Saipem, the Italy-based oilfield services provider, has revealed its strategic plan for 2016-2019, that the company hopes will make it leaner, more competitive and ready to react to the energy market recovery.
The company feels the oil market could start recovering gradually in 2017. In line with the new strategy, the company has also revealed a new logo (see the photo below).
As reported earlier today, the company will have a changed ownership structure after Eni, its largest shareholder decided to sell a share in Saipem to Fond Strategico Italiano. Saipem also hopes to raise 3.5 billion euros through a rights issue, in order to repay the debt to Eni and become independent. (Read more on that here: https://bit.ly/1Xy9MGo)
Operationally, the company on Wednesday highlighted several factors that are making the market for the oilfield services providers difficult at the current low oil price environment.
The company said the market is seeing delayed FIDs, especially in deepwater, offshore fleet overcapacity, pressure on rig rates, clients more and more focused on cost reduction, resulting in tougher negotiations, pressure on supply-chain margins etc.
Focus on core
Thus, Saipem has decided to focus on its core strengths, divest some of its assets and cut costs. The company has now increased cost cutting target from from €1,3 billion announced in July to €1,5 b (2015 – 17 cumulated).
The additional initiatives include the optimization of external costs and a further rationalisation in the engineering capacity in Brazil, UK, Australia, Angola, Romania, UAE and India, the company said, adding that expected benefits in terms of operating profits are €150m in 2015, €370m in 2016 and €480m in 2017.
As part of the savings initiatives, the company will look to reduce numbers in overseas support functions (local and expat personnel).
To sharpen focus, the company said it would shed non-essential parts of its business, such as leased FPSOs and its infrastructure business segment in Italy, scrap four vessels and reduce presence in regions with least potential. The vessels set for scrapping are Semac 1, Castoro 7, SB320, S355.
Also, the company said it would keep its per-year investments in 2016 and 2017 below €600. The investments will mostly focus on the maintenance of the company’s offshore engineering and construction and drilling rig fleets.
The disciplined financial policy, as Saipem describes it, should support organic cash generation, and see net debt decline below €1,5 billion in 2016 and below €1 billion million in 2017.
The company has also reported its 3Q 2015 results. Revenues were €3,072 million (€3,509 million in the third quarter of 2014) and net income was 54 million euros, versus 76 million a year ago.
Stefano Cao, Saipem CEO, commented: “Saipem results for the third quarter of 2015 were in line with the same period of 2014, despite the deeply deteriorated market scenario. This was achieved as a result of an improvement in the onshore E&C segment, which returned to breakeven, coupled with the relative stability of the drilling segment.
In its webcast on Wednesday, presenting its strategic plan, the company said it expected to see a pick-up in upstream spending by oil majors, and recovery in exploration. The company also anticipates a rebalanced rig capacity following the attrition, and consequently the day rates to rise.
Talking about near-term opportunities the company is looking at, Saipem said it would focus on Egypt. While it did not explicitly say it, Saipem probably hopes to take part in the development of the giant Zohr offshore gas discovery Eni made in September in the Mediterranean Sea, offshore Egypt.
The company is also looking to pick up work in Iran, subject to the lifting on sanctions. Additionally, it sees opportunities in Mexico, where it has secured work for the development of a deepwater field by Pemex.
Also worth noting, Saipem is interested in taking part in the development of Abadi FLNG project, citing favorable position of its yard in Indonesia. To remind, Inpex, the operator of the Abadi gas field submitted a revised plan for development, with a bigger FLNG unit needed than originally expected.
Offshore Energy Today Staff