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UPDATE 1-Saipem stays glum on year ahead
February 23, 2017 / 8:48 PM / 10 months ago

UPDATE 1-Saipem stays glum on year ahead

(Recasts lead, adds management comments)

MILAN, Feb 23 (Reuters) - Italian oil services group Saipem does not see any recovery for the industry this year in spite of higher crude prices, with oil companies continuing to delay projects.

Saipem, jointly controlled by Italian major Eni and state-lender fund FSI, reported a net loss of 2.1 billion euros in 2016 on Thursday due to heavy writedowns booked to deal with a prolonged slump triggered by lower oil prices and increased competition.

Since OPEC reached an agreement in November to cut production levels, crude prices have risen slightly but Saipem said oil majors remained cautious.

“Our clients are still delaying projects, especially in deep water,” Saipem CEO Stefano Cao said on a call with analysts.

“The low level of investments will persist in 2017, with the exception of North America and in part in the Middle East,” Cao said.

The company confirmed targets for the year set back in October, including adjusted core earnings of around 1 billion euros, but noted they were underpinned by work already in the backlog portfolio.

Asked if the group could repeat its 2016 order intake this year Cao said: “We will do what we can to achieve that.”

Oil service companies around the world are finding business tough as weak crude prices force oil majors to cut billions of dollars in costs.

In the fourth quarter, the contractor made an adjusted net profit of 26 million euros, whereas a Thomson Reuters consensus had forecast 57 million euros.

Saipem, which employs 38,000 people, is a market leader in subsea engineering and construction (E&C) work including the world’s most expensive oil field, Kazakhstan’s Kashagan.

But its onshore E&C and drilling businesses remain a problem and some analysts have said it could sell assets.

“We are not studying any disposals of our units,” CFO and strategy officer Giulio Bozzini told a media call.

Bozzini said Saipem was asking for compensation of 600-700 million euros from Gazprom for cancellation of a South Stream contract in 2015.

He said he expected a decision to be made in 2018. (Reporting by Stephen Jewkes; Editing by Elaine Hardcastle and Susan Fenton)

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