 m and special items of Ɯ34 m.

Other highlights

GGND stake sale conclusion

In October 2020, Galp agreed with Allianz the sale of 75.01% of GGND for a total consideration of Ɯ368 m. Completion of the deal occurred in 1Q21 and Galp received Ɯ343 m, with the remaining Ɯ25 m expected to be received in 2Q21.

1The adjusted operating cash flow indicator represents a proxy of Galp's operational performance excluding inventory effects, working capital changes and special items. The reconciliation of this indicator with CFFO using IFRS is in chapter 6.3 Cash Flow.