Investments in the first quarter of 2009 amounted to EUR495 million (EUR422 million in the first quarter of 2008) and included:
— EUR200 million in the offshore sector relating mainly to the purchase of the lay barge piper, the construction of a new pipelayer and an ultra-deepwater Field Development Ship, the development of a new fabrication yard in Indonesia, and maintenance and upgrading of the existing asset base;
— EUR219 million in the offshore drilling sector, relating to the construction of two semi-submersible rigs, a new ultra-deep water drillship and a jack-up, in addition to maintenance and upgrading of the existing asset base;
— EUR68 million in the onshore drilling sector for the upgrading of existing assets and the construction of five rigs, for which long-term contracts have already been secured;
— EUR8 million in the onshore sector for maintenance and upgrading of the existing asset base.
Net financial debt at March 31, 2009 amounted to EUR2,514 million, representing an increase of EUR482 million from December 31, 2008, attributable mainly to investments made during the period and a reduction in client advances compared to the exceptionally high level at the end of 2008.
New contracts and backlog
During the first quarter of 2009, Saipem was awarded new contracts amounting to EUR2,518 million (compared to EUR2,255 million in the first quarter of 2008). The most significant orders awarded in the first quarter include orders for:
Onshore:
The joint venture Eni-Sonatrach, the EPC project in Algeria, for the facilities for natural gas extracted from the Menzel Ledjmet East field and from the future developments of the CAFC (Central Area Field Complex). The contract encompasses the EPC (engineering, procurement and construction) of the natural gas gathering systems and processing plant and the related export pipelines;
Offshore:
— The increase in workscopes of various contracts in the backlog;
Offshore Drilling:
— Burullus Gas Company, the extension until the fourth quarter of 2014 of the charter contract for the semi-submersible platform Scarabeo 6 in Egypt.
Saipem Group’s backlog at March 31, 2009 stands at EUR19,045 million.
Management outlook for 2009 and medium-term outlook
Weakness in hydrocarbon demand and prices coupled with much tighter access to credit have led to a reduction in spending by the Oil Industry and a consequent deterioration in the oil services market. When analysing the outlook for the oil industry it is worth noting that while the collapse of hydrocarbon prices has an immediate impact on oil company profits, the impact on contractors is temporarily delayed by the execution of orders in the backlog. Saipem’s very high backlog mostly comprising long-term contracts further dilutes the impact of the current crisis.
Notwithstanding the expected future impact of the current crisis, for 2009 Saipem forecasts the achievement of largely positive results: revenues approaching EUR10 billion, EBITDA slightly higher than 2008, and operating profits of around EUR1 billion. This forecast is based on the assumption, which at present seems likely, that cancellations or renegotiations will have no significant impact on the backlog. Investments for 2009 are confirmed to be in the region of EUR1.6 billion.
In the longer term Saipem’s volumes and profits, although directly related to Oil Industry spending, will benefit from an industrial model that is especially competitive for the execution of complex projects in strategic areas. This renders Saipem less exposed, compared to its competitors, to the cyclical nature of the market.
