Good afternoon, ladies and gentlemen. Welcome to the Galp second quarter 2022 results presentation. I will now pass the floor to Otelo Rebelo, Head of Investor Relations.
Thank you, Sharon. Hello, everyone, and thank you for joining us today on the analyst Q&A session related to Galp's Third Quarter and Nine Months 2022 Results. As usual, we released the results materials early this morning, including a management presentation video highlighting the key achievements during the quarter and covering the financial results. Therefore, we would start with some words from Andy, our CEO, and then go straight to Q&A. As in previous occasions, we will have Andy, Filipe, Teresa, Georgios, and Thore at the call, so the full executive team here available to take your questions. If you want to participate, please follow the operator's instructions at the end of the call. Also, as usual, I would like to remind you all that we will be making forward-looking statements that refer to our estimates.
Actual results may differ due to factors included in the cautionary statement presented at the beginning of the presentation that we released this morning, which we advise you to read. Andy, do you want to say a few words before we start the Q&A?
Yes, please, Otelo. Before we start, I'd just like to say a few words about my decision to step down at the end of my mandate at the end of this year. Two years ago, I received a challenge to transform Galp, to change its portfolio, to embrace the energy transition, to professionalize the operations, to improve the external image, and to adapt the internal leadership style. I was asked to complete the two years of Carlos Gomes da Silva's mandate to end 2022. I came out of retirement, resigning my board and advisory roles in order to avoid conflict. Over these two years, we've expanded our renewables position, doubling our portfolio and our equity generation capacity. We've launched a whole new hydrogen biofuels business on the verge of world-scale FIDs.
We've secured a joint venture with Northvolt to enter the battery value chain. We've launched a project to transform Matosinhos refinery to an innovation district. In commercial, we have new businesses, e-mobility, distributed solar, and we're building our convenience retail contribution. In upstream, we've cemented 25% growth with the Coral startup and the progression of the Bacalhau project through FID into construction. Meanwhile, we have transformed the focus on operational excellence and safety and are now delivering in line with our plan. What is not so visible is that we've reorganized and recruited the talent needed to take the businesses forward. Many new recruits are taken from the international world. Perhaps most importantly, we've changed the internal leadership culture, empowering staff and holding them accountable in a much more open and dynamic Galp.
Whereas for many of you, two years appears very short and there's still a lot of work to do, the changes are deep-rooted and hardwired. Going forward in 2023, without the gas drift of hedges committed in 2020, Galp can go forward from strength to strength and reap the benefits of this transformation. Galp has extraordinary people and world-class assets. It's been a pleasure to lead Galp, and I will continue to the end of the year. I wish the new CEO every success in taking the company forward next year. Thank you.
Thank you, Andy. Sharon, can we start the Q&A session, please?
Thank you. As a reminder, to ask a question, you will need to press star one and one on your telephone and wait for your name to be announced. To ensure everyone has the opportunity to ask questions today, please limit yourselves to just two questions. Please stand by while we compile the Q&A roster. Now we will take our first question. Your first question comes from the line of Oswald Clint from Bernstein. Please go ahead.
Yes, good afternoon. Thank you very much. Thanks, Andy, for the reminder of everything you've executed over those last two years, and obviously good luck with what's next. Perhaps a question just on CapEx, please, and really I mean, you've taken up a little bit. I understand the FX, I understand the Titan acquisition, but there's a lot of discussion around cost inflation more internationally now going into next year. I wondered if you could perhaps speak around what you're seeing there with rigs and vessels, sub-sea, you know, even exploration and perhaps even across into the renewable side of the market, and perhaps how protected you feel you are or Galp will be to those potential inflationary pressures. Secondly, I wanted to ask about Brazil.
I see good, stable oil volumes in the last nine months relative to last year, so that's good. I was curious around the natural gas realizations now, given the increased marketing in Brazilian gas. The realization $55 per barrel in the quarter. I had in my head that there was some sort of cap there for that gas. I thought it was sub $50. Perhaps you could talk, remind us, perhaps, of the pricing formula as it relates to Brazilian natural gas. Thank you.
Thank you, Oswald. You know, firstly, I think on CapEx, I think the change in guidance from the CapEx is as much about the exchange rate, actually, between the dollar and the euro, and obviously now we're paying 100% of the Titan portfolio. That has increased our CapEx guidance. I'm gonna pass the floor to Tore and then to Georgios to talk a little bit about how in upstream and renewables, what we see in the market and how much it actually affects us. How much is already locked in at a lower price. Tore?
Thank you, Andy. When it comes to the major project that Galp has underway right now, and in particular, I'm thinking then about Bacalhau, we are largely well protected through the contracts that we already have in place and where we have locked in for a large part the costs associated with it. Bacalhau should be overall quite well protected. There are some exposure in when the unit comes to Brazil and the scope of work in Brazil, but overall, that project is well protected. What we do, however, see is that the rig market is firming up. New rig contracts will entail higher rig rates. We see a pressure in that market, which over time, of course, also will have an exposure for Galp and our operation.
We also see that in the other part of the value chain. In particular, the rig market is now firming up a bit. I'll pass to Georgios on renewables.
Thanks, Thore. Thanks, Oswald. On renewables, we are obviously seeing an increase in CapEx as in many other activities. We have had in the Titan negotiation and the acquisition, we have made an arrangement so that there is a certain part of the civil cost is secured. We are seeing in Brazil, we are seeing an increase in CapEx as our projects mature. But we're also seeing and in Iberia, in particular, we're seeing a very high, very strong price environment that is more than reflecting these CapEx increases. We are very comfortable with those levels today.
Just on one point, we are above the guidance of EUR 1 billion net CapEx on a five-year basis. I think you need to reflect that we haven't had any divestments this year. In the round, over the years to come, we're expecting divestments that will balance this net CapEx over. This isn't a one-off increase in guidance. This is just a reflection. It's a year without divestments. Now, on the natural gas realizations, we have actually something like 30 contracts in Brazil. We're selling our gas, we're selling third-party, other people's gas, and we have a number of deals that we're negotiating where we will increase that amount of third-party gas we're selling into the Brazilian market.
The prices are based on Henry Hub and Brent and different indexes for different contracts of different forms. There was no hard feeling at $50 a barrel. $55, I think, was the realization for this quarter. It was a little bit up from previously. What is it? 5x more than we had last year. Clearly this is a significant cash flow for us.
Very good. Thank you.
Thank you. We'll now go to our next.
Next question, please.
Thank you. We will now go to our next question. Your question comes from the line of Biraj Borkhataria from RBC Capital Markets. Please go ahead.
Hi. Thanks for taking my question. The first one's on Nigeria LNG. I mean, looking through your slides, it looks like you're assuming one missed cargo there. I was wondering if you had any commentary from the operator, and you know, on the basis of what goes into that assumption. And secondly, you know, as it relates to securing the LNG, I know there's a lot of LNG waiting off the coast of Spain, but have you had any initial conversations on the availability of cargoes for October and November? And the second question's on Brazil, looking into 2023. I know 2022 was a heavy maintenance year.
Could you just talk about the 2023 schedule relative to 2022, and so how we can compare and contrast and help us with our modeling? Thank you.
Thanks, Biraj. To you and Oswald, I know I was with you both quite recently, and obviously I couldn't give you indications of my impending departure. To you, my apologies for that. Now, on Nigeria. Clearly I think the first thing to say is, our sympathy goes to the people that are suffering the floods of Nigeria. Many hundreds have lost their lives and you know, I think a million and a half displaced people. This is a real tragedy. Clearly, for us, this is a concern in terms of our own deliveries. Force Majeure has been called, and we've heard that the cargo scheduled for the end of October has some impact on it, whether it's just a delay or cancellation, we're not quite sure.
I have actually invited to this call also Rodrigo Vilanova, who's our head of energy management, and he is quite busily buying up some alternative supplies, I think at very reasonable prices. Rodrigo, give us a little bit of update about what you're buying, how you're buying it, and this thing about the LNG cargoes, tankers waiting to dock in Iberia. Rodrigo.
Thank you very much, Andy. Thanks for the question. As Andy mentioned, I mean, we received a notification of Force Majeure from Nigeria a week ago, which is a soon effect. Their latest update from Nigeria is that one LNG cargo might be impacted at the end of October. They're currently not expecting a further impact in November. For the volumes potentially impacted in October, our gas trading team has already succeeded in acquiring most of the value of the volumes, sorry, under natural gas pipeline purchases. We are seeing currently a limited impact, especially because pipeline gas prices are reduced due to the full inventory that you mentioned.
So far, we are expecting one LNG cargo impacted late October, and most of the replacement gas has already been procured.
Thank you. Yeah. I think it's, you know, we're skewing it lower actually than we indicated in the presentation. I think the impact at this stage, and we don't know what the spot prices will do, but the spot prices have moderated significantly obviously, which is fortuitous for us at this moment. In Brazil, next year, this is always a balance between maintenance and natural declines and infill drilling. Thore Kristiansen, any. No guidance at this stage, I guess, but any indications of how 2023 will pan out?
What we can say is that we have to expect that maintenance will be kept basically at the same level that it is in 2022. We have a backlog to catch up from the time of COVID. This is well-invested time and money in order to make sure that we secure the integrity and longevity of these facilities. Basically expect the maintenance activity to be in line with 2022. The final programs are still not firm, so I take a little bit of reservation that something could happen in the end and towards the end of the year, but it's basically the same. Thank you.
Let me just reflect on the clear decline in Brazil, obviously maintenance activity, some infill, but also we now have Coral that, as we say in our presentation, will be contributing. It's already contributing some volumes, but contributing increasingly through Q4 into next year. That's one of the areas where we hope to compensate for some of the natural declines in the fields that are producing today. Thank you, Biraj.
Thank you very much. Thank you.
Thank you. We'll go to our next question. Your next question comes from the line of Mehdi Ennabati from Bank of America. Please go ahead.
Hi. Good afternoon all, and thanks for taking my questions. I will limit to two questions, please. First one regarding the Rovuma project. It clearly became a very strategic project, but it also remains super challenging due to the political situation in Mozambique. I read, you know, on the specialized press that there was some news about developing part of Rovuma project with FLNG units. Maybe can you tell us, please, you know, the pros and cons between, you know, onshore LNG trains and FLNG units, especially, you know, regarding the CapEx? Are we talking about much higher CapEx if the consortium decides, you know, to develop FLNG units, or no?
What could also be, let's say, you know, the positive and negative regarding that project? The second question is for you, Andy. You announced that you are leaving the company at the end of your mandate. I wanted to ask you during those years, you know, as a head of as CEO of Galp Energia, what has been the most challenging for you, as a CEO? Was it running the operations or more, you know, the setup of a new strategy for the group? Anything that you would have considered as particularly challenging, you know, just for us, you know, to better understand the challenges at Galp. Thank you.
Thank you, Mehdi. Let me say a few words on Rovuma, and I might ask Thore if he wants to add. You know, clearly, the partners are discussing the options for Rovuma, because clearly what we've seen is floating LNG is working. It's working well. It's cost effective, on time and on budget. There is an opportunity clearly, if you wanted to stay well offshore, would be to build another. Or you can go nearer to the coast, you can go modular, you can go small scale or the big scale scheme that we had before. The partners are looking at all these schemes, and I have to say there's no decision at this stage. What I think Coral has done, it creates optionality.
Even in a deteriorated onshore security position, it does clearly show that the asset has significant value, even on offshore solutions. That's not to say that's the way we're going, but it creates the optionality, for that. Thore, do you want to add anything to that? Because I think it's a-
Just underlining. First of all, Coral South seems to be really, really well done. It's on time, and it's below budget. We got first LNG drop in October. We do see that by doing a second one, you can actually optimize and make it even more efficient. That is natural that we study. As Andy said, we have not taken the decision. In my mind, it, the likely case for it will be that you will doing both. You will both, because the resources are so enormous in Rovuma. We're talking 85 trillion cubic feet. A dual development offshore/onshore is most likely the way it will go forward.
The partnership is now studying the solutions and also learning from the very successful modular development that has been achieved in the U.S., which might be applicable also for a situation in Mozambique. Thank you.
Now the other one, obviously I've got my team listening to me here. You know, I think one of the issues has been tackling the legacy issues that the company has faced and of course, as you all know, we've had problems with the gas derivative hedges. It has meant that every single quarter we've had some kind of bad news, which hasn't been very easy, clearly as CEO. Getting through that and seeing ourselves, and I think 2023 looks like it's, we're gonna have a much clearer path going forward, particularly in our gas positions. I think the second thing is, you know, within the company driving operational excellence and safety and really getting everyone to understand their role in delivering to the bottom line.
Lastly, would be getting our message across to the people of Portugal and to society, and that, you know, Galp is transitioning. It's seen as a company I think in many ways that is an oil and gas company that is a bit rigid. But getting a message across, we're much more open, we're much more dynamic, and we're much more embracing the energy transition, is a story we're still trying to tell, and still trying to make sure that everyone understands that, you know, we are wanting to be on the right side of history as we go forward as a company. Thank you.
Perfect. Thank you very much.
Thank you. We'll go to our next question. Your next question comes from the line of Joshua Stone from Barclays Capital. Please go ahead.
Thanks, and good afternoon, all. Two questions, please. The first one comes back to the gas business and the restrictions there. Can you just talk about when you're looking to 2023, the additional flexibilities you expect to have in. Does it come at you from January? Is it like the contract expire in January? And as for how much volume? Do you still expect to pre-sale any gas? And when do you expect to get the Venture Global LNG in the business as well? I'm just trying to work out how protected is this business gonna be in 2023, if there are any further restrictions on sourcing. Then secondly, just looking at the...
Coming back to the inflation point in Brazil, just looking at the upstream operating costs, they have ticked higher for a few quarters in a row now on a unit basis. Can you just talk about what's driving that? I presume there's some decline on the older fields in there and where you think sort of through cycle steady state, you know, unit costs should be now. Thank you.
Thanks, Josh. I think the first thing to say is one thing that we've managed to do is to reposition ourselves. We don't have any hedges for 2023, which means the contracts we have from Algeria and Nigeria will be exposed to hopefully some upsides if the gas prices are still solid. We haven't committed too much within the overall energy management and commercial areas for sales for next year. We retain a buffer because clearly we're, you know, we've been a little bit bitten by having no flexibility when Nigeria volumes don't appear as they should. I think one message is we will have flexibility to cover all our commitments.
Secondly, we are retaining at this stage what we believe should be a reasonably strong margin for the volumes we have from our legacy contracts. So if we go from what is significantly negative. Let's, you know, be clear. We've probably a EUR 150 million loss in Q3 as a result of the PDP to TTF spread and due to the restrictions in supply. So that's a negative number that will flip in from January onwards to a positive contribution. Then the Venture Global LNG, we're hoping to receive it as early as possible next year. There's a long stop date in Q3, but, you know, it is now running.
You know, we're looking forward to those supplies, which are clearly destination flexible, fixed price contracts, which will be extraordinarily accretive, once we have those online. Both of those items I think will put Galp in a very different position, next year when it comes to making money from the gas business rather than losing money in the gas business. I'm just disappointed I won't be here to enjoy that. Now, when it comes to production costs, these are very small numbers, around $3 a barrel. I think we went from slightly below three to slightly above three. Yeah. Thore, anything sinister in those numbers?
No, actually that's for once it's actually good cost. It's good cost because actually they were largely due to the fact that we paid some performance related bonuses to the operating companies due to better than anticipated performance. That's the main driver of the increased production cost for the quarter. Going forward, we still maintain that you can expect that to be below $3 per barrel. It's the sort of guidance that we can give you at this stage. Thanks.
Very clear. Thank you. Best of luck, Andy. Thank you.
Thank you. We'll go to our next question. Your next question comes from the line of Henri Patricot from UBS. Please go ahead.
Yes, everyone. Thank you for the presentation and all the best for the future from my side as well. I've got two questions on the outlook, please. The first one on the upstream side. I look at your guidance for the full year. I mean, it seems like the fourth quarter kind of takes into account the absence of the deliquidation and then the lower oil price, but not much for kind of reversal of the lower sales volumes because of the larger number of cargos in transit in the third quarter. Is that there's no kind of reversal in the annual guidance for the full year, or is there, like, another negative that we should have in mind when we think about the fourth quarter upstream?
Just wanna get a bit of an update on your thinking on the hedging policy for next year. We'd like to see more of the refining upstream volumes due to be hedged within the next three months. Thank you.
Thanks, Henri. On the upstream guidance, as you say, you know, we're sticking to our guidance of 127 thousand barrels a day. We're slightly shy of that at the moment, but we're actually going well in Q4, and we're maintaining the guidance for the full year. Clearly, we have three cargoes in transit. It's more than normal, so some of that money will be coming back to us in the fourth quarter. Those are only two things. I think we talked about EUR 3 billion EBITDA guidance for the full year. I think that assumes something like an $85 going forward or $90 for the second half of the year. Now, when it comes to hedging, we...
The gas derivative hedges, as I say, won't be there. Also the oil price hedges won't be there. We will have some legacy refinery hedges. I don't know if Thore want to discuss a little bit about that. Not significant volumes, but there will still be some refinery hedges for 2023.
Yes, that's correct, Andy. It was put on back in early 2021. So there's around 7 million barrels that have been hedged under refinery margin, partly to directly refinery margin and partly cracks. But it's limited to 7 million barrels. We have no further plans of any further hedge at this stage.
EUR 7 million in about EUR 90 million is, well, that was the run rate.
Correct.
Yes.
Correct.
Relatively minor.
Okay. Thank you.
Thank you. We'll now go to the next question. Your next question comes from the line of Raphaël Dubois from Société Générale.
Hello, can you hear me?
We can.
Yeah, great. Thank you very much for taking my questions. The first one is about shareholder distribution. I guess there are always pros and cons on doing more buybacks at a certain point of time. There is certainly some pressure at the moment on all oil and gas companies to maybe refrain from being too generous with shareholders. But in the meantime, at current low share price, very strong balance sheet and strong cash flow generation, I would like to understand why do not you decide to increase the buyback program now and still talk about a EUR 500 million potential buyback for next year? It will look like the best economic decision would be to accelerate it instead of having a pause. That would be my first question. The second one is about your pipeline in renewables.
It would be great if you could give us an update on those 0.3 gigawatts of projects that are in construction. When will they be in production? When I look at what's under development, how quickly do you think some of it will be put into the construction phase? Is not the 4 gigawatt-plus target in 2025 at risk, considering we're already at the end of 2022? Thank you very much.
Thanks, Raphaël. I'm gonna hand over in a second to Filipe. I can just say that we clearly have this distribution policy with a dividend growing at 4% and then up to a third of our operational cash flows, then the balance distributed in a buyback. If our Net Debt to EBITDA is below 1. It's now, as you know, 0.6, so we have some scope. The scheme is designed to be flexible based on our OCF, and we do live in very volatile times. Filipe, any news or any update on distribution frameworks?
Yes, Raphaël. Whilst it is true that our balance sheet is very strong and we are generating OCF, the formula already provides for that. One-third of OCF. If OCF is higher, then distributions will be higher through share buybacks. This comes on top of the 4% increase on the cash dividend. For now, we're in October. The plan is we stick with about EUR 500 million share buybacks related to fiscal year 2022 until further notice. We'll see early next year how 2022 will close and how 2023 will look like. For now, this is unchanged.
Georgios, can you give a kind of a flavor of how quickly we can see projects coming into the final to ready to build and then, you know, meeting our 4 gigawatt target for 2025?
Sure. Thank you, Andy. Thanks, Raphaël, for the question. As you said, we have 1.3 in operation now and 300 in construction. We expect 100 of those to be delivered and in operation by the end of this year. The other 200 is their online date is expected sometime in the second half. We have a very. Our pipeline in the meantime is maturing and we have we expect in the next six months to have about a gigawatt of new capacity and ready to build. We will be ramping up considerably in start of construction in the next year, and we will be seeing much higher CODs, obviously, based on our decisions of how many to deploy.
We will be seeing much higher numbers of CODs in 2024 onwards.
Thank you.
Thank you. We'll go to our next question. Your next question comes from the line of Pedro Alves from CaixaBank BPI. Please go ahead.
Hi. Good afternoon. Thank you for taking my questions. Just to the first one, regarding the decision of the Portuguese government to allow the temporary shift of clients in the gas market from the liberalized to the regulated tariffs. How do you see until the end of the year, and perhaps even for the next year, the number of clients moving to the regulated market? Because I think there was some delays in having this decision. What could be the financial impact for you? The second question, I think you mentioned potential divestments over the coming years to offset also some of the CapEx inflation.
I know that you have touched this on your Capital Markets Day today, and you mentioned the potential portfolio management in upstream, and sell downs in renewables. Could you just give us additional color on how do you see this going on, especially with this new cost of capital environment? Thank you very much.
Thank you.
Thank you, Pedro. Yes, clearly for us, this regulated market move was very unexpected. It wasn't in line with previous indications from government and from the European Union. It means that we're actually having to deliver gas to the regulated market at a price that we don't have the supplies for that because of our hedges. But I think we've seen about 90,000 of the 1.5 million customers move across. We've seen clearly spot prices go down a lot, so the impact is not significant. I think the move in many ways, we don't think is appropriate, from the government side to regulate the market and to oblige us to deliver at a certain price of gas we don't have.
The cost at this stage, I would say, is not as high as we was concerned it could be. Now, what happens next year? Clearly I just need to note that both in Nigeria, there may well be a price review, which may mean that the price passed on to the regulated customer will go up. That's part of a discussion we have with Nigeria LNG at the moment. We, you know, reserve our position with the government on this particular move. We have to see what's gonna have to transpire next year. For 2022, it is because of the relatively low number of clients, perhaps nervous that the price will go up on first of January anyway, have not moved across.
Now in terms of divestments, you will probably appreciate it's very difficult for me to say anything about divestments. I have to say, we continue to actively look at our portfolio, not just in upstream, but as I say, renewables in other areas of our business. You know, we have no announcement at this stage on those divestments. I just need to note that we haven't changed our guidance on a net CapEx basis of EUR 0.8 billion to EUR 1 billion of net CapEx per year. In the round, clearly there will be divestments at some stage in the coming years.
Thank you.
Thank you. We'll go to our next question. Your next question comes from the line of Giacomo Romeo from Jefferies. Please go ahead.
Yes, thank you for taking my questions and best of luck with your future endeavors. On the change in CEO, just wondering whether you have been involved in some capacity in terms of selecting your successor. If you can give a sense of the sort of search parameters that the board has and if the mandate will be one of continuity. Sounds like this is the case, but it would be helpful to have some color around this. The other question that is remaining is about your OCF to EBITDA guidance, and which for upstream remains unchanged.
Obviously your operational guidance is also unchanged production, operational cost, and you said $90-$80, which was the same as we had last quarter. But at the same time, obviously, there is an FX effect which that you have discussed for net CapEx. Just wondering why the upstream EBITDA guidance hasn't changed on the back of the effect that has impacted CapEx. Just very more of a maintenance questions. That's the one I've got left. Thank you.
Giacomo, you know, if you will excuse me, I don't really want to divulge or go into details around individuals and succession. At this stage, I have to say there is no change to the strategy. I have to say that the transformation we're on and the strategy that the board has embraced with me as CEO remains unchanged. Clearly, I think a successor would be someone able to take that journey forward and continue with the transformation of Galp and particularly the transformation of the portfolio and the way we lead our organization internally. On the EBITDA OCF guidance, Filipe, anything to add on?
No, Giacomo, you make a good point. I think we've built a bit of cushion in our guidance. I know we'll make sure we don't miss expectations again. It will depend on number of cargoes in transit as of December thirty-first on the dollar. Yes, this is a conservative guidance on the upstream front. Thank you.
Thank you. We'll go to our next question. Your next question comes from the line of Matthew Lofting from JP Morgan. Please go ahead. Your line is open.
Oh, hi, team. Thanks r taking the questions. two, if I could please. First, just coming back to gas and power. I think, Andy, you sort of talked about some of the, sort of key steps or bridging points to think about for 2023 vs 2022 earlier. I wonder if you could just talk a bit behind that around latest company thinking on diversification of supply, from the perspective that in some ways, even before Nigeria, more recently, the last sort of six to 12 months has arguably been characterized in the business by challenges around gas sourcing.
In a market that globally potentially stays tight for a period of time, and also given Galp's relatively modest upstream equity gas position, I wonder if the Venture Global volumes that come in next year is enough, or whether from a risk management perspective, there's planning and a scenario around sort of ways that position could be further diversified through the medium term. Secondly, just coming back to the upstream and the point around sort of cargoes in transit, I understood that three in transit is high vs the normal one to two.
Just wondered if you could give us a sense of the sort of standard deviation or range around that historically, the extent to which three is an abnormal quarter or something that we could see reoccur looking into next year and beyond. Thanks.
Thank you, Matt. Look, diversification of gas sourcing clearly something we do discuss. The Venture Global clearly adds another string to our bow, which particularly with destination flexibility, with a fixed price and we have linked, it does diversify not only the sources, but also the pricing basis of our cargoes. And we will continue to look forward at, you know, how that develops over time. As you say, you know, we clearly need to look in very much into the long term, meeting our customers' needs, particularly in Iberia. I might say that, you know, we're also not linked into kind of fixed sales volume within Iberia. We can flex how much we're selling in this market at the same time.
The one lesson learned going forward is not to box ourselves in too much, the situation we found this year. I, you know, I do think we're gonna be in a better place, but we are gonna keep a very careful eye at diversification of sources and pricing basis. I don't know if we can say much about the cargo. Three is more than normal, so much more than normal. I think it's, I don't know if you can say, Thore Kristiansen, this would be as high as it ever gets to. It's normally kind of one or two at the most, isn't it? How do you see it?
No, no, it's very exactly, Andy. Thank you, Matt, for the question, as you know. On average, what we have seen is that it is between one and two cargoes. This is, of course, very dependent on exactly what happens at the end of the quarter. It's a bit haphazard as well. I think for planning purposes, for your estimation purposes, you know, use one to two cargoes. That's what you can do. Thank you.
Great. Thanks all.
Thank you. We'll take our next question. Our next question comes from the line of Jason Kenney from Santander. Please go ahead. Your line is open.
Hi. Thanks very much. I'm gonna go back to the share buyback. Just a point of clarification, really, I suppose. EUR 150 million this year, EUR 500 million for the calendar year 2022. Does that mean you do EUR 350 million in the first part of next year? Just an idea of phasing of the balance to EUR 500 million would be useful. Thanks. But then secondly, on exploration, you know, obviously some disappointment with São Tomé. Any lessons learned from São Tomé and, you know, the options going forward for São Tomé?
Maybe more broadly on exploration, you've still got Namibia, second half of next year, but would that be a last kind of traditional effort on new resource, because my understanding was no new exploration outside of current licenses on a medium-term basis. I'm assuming that's gonna be your last well next year. Thanks.
Okay. Jason, a couple of points. On the buyback, EUR 150 million this year is gonna be basically for 2021 kind of reward for the shareholders in 2022. EUR 500 million is extra, but it will be bought back over next year on a smooth basis. We wanna avoid any market abuse issues in terms of making sure that we buy those back in a very steady way across the year. On exploration, I have to say São Tomé and Príncipe was actually quite exciting. You know, we saw some very interesting things in this well. No commercial discovery. It's what you call an exploration success, I guess, not a commercial success. And I'm gonna hand over to Thore.
I'll just say something about, you know, we have said we are not going to pursue new areas, new licenses for frontier exploration. That doesn't mean to say that in the blocks, in the areas we have now, that we will fully appraise and develop what, you know, what we discover, which is true in São Tomé and Príncipe, and it's true in Namibia. I think what we're saying at the moment, we're not actively looking to buy into new upcoming frontier areas as we focus our attention more now to the energy transition. Thore, do you wanna say something about our position in São Tomé and Príncipe or the blocks we've got and what we can imagine going forward?
Thank you, Jason, and it's a relevant question on the exploration side. Actually, I would like to start in Namibia. You know, remember what is our story in Namibia is that we participated in four dry wells, but we learned so much from those four wells that we decided to hang in Namibia, even though it looked very bleak and it was difficult to see the opportunities. But we knew that we had the factors. We saw a working petroleum system in one well. We saw that we had the reservoir conditions in another well. It was all about, and what the exploration is a lot about, is to get the mosaics to fit together.
Thank God, I will say, that we chose to hang in in Namibia, and we are going to have a very interesting exploration phase coming up in Namibia. When it comes to São Tomé and Príncipe, actually Andy said, yes, it was not commercial, but we actually found a working petroleum system. That is a very important achievement. We know that there is a source rock that is working in São Tomé. We actually found higher up in that well, also very interesting reservoir conditions. Galp has positions in three blocks in São Tomé and Príncipe with quite significant ownership share. We do actually see that we have a very interesting exploration portfolio in São Tomé and Príncipe.
What we're doing right now is then to analyze all the data, including that we have, as we speak, fluid samples that are in the lab, and now we are interpreting them. Then we will sit down with our partners and agree on what will then be the go-forward program, both with respect to further exploration and possible appraisal. São Tomé and Príncipe remains a very interesting area for Galp to further explore. What we will not do, and what is not in our plans, is then to go further and beyond to look for new frontier exploration. Our focus then will be infrastructure-led exploration, i.e., exploration around our existing assets to see how we can maximize the value of these assets and smoothen the plateau phase.
That would be our focus going forward beyond São Tomé and Namibia. Thanks.
Yeah, very clear. Thanks very much.
Thank you. We will go to our next question. Your next question comes from the line of Pablo Cuadrado from Kepler Cheuvreux. Please go ahead. Your line is open.
Hello. Good afternoon, everyone. Yes, two quick questions. The first one is on the outlook on the refining margin for Q4. It's actually more a clarification. I was wondering that the $15 per barrel that you mentioned as a guidance, if that reference assumes, let's say, the new methodology of calculation or if it refers to the old one. And the second question would be on volume, the renewable segment. Now that you have Titan consolidated, clearly you have gained full exposure to that asset and clearly it's a new business line for the future. And clearly the current environment with, you know, increasing gas prices, marginal technologies, gas in Europe, so price has been very high.
The question is, more strategic probably going forward, if you think or you are comfortable now having that, consolidated hundred percent to maintain everything on merchant, or you have started to consider probably to move to a more, PPA framework, or if you think that you are fine right now with the current capacity, maybe on merchant and probably focus on PPA just on the future, commissioning of assets.
Okay. Let's start with the refinery margin. I'll hand over to Thore to talk a bit about the guidance and where we are with the new way of calculating that.
It's correct, and thank you, Pablo. It's correct that the guidance that we're giving you are including the fact that we now are basing the refining margin on the spot gas prices, PVB. Actually, month to date, we see very healthy, significantly, actually even above 15. Let's see how that develops during the quarter, but right now the margins stay very healthy with very strong diesel cracks. Actually quite reasonable jet cracks as well. For now, it's good, and our guidance is based on the new gas spot assumptions. Yes.
I'll say a few words on Titan and consolidation. We are on the merchant market. As I think we've reflected, if we had had all these assets in consolidated form for the last 12 months, it would generate EUR 240 million EBITDA on about EUR 1 billion investment. This is, you know, obviously a very good portfolio for us, particularly on a consolidated basis. At the moment, that's where we have that position. What we want to say is we remain flexible. We remain flexible to get the most return for shareholders. Having it on the merchant today is certainly the most attractive way for us to do that.
I don't know if Filipe or Georgios, if you want to say any more words than we remain flexible. At the right moment, we may need to lock in some long-term contracts. At this stage, we are very much enjoying that merchant position.
Galp is an integrated player, so we are a keen offtaker of those electrons. Could we consider internal PPAs? We could. We could do that. One of the topics for next year will be can we maximize project funding if we have PPAs, even if internal? Can we get much longer maturities at very competitive terms? Yes, we could do that. We need to keep an eye and be very mindful of regulation, it's not indifferent, and taxation, but it is not obvious why a company, an integrated company like Galp, would sign offtake agreements with third parties. Most likely we would do it internally. Now, if we also want to rotate some assets, if we want to do dividend recaps, which would reduce the CapEx. We had in our CapEx guidance, if you recall, we had not only asset rotation, we also had dividend recapitalization.
We can do that to also reduce how much of the Galp shareholder stands behind those assets. Thank you.
All right. Thank you, guys.
Thank you. We'll go to our next question. Your next question comes from the line of Alessandro Pozzi from Mediobanca. Please go ahead. Your line is open.
Hi there. Thank you for taking the questions. Just wanted to talk about maybe the commercial. You alluded to the weakness potentially in the gas and electricity market with sales down in Q3. I was wondering if you can give us maybe a sense of the impact that had on EBITDA. And also, I guess whether there is a risk for clients not paying and therefore maybe it's a good time to increase the provisions against that risk. And also, on the second question on the energy management, I believe you mentioned you're not hedging anymore. Not sure if I got it right, but I guess that's a margin business in a way. I was wondering a certain level of hedges will be in place for that business line.
I was wondering if you can give us a sense of that as well. Thank you.
I think Teresa probably wanted you to talk about the oil market, where we're 12% up year-on-year. You've asked her about the gas and power market, which, as you might imagine, is quite tough at the moment. Teresa, what can we say about that? And any provisions?
Well, it's true that the sales of natural gas and power are down quarter-on-quarter, partly because of seasonality, of course, but also because of some reduction in demand observed given the high prices. The impact on EBITDA is small. As you know, this business line is small in terms of the overall commercial EBITDA. What we expect in Q4 is actually some increase in volumes picking up also because of seasonality. We are working with our clients and trying to recover part of the demand that is being taken away by the high prices. Overall, we expect the situation to improve in Q4.
Good. Thank you, Teresa. Look, it is a margin business on the gas business. Clearly, you know, we will be, you know, if you look at the Venture Global volume, we're, you know, potentially looking at placing some of the volume on a medium-term basis at a price where clearly we would lock in a margin. We are looking at those ways to secure the upside. Now clearly there will be a moment where we see the actual market prices and the price of our supply contracts closing, in which time we may want to take some limited hedges. And very much on the principle of hedging. You know, it's when the value we can create is small vs the exposure we take.
As long as the value is high and the exposure is relatively small, then we won't hedge. The second we see those things reversing somewhat, we will consider taking out hedges. Only on a basis, clearly, where we can retain flexibility. Going forward.
All right. Thank you. Thank you. We will now take our final question. The final question comes from the line of Mehdi Ennabati from Bank of America. Please go ahead.
Yes. Hi. Thank you. Just a follow-up question regarding the refining margin for 2023. So you said earlier that you hedged 7 million barrels in 2023 out of 19 million barrels, let's say of throughput. Can you please tell us at what refining margin level you hedged, please? And second, did you hedge for a quarter in particular, Q1 2023, for example, or did you hedge, you know, 8-9% of your throughput in Q1, Q2, Q3, and Q4 2023? Thank you.
Mehdi, it's EUR 7 million out of 90. Well, less than 10%. What I can say is smeared across the whole year, so it's not on any specific quarter. I don't think we have at hand exactly the price of that hedge that we can reveal to you, Mehdi. I suppose we can follow up through our IR team and give you some indications on that.
Yes. Thank you very much.
Okay. I think that was the last question. Before we formally close, can I just thank you all? 'Cause, you know, I knew most of you in my Shell career, and I've known most of you in my Galp period. I find you all extraordinarily professional and supportive of everything we do. I just want to thank you for your professionalism and your engagement and your, you know, willingness to understand our business and the direction we're going. Thank you all. You never know, there may be a third time. Let's see what happens next. All right. Nothing firm. No. No speculations, please. All right. Thank you very much. Operator, you can close the call now. Thank you.
Thank you. This does conclude our conference for today. Conference all disconnect.