Saipem Board Approves Q1 Results
The Board of Directors of Saipem S.p.A. on Wednesday reviewed the Saipem Group's consolidated first quarter results at March 31, 2007, which are not subject to audit.
As previously stated, revenues and associated profit levels, particularly in the Offshore and Onshore sectors, and, to a lesser extent, in the Drilling sector, are not consistent over time, as they are influenced not only by market performance but also by climatic conditions and individual project schedules. Consequently, the results from any one particular fiscal period can vary significantly, thereby precluding a direct comparison with the same period in other fiscal years or extrapolation of figures from a single quarter to the entire year.
Investments in the first quarter of 2007 amounted to Euro 252 million and consisted of: maintenance and upgrading of the existing asset base, including works on the construction of the new semi-submersible platform Scarabeo 8 and the new pipe layer (Euro 134 million); investments in vessels and equipment for specific projects, mainly in Saudi Arabia and preparatory works on Scarabeo 6 due to perform operations in Egypt (Euro 19 million); capex to strengthen the operating bases/yards in Kazakhstan and West Africa (Euro 6 million); conversion of two tankers into FPSO units, due to operate respectively on Petrobras' Golfinho 2 field in Brazil and on behalf of Sonangol P&P in Angola (Euro 85 million); and investments carried out by Snamprogetti (Euro 8 million).
Net financial debt at March 31, 2007 amounted to Euro 1,437 million, representing an increase of Euro 20 million from December 31, 2006, ascribed mainly to capital expended during the period.
New contracts and backlog
During the first quarter of 2007, Saipem, as a stand-alone entity, was awarded contracts amounting to Euro 1,779 million (compared to Euro 1,125 million in the first quarter of 2006); during the same period, Snamprogetti won contracts amounting to Euro 589 million. The most significant orders awarded in the first quarter include:
- on behalf of Medgaz, an EPIC-type project, comprising installation of a subsea pipeline system which will enable the transportation of natural gas from Algeria to Spain under the Mediterranean Sea.
- on behalf of Eni Australia, an EPIC-type project in Australia, comprising engineering, procurement, construction, installation and commissioning of production platforms and the associated subsea pipeline system for transporting oil & gas to the onshore terminal;
- on behalf of BG Tunisia Limited, a project in Tunisia, comprising procurement, installation and commissioning of a subsea pipeline connecting the Hasdrubal field, approximately 350 kilometers southeast of Tunis, to the onshore terminal;
- on behalf of BP Norge As, a project in the Norwegian sector of the North Sea, comprising transport and installation of a jacket, mooring facilities and a three-tier deck that will house all production plant and associated structures for the Valhall field;
- on behalf of Cabinda Gulf Oil Company Limited, an EPIC-type project in Angola, comprising engineering, procurement, transport and installation of two subsea pipelines in the Mafumeira field, located in Block 0 off the Angolan coast;
- on behalf of Saudi Aramco, an EPC-type project in Saudi Arabia, for the expansion of the Qarayyah plant, which forms part of the Khurais field facilities, located 250 kilometers south-west of Dhahran, and is used to treat sea-water for subsequent well injection;
- on behalf of Saudi Aramco, an EPC-type project in Saudi Arabia, comprising engineering, procurement, construction, installation and commissioning of pumping stations, which inject water from the Qurayyah treatment plant into the Khurais field. The contract was awarded to the 50-50 joint venture comprising Saipem and the Canadian company SNC-Lavallin;
- on behalf of Scogat, the Trans-Tunisia Pipeline contract, in Tunisia, comprising engineering, procurement, construction and commissioning of two new gas compression stations in addition to the expansion of existing compression facilities.
- on behalf of Engro Chemical Pakistan Limited (ECPL), in Pakistan, the project for the supply of technology licenses, engineering, procurement and supervisory activities relating to the construction of a plant for the production of ammonia and urea, inclusive of all service infrastructures; the plant will be located in Daharki, approximately 450 kilometers north-east of Karachi.
The backlog of the Saipem Group at March 31, 2007 stands at a record level of Euro 13,268 million.
Management outlook for 2007
The strong overall market performance, Saipem's positive results for the first quarter and the fact that projects under execution are generating expected volumes and margins underpin management's expectations of achieving, as previously announced, revenues in excess of Euro 9 billion and an increase in net profit, before one-off income from disposals, of at least 20% compared with 2006. This, despite the fact that the devaluation of US dollar, the currency in which approximately 70% of revenues are denominated, has negatively impacted 2007 operating income by approximately Euro 20 million compared with 2006.
As previously stated, disposals of non-core assets are planned to take place in 2007. The proceeds from these disposals are expected to be in the region of Euro 700 million, with a pre-tax capital gain amounting to approximately half of that sum. These disposals will contribute to a more effective financial planning of the Group's industrial development. Accordingly no immediate impact in Saipem's dividend policy is contemplated.
With regard to capital expenditure, the contract for the construction of a new pipelay vessel was formalised with the Chinese Shipyard Yantai Raffles. Also, a letter of intent was sent to the Italian company Fincantieri, for the completion and outfitting of the semi-submersible platform Scarabeo 8, whose hull is being built at the Russian Shipyard Sevmash in Severodvinsk. Works for the realisation of the new construction yard specialising in large offshore structures have yet to start, while negotiations with the land owners, in a specific area, continue; Saipem is committed to pursuing this project, and alternative locations are being considered.
Alongside the above mentioned investments, a turnkey contract was recently signed with Samsung Heavy Industries Co., of the value of US$ 660 million, for the construction of a new deep-water drillship to be called Saipem 12000, due to be delivered in the first quarter 2010. This new ship will be 228 meters in length and 42 meters wide; it will be equipped with a dynamic-positioning system, and is designed to operate at depths of 3,600 meters (12,000 feet). Its maximum cruising speed will be 11.5 knots and it will be capable of accommodating up to 200 personnel. The decision to start construction of the new vessel was reached following protracted negotiations with clients for the award of a new long-term contract, and the fact that clients demand, as a pre-condition for negotiations, a definite delivery date of the vessel. The total capital expenditure for 2007 is forecast to be marginally in excess of Euro 1.2 billion, which was previously announced. This is due to the combined effect of the start of the investment on the drillship Saipem 12000 and the revised time schedule for other initiatives.
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