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UPDATE 2-Portuguese oil company Galp halves dividend after 98% profit slump

(Adds CEO comments)

LISBON, Feb 22 (Reuters) - Portuguese oil and gas company Galp Energia cut its dividend payout by half on Monday after reporting a 98% plunge in fourth-quarter net profit as the COVID-19 took its toll on margins and output.

The company said it would propose a dividend of 0.35 euros ($0.4237) per share for 2020, down from 0.70 euros paid the previous year.

“The dividend cut reflects the impact from unexpected and unprecedented market conditions”, Galp said in a statement, adding that it would target a 2021 payout of 0.50 euros per share.

Chief Executive Andrew Brown warned that the short-term outlook looks challenging and that it needs to “show prudence” in its investments, which range from upstream oil and gas to refining and renewable energy.

“We have to be really clear on which things and which of these sources we’re backing, because I don’t think we can afford to do everything,” he told a conference call with analysts.

Galp suspended production at its largest refinery in Sines and the smaller Matosinhos plant between April and June. It stopped producing at Matosinhos again in early October ahead of being decommissioned.

The company said production in the fourth quarter fell to 122,800 barrels of oil equivalent per day (boepd) on a working interest basis, against 136,900 boepd a year earlier.

Its refining margin fell to $1.60 per barrel from $3.30 in the same period in 2019.

Adjusted net profit slumped to 3 million euros ($3.7 million) from 157 million euros a year earlier, while earnings before interest, tax, depreciation and amortisation (EBITDA) fell 37% to 410 million euros.

For the full year, Galp swung to a loss of 42 million euros from a profit of 560 million euros in 2019, while EBITDA fell 34% to 1.57 billion euros.

The company said it expects EBITDA of between 1.6 billion and 1.8 billion euros in 2021. ($1 = 0.8220 euros)

Reporting by Sergio Goncalves Editing by Andrei Khalip and David Goodman

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