For Immediate ReleaseChicago, IL – March 6, 2025 – Today, Zacks Equity Research Equity arePhillips 66 (PSX) , Marathon Petroleum (MPC) , Valero Energy (VLO) and Galp Energia (GLPEY) .Industry: Oil & Gas - Refining & MarketingLink: https://www.zacks.com/commentary/2425703/4-refining-marketing-stocks-that-can-weather-the-industry-stormThe Zacks Oil and Gas - Refining & Marketing industry faces challenges from volatile crude prices, regulatory pressures and rising operational costs. Seasonal Q4 refining margin ...

Core Viewpoint - The Zacks Oil and Gas - Refining & Marketing industry is currently facing challenges such as volatile crude prices, regulatory pressures, and rising operational costs, but it holds long-term growth potential due to strong demand for refined products and strategic investments in optimization and sustainability [1][4]. Industry Overview - The industry comprises companies that sell refined petroleum products and non-energy materials, with primary activities involving the processing of crude and other feedstocks into various refined products. Refining margins are highly volatile and influenced by factors such as inventory levels, demand, imports, and capacity utilization [2]. Trends Defining the Industry's Future - The industry is experiencing pressure on margins due to fluctuating crude prices, regulatory challenges, and seasonal weakness in refining margins. Geopolitical risks and rising operational costs are additional factors impacting profitability [3]. - Despite these challenges, the industry is well-positioned for long-term growth driven by strong global demand for refined products and operational efficiencies [4]. Cost Dynamics - Increasing operational costs from store expansions and wage pressures are affecting financial performance. Competitive pricing in non-fuel categories and slower recovery in discretionary spending further complicate the market landscape [5]. Industry Performance - The Zacks Oil and Gas - Refining & Marketing industry has underperformed compared to the broader Zacks Oil - Energy Sector and the S&P 500 over the past year, with a decline of 10.7% compared to a 3.3% increase in the sector and a 17.2% gain in the S&P 500 [10]. Current Valuation - The industry is currently trading at an EV/EBITDA ratio of 3.64X, significantly lower than the S&P 500's 17.27X and slightly below the sector's 4.21X. Over the past five years, the industry's EV/EBITDA has ranged from 1.80X to 6.96X, with a median of 3.63X [13]. Company Highlights - **Phillips 66**: A leading refiner with a refining capacity of 2.2 million barrels per day, expected to see 7.8% earnings growth in 2025 [15][16]. - **Marathon Petroleum**: An independent refiner with access to lower-cost crude, has a market capitalization of $45.6 billion and has consistently beaten earnings estimates [18][19]. - **Valero Energy**: The largest independent refiner in the U.S. with a capacity of 3.2 million barrels per day, has a strong earnings performance record [21]. - **Galp Energia**: A Portuguese integrated energy firm with a refining capacity in Portugal, has shown a 51.2% average earnings surprise over the past four quarters [22].

Oil and Gas Market Overview - Oil prices rose by 4.7% to $73.96 per barrel, driven by optimism around Chinese stimulus plans [2] - Natural gas prices fell by 0.9% to $3.3540 per MMBtu due to milder weather forecasts [2][3] Major Industry Developments Galp Energia - Discovered oil and gas in Namibia's Orange Basin under Petroleum Exploration License 83 [3] - Mopane-2A well found hydrocarbon columns in AVO-3 (gas-condensate) and AVO-4 (light oil) reservoirs [3] - High-quality reservoirs with good porosity and permeability, low CO2 and no H2S concentrations [4] - Operates with 80% working interest, partners NAMCOR and Custos hold 10% each [5] Harbour Energy - Discovered hydrocarbons in Jocelyn South prospect in UK's Central North Sea [5] - Operator with 67% interest, partner Ithaca Energy holds 33% [6] - Gas-condensate found in Joanne sandstone reservoir at 12,620 ft TVDSS with 434 ft MD net pay [6] BP - Commenced gas production from Greater Tortue Ahmeyim (GTA) project in Senegal and Mauritania [7] - $4.8 billion FLNG facility to produce 2.3 million tons of LNG annually in initial phase [8] - Wells located at 2,850 meters water depth, gas transported to floating storage and processing vessel [8] Cheniere Energy - Achieved first LNG production from Train 1 of Corpus Christi Stage 3 Liquefaction Project [9] - Project completion at 75.9% as of Nov 30, 2024, with Train 1 expected to be substantially completed by Q1 2025 [10][11] - Seven midscale LNG trains to increase facility capacity to over 25 mtpa of LNG [10] Repsol - Restarted exploration in Libya's Murzuq Basin after a decade-long hiatus [11] - Spudded A1-2/130 well near Sharara oil field, planned depth of 1,844 meters [12] - Sharara field has production capacity of 320,000 barrels per day [13] Price Performance - Energy Select Sector SPDR rose 3.5% last week but edged down 1.2% over past six months [14] - Notable weekly stock gains: RIG (+12.2%), MPC (+5.2%), COP (+4.3%), OXY (+4%) [14] Future Market Focus - US government oil and natural gas statistics to guide commodity price trends [15] - Baker Hughes' rig count data to monitor US crude and natural gas production trends [15]

Company Overview - Galp Energia, SGPS, S.A. has made a significant oil and gas discovery in Namibia's Orange Basin through its Petroleum Exploration License 83, with the Mopane-2A well revealing a hydrocarbon column of gas-condensate and light oil [1][5] - The company operates with an 80% working interest in the Mopane-2A well, partnering with NAMCOR and Custos, each holding a 10% interest [5] Reservoir Characteristics - The AVO-3 and AVO-4 reservoirs are identified as high-quality with good sands, porosities, and permeabilities, characterized by high pressure and low fluid viscosities, containing minimal CO2 and no H2S [2] Industry Context - Namibia is emerging as a significant hotspot for oil exploration, attracting major oil companies due to recent discoveries along its coast [3] - Other major players, including Shell and TotalEnergies, have also made notable discoveries in the Orange Basin, enhancing Namibia's position in the global oil industry [4] Future Plans - Galp Energia plans to further analyze data from the drilling process to assess the commercial viability of the Mopane complex and will relocate the Santorini drillship to target additional prospects [6] - A high-density, high-resolution 3D seismic survey will be conducted across the Mopane complex to complement drilling activities [7]

Industry Overview - The Zacks Oil and Gas - Refining & Marketing industry includes companies that sell refined petroleum products and non-energy materials, as well as operate terminals and transportation services [4] - The primary activity involves processing crude and other feedstocks into various refined products, with refining margins being highly volatile and influenced by multiple factors [5] Current Industry Trends - Refining margins are affected by fluctuating crack spreads and global economic uncertainties, particularly in key markets like China, leading to short-term operational pressures [6] - There is steady demand growth for refined products such as gasoline, diesel, and jet fuel, which provides a positive outlook despite rising operational costs and economic challenges [7][8] Industry Performance - The Zacks Oil and Gas - Refining & Marketing industry has underperformed compared to the broader Zacks Oil - Energy Sector and the S&P 500, declining by 11.2% over the past year while the sector increased by 8.2% and the S&P 500 gained 29.2% [13] - The industry's Zacks Industry Rank is 204, placing it in the bottom 18% of 250 Zacks industries, indicating a bearish outlook [9][10] Earnings Outlook - The industry's earnings estimates have decreased significantly, with a 29.5% drop for 2024 and a 20.3% decline for 2025 over the past year, reflecting a negative sentiment among analysts [11] Valuation Metrics - The industry is currently trading at an EV/EBITDA ratio of 3.38X, which is lower than the S&P 500's 18.81X and slightly below the sector's 3.58X [15] - Historical trading ranges for the industry show a high of 6.72X and a low of 1.74X over the past five years, with a median of 3.56X [16] Company Highlights - **Marathon Petroleum**: A leading independent refiner with a market capitalization of $48.6 billion, benefiting from access to lower-cost crude and strong cash flow generation [17][18] - **Valero Energy**: The largest independent refiner in the U.S. with a refining capacity of 3.2 million barrels per day, showing an expected EPS growth rate of 6% over the next three to five years [19][20] - **Galp Energia**: A Portuguese integrated energy firm with a market capitalization of $12.3 billion, known for its strong earnings surprise history [21]

Industry Overview - The Zacks Oil and Gas - Refining & Marketing industry includes companies that sell refined petroleum products and non-energy materials, operating terminals, storage facilities, and transportation services [2] - The primary activity involves buying crude and processing it into various refined products, with refining margins being highly volatile and influenced by inventories, demand, imports, and capacity utilization [2] Trends Defining the Industry's Future - Refining margins are affected by fluctuating crack spreads and global economic uncertainties, particularly in key markets like China, leading to potential cash flow pressures [3] - Steady demand growth for refined products like gasoline, diesel, and jet fuel provides a positive outlook, supported by structural advantages such as access to low-cost energy and high facility complexity [4] - Rising operational costs from store expansions and wage pressures create challenges for financial performance, necessitating careful cost management [5] Current Industry Outlook - The industry currently holds a Zacks Industry Rank of 204, placing it in the bottom 18% of 250 Zacks industries, indicating dull near-term prospects [6][7] - Analysts have revised earnings estimates downward, with a 29.5% decrease for 2024 and a 20.3% decrease for 2025 over the past year [8] Performance Comparison - The industry has underperformed compared to the broader Zacks Oil - Energy Sector and the S&P 500, declining by 11.2% over the past year while the sector increased by 8.2% and the S&P 500 gained 29.2% [10] Current Valuation - The industry is trading at an EV/EBITDA ratio of 3.38X, significantly lower than the S&P 500's 18.81X and slightly below the sector's 3.58X [13] Company Highlights - **Marathon Petroleum (MPC)**: A leading independent refiner with a market capitalization of $48.6 billion, known for strong cash flow generation and shareholder returns, with shares gaining 3.6% in a year [15][16] - **Valero Energy (VLO)**: The largest independent refiner in the U.S. with a refining capacity of 3.2 million barrels per day, expected EPS growth rate of 6%, and shares gaining 6.8% in a year [19][20] - **Galp Energia (GLPEY)**: A Portuguese integrated energy firm with a market capitalization of $12.3 billion, known for a four-quarter average earnings surprise of 51.2%, with shares increasing by 22.1% in a year [23]

Galp Energia SGPS SA (GLPEY) , a Portuguese energy firm, has scrapped its plans to build the Aurora lithium refinery on the Portuguese coast in Setubal. The decision followed its failure in finding a partner to invest in the project after its previous partner in the venture, Northvolt AB, decided to quit. Details of the Partnership Northvolt AB, a Swedish battery developer and manufacturer, and Galp Energia had formed a 50-50 joint venture in 2021 to develop the lithium processing facility. However, at the ...

Financial Data and Key Metrics Changes - The company reported robust performance despite a less supportive refining and commodities price environment, indicating confidence in beating full-year guidance [5][6] - The CapEx guidance for the next three years is expected to be less than €1 billion per annum, with adjustments anticipated following the closure of the Mozambique divestment [14][15] Business Line Data and Key Metrics Changes - The Downstream segment showed strong performance in convenience client services, while industrial initiatives in energy efficiency and green hydrogen are progressing well [6] - The Upstream segment is actively drilling in Namibia, with the third well currently underway and plans for additional wells [7][8] Market Data and Key Metrics Changes - The refining margins have decreased from earlier in the year, with expectations of continued pressure due to increased gasoline exports from China [50][51] - The company is monitoring the impact of the Dangote refinery ramping up production, which may further pressure refining margins [57] Company Strategy and Development Direction - The company aims to maintain an 80% stake in Namibia until further drilling results are obtained, indicating a cautious approach to partnerships [8][46] - Preliminary work on FPSO design is ongoing to ensure readiness for development once a partnership is established [52] Management Comments on Operating Environment and Future Outlook - Management expressed optimism about the upcoming drilling results in Namibia and the potential for significant discoveries [37][72] - The company is not rushing into decisions regarding the lithium joint venture due to challenging market conditions and regulatory uncertainties [26] Other Important Information - The company is progressing well with its green hydrogen projects, with commercial operations expected by 2026 [55] - The RED III directive implementation in Portugal is planned for mid-2025, which is anticipated to foster green hydrogen demand [56] Q&A Session Summary Question: Midstream contribution and guidance for 2025 - Management expects a strong contribution from the midstream segment, but is not yet incorporating Venture Global volumes into guidance [12][13] Question: CapEx expectations and Mozambique divestment - CapEx is expected to remain within the three-year guidance, with significant impacts anticipated from the Mozambique divestment closure [14][15] Question: Namibia drilling details - The current well is an appraisal well targeting AVO-1, with no back-to-back drilling due to ongoing seismic analysis [20][21] Question: Lithium joint venture delay - The project is delayed due to challenging market conditions and concerns about the viability of lithium mining in Portugal [26][27] Question: Tupi project updates - Discussions are ongoing regarding the Tupi field life extension and additional FPSO requirements [33] Question: Refining market outlook - Refining margins are under pressure, with expectations of continued challenges from increased gasoline exports from China and the Dangote refinery [50][57] Question: Non-fuel performance in convenience retail - Non-fuel contributions to EBITDA have increased significantly, with ongoing transformation efforts in service stations [61][62] Question: Forward-looking guidance - Management is currently assessing significant developments and will provide updates on forward-looking guidance soon [78]

3Q24 Results October 28, 2024 1441 34 3Q24 Highlights Continued strong operational momentum 112 kboepd Upstream production1 22 mboe Refinery raw materials processed 1.9 mton Oil products sold to direct clients 853 gwn Renewable power generation e820 m RCA Ebitda e540 m OCF e229m Net capex 0.5 × Net debt to Ebitda | --- | --- | |-----------------------------------------------------------------------|-------| | | | | Delivering strong operating | | | performance despite lower | | | commodities prices & refini ...

Core Viewpoint - The Zacks Oil and Gas - Refining & Marketing industry is facing declining fuel margins and rising costs due to inflation, but strong demand for gasoline and distillates may provide some support for refiners [1][2][5]. Industry Overview - The industry includes companies that sell refined petroleum products and non-energy materials, and some operate terminals and transportation services [3]. - The primary activity involves processing crude oil into various refined products, with refining margins being highly volatile and influenced by several factors including inventory levels and demand [4]. Trends Defining the Industry's Future - **Refining Margins Under Pressure**: Refining margins have weakened from 2022 highs, with crack spreads narrowing due to lower refined product prices relative to crude oil. Elevated inventories and demand uncertainties are additional risks [5]. - **Refiners Poised for Growth Amid Rising Product Demand**: Strong demand for gasoline and diesel is driven by travel and mobility, with gasoline inventories slightly below the five-year average and distillate stocks 9% lower [6][7]. - **Supply-Chain Challenges**: The industry faces supply-chain disruptions and cost inflation, limiting refiners' ability to deliver volumes and impacting profitability [8]. Industry Performance - The Zacks Oil and Gas - Refining & Marketing industry ranks 205, placing it in the bottom 18% of over 250 Zacks industries, indicating dull near-term prospects [9][10]. - The industry's earnings estimate for 2024 has decreased by 20.9% over the past year, with a decline of 8.6% for 2025 [11]. Comparative Performance - The industry has underperformed compared to the broader Zacks Oil - Energy Sector and the S&P 500, with a decline of 2.9% over the past year versus a 27.5% gain for the S&P 500 [13]. Current Valuation - The industry is currently trading at an EV/EBITDA ratio of 3.55X, lower than the S&P 500's 18.90X but above the sector's 3.09X [15]. Stocks in Focus - **Galp Energia**: A Portuguese integrated energy firm with a market capitalization of $14.5 billion and a four-quarter average earnings surprise of 64.3% [17]. - **Valero Energy**: The largest independent refiner in the U.S. with a refining capacity of 3.2 million barrels per day and an expected EPS growth rate of 4% [19]. - **Murphy USA**: A leading independent retailer with a market capitalization of $10.8 billion, benefiting from its proximity to Walmart supercenters [21].