Jefferies raised its recommendation on Galp Energia to Hold from Underperform and boosted its price target to €20 from €14.30 on Thursday, following a material upgrade to the firm's earnings outlook. The broker cited a combination of improved commodity prices, firmer refining margins and a favorable fiscal profile at Galp’s flagship Brazilian offshore project as the primary drivers of the revision.
Central to Jefferies’ revised view is the Bacalhau field in Brazil. The development is moving toward a net peak production of roughly 40,000 barrels per day by 2027, and Jefferies expects that output to underpin total company production growth of about 30% relative to 2025 levels. The Bacalhau project benefits from a pre-salt fiscal regime that, in Jefferies’ model, results in cash tax rates of just 15% to 30% through 2028.
"These low early-life tax rates materially enhance CFFO leverage to higher oil prices," analysts led by Sasikanth Chilukuru wrote.
Jefferies also identifies upside in Galp’s industrial operations on two fronts. First, the completion of a major turnaround at the Sines refinery, scheduled for the fourth quarter of 2025, positions the refinery to capture what Jefferies now views as substantially stronger refining margins. Second, the firm highlights an expanding differential between relatively high European gas prices and lower U.S. Henry Hub gas prices. Because Galp’s Venture Global LNG offtake contracts are indexed to the U.S. benchmark, that spread is expected to lift midstream profitability.
Reflecting those industrial tailwinds, Jefferies said it has raised its 2026-27e Industrials EBITDA forecast by roughly 50%.
The broker framed the current macroeconomic and commodity backdrop as supportive of accelerated balance-sheet improvement. In its base case, Jefferies projects net gearing, including leases, will decline from 33% at the end of 2025 to about 13% by the end of 2028. Free cash flow yield to equity is forecast at 10.9% for 2026.
Jefferies also noted investor sentiment has been aided by Galp’s lack of exploration and production or refining exposure to the Middle East, a trait the analysts say Galp shares with peers such as Repsol and Equinor.
Contextual notes
- The upgrade and target increase reflect Jefferies’ updated earnings and cash-flow assumptions driven by Bacalhau production, lower early-life tax rates through 2028, and improved industrial margin expectations.
- Industrial drivers include the Sines refinery turnaround in Q4 2025 and benefits to midstream cash flows from a widening Europe-to-U.S. gas price spread given Galp’s U.S.-indexed LNG offtake contracts.