Saipem Cuts Guidance as Project Delays Take Toll

Reuters

MILAN, July 27 (Reuters) - Italian oil contractor Saipem cut its guidance for the year on Wednesday, saying clients hit by low oil prices were delaying the awarding of contracts.

Saipem, controlled by oil major Eni and state-backed fund FSI, said it expected revenue for the year to come in at around 10.5 billion euros from a previous target of more than 11 billion euros.

Adjusted net profit will be around 250 million euros this year. The company had previously guided to a profit of around 300 million euros.

Saipem Chief Executive Stefano Cao, a veteran oil man formerly in charge of exploration and production at Eni, said a slowdown in engineering and construction work and onshore drilling was taking a toll.

"The industry is still crossing the desert," he said in a call with analysts.

Oil service companies around the world are finding business tough as weak crude prices prompt oil companies to cut back on spending.

Saipem, whose shares have lost 92 percent in the last four years after a series of profit warnings, a bumper share issue and a corruption case in Algeria, also cut its profit target for the year due to higher charges and taxes.

Analysts said the guidance cuts were not good news but had been expected by the market to bring it in line with consensus.

"Operationally, the company posted a good set of second-quarter results, above expectations, though its drilling business remains a problem," an analyst said.

In the second quarter Saipem reported adjusted core profit of 182 million euros, some 15 percent above market expectations with a strong performance in offshore construction.

The company, which employs some 45,000 people, is a market leader in subsea work including the world's most expensive oil field, Kazakhstan's Kashagan.

But its drilling business remains a headache and onshore drilling activity posted a loss of 96 million euros in the second quarter.

Cao told analysts drilling was showing no sign of recovery despite a recent pull back in oil prices.

"I consider onshore drilling to be a tradeable business," he said when asked about the group's ambitions in possible merger and acquisition operations.

Saipem shares ended the session up 3.2 percent at 0.4396 euros. The results came out after market close.

(Editing by David Evans)

Copyright 2016 Thomson Reuters. Click for Restrictions.

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