Saipem in 269 million euros loss as projects get parked, axed

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Italian multinational oilfield services company Saipem said on Thursday it can no longer offer guidance for 2020 due to unpredictable market conditions brought on by the coronavirus pandemic and plummeting oil prices. Saipem said it recorded a loss in Q1 2020 of 269 million euros down from a profit of 21 million euros last year as it has had to write down a number of offshore drilling assets.

In Guyana, Saipem has been awarded subsea contracts for the first two phases of the Liza development in the offshore deepwater Stabroek Block, operated by US oil major ExxonMobil.

Saipem had also announced in November 2019 that it was awarded a contract for the proposed Payara development project also located at the Stabroek Block.

“Recently, talking about the offshore, we had a long conversation with Exxon, the management of Exxon of the sub-sea phase of their development in Guyana. Again, they confirmed that they intend to go ahead but there would be a shifting in time,” Stefano Cao, Chief Executive Officer, told investors on an earnings call this week.

The company said last week the growing uncertainty caused by COVID-19 might cause a sharp demand contraction and consequently a delay of some its projects.

Saipem is now looking at cost reductions and plans to cut investments this year by 20-25% from a previous estimate of around 600 million euros. It said in its results statement that a dramatic and widespread drop in demand for services triggered by the coronavirus together with volatile energy prices had led to a revision of future investment plans by its clients.

Oil markets are in unprecedented territory with the collapse of crude prices prompting most oil majors to slash investments and defer projects to conserve cash.

Saipem, controlled by Italian state lender CDP and oil major Eni, said the unexpected deterioration of the market and rejigged investment plans by its clients had led it to write down offshore drilling assets by 260 million euros.

It also said it had approved a one-year renewal of the non-convertible notes issue programme for up to 3 billion euros, of which 1.5 billion euros remained outstanding.

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