Portugal’s oil and gas major Galp showed a strong performance in the third quarter off the back of a better than expected contribution from upstream and midstream operations, and has issued a new, higher guidance target for earnings in the full year.

In its latest financial update on Monday, Galp posted €210 million ($221.8 million) in third-quarter net income, 12% higher year on year but short of analyst forecasts, estimated at €229 million.

The company’s earnings before interest, taxes, depreciation and amortisation, at €1.1 billion, were 35% higher than this time last year and 4% above consensus.

Chief financial officer Maria Joao Carioca described “a quarter of strong operating momentum across all business units at Galp”.

Total production in the quarter stood at 125,000 barrels of oil equivalent per day. This was lower than last year owing to the divestment of the Angolan upstream assets, but 8% higher on a comparable basis, supported by output in Brazil and the ramp up of Coral Sul FLNG.

Group operating cashflow in the quarter was €716 million, and cashflow from operations was €686 million, below analyst-provided consensus of €763 million.

The company reduced debt in the quarter, which now stands at €1.2 billion, 42% down from this time last year.

Supporting the performance in the period were “strong cracks market environment”, as Carioca described it. The refining margin for Galp was at $14.6 per barrel of oil equivalent in the quarter.

From this basis, Galp said it was confident it could achieve better than previously forecast results for 2023.

The company is “revising upwards guidance due to better than expected upstream production and midstream contribution”, said Carioca.

Galp now forecasts to achieve more than €3.5 billion in Ebitda, and more than €2.3 billion in operating cashflow. The major had previously forecast €3.2 billion and €2.3 billion, respectively.

Organic capital expenditure is unchanged at €1.1 billion.

Namibia exploration start

In Namibia, where Galp is currently exploring, Carioca said the company is “on track” to spud its first exploration well in November.

As Upstream previously reported, the operator has been in talks to secure a partner to drill two consecutive probes in Orange basin blocks 2813A and 2814B, covered by Petroleum Exploration Licence (PEL) 83.

The company expects its total production in 2023 to be around 120,000 boe per day, slightly below third quarter, and decline to 115,000 boe per day until the start-up of the Bacalhau FPSO project offshore Brazil.

Renewables strength

In its renewables division, Galp posted a 12% increase in year-on-year Ebitda, reaching €43 million in the quarter. This was also 8% above industry consensus.

Installed capacity stood at 1.4 gigawatts, 8% above last year.

In a note following the result, Bernstein Research said the quarterly performance of the renewables division “highlights another integrated successfully building out a renewable business”.

At the same time, the company has rowed back on its existing target to deploy 4 gigawatts of renewable energy capacity by 2025.

“The full delivery of the 4 GW of renewables organic portfolio is unlikely to be achieved by 2025,” said Carioca. That target is now “being reassessed given the return profile” seen in some of the projects, which she described as “well below Galp’s minimum”.

Part of this is thought to be related to slower than expected renewable deployment in Brazil. The company took a €59 million impairment related to its renewables portfolio there, which it described in the latest report as being “in light of the challenging market conditions in the country”.