Galp sees shares soar over Gulf crisis

Galp has been one of the main beneficiaries of rising oil prices in international markets, not only on the Lisbon Euronext stock exchange, but also among its peers in the sector in Europe.

Galp ranks among the 10 best-performing shares since February 28th, accumulating 16% since the beginning of the trade war and 44.5% since the start of the year. Analysts have been followed the stock’s performance with optimism, but have become more cautious in recent weeks.

Galp is fortunate since its activities are exclusively focused on exploration and production (‘upstream’) in stable jurisdictions such as the North Sea and Brazil) and is not dependent on the Persian Gulf.

Other listed companies such as Equinor, Aker BP, and Repsol have also benefited from the trade war.

With Brent above US$90, conversion to cash is immediate and reinvestment risk remains controlled. When Brent was at US$116 there was a peak in cash flow generation, extraordinary dividends and share buyback programmes are highly likely,” he explains in a note according to an analysis from AlphaValue.

This idea is corroborated by Goldman Sachs, which indicates that both Iberian oil companies — Galp and Repsol — are the most exposed to fluctuations in the price of a barrel of oil among the European “majors,” hence they have had some of the biggest boosts from the upward revision of Brent estimates — the benchmark for Europe — by the vast majority of investment houses and banks.

With the re-opening of the Straight of Hormuz on Wednesday morning the price of Brent fell back to US$93 despite Iran continuing to fire missiles to Gulf States on Wednesday morning.

Source: Negócios; Credits: Galp Energia