Presentation to the Financial Community First Half 2009 Results
July 2009 Forward-Looking Statements
Forward-looking statements are based on a number of assumptions and expectations that could ultimately prove inaccurate, as they are subject to risks and variables, outside the company’s control, that could cause actual results to differ materially, including currency fluctuations, the level of capital expenditure in the oil and gas industry as well as other industries, the timing of development of energy resources, construction and project risks, armed conflict or political instability in the Arabic Gulf or other regions, the strength of competition and interest rate fluctuations.
2 Presentation Outline
¾ First Half 2009 Financial Results
¾ Oil & Gas Industry Market Outlook – What’s Changed?
¾ Saipem’s Strategy for Current (Weak) Market
¾ Saipem Medium/ Long Term Strategy Focus on ‘Tough Trends’:
¾ 1. Hydrocarbons in Developing Countries Focus on Onshore ¾ 2. Deep/Ultra-Deep Water 2.a. Drilling 2.b. Field Development ¾ 3. Extreme Pipelines
¾ Conclusions
3 First Half 2009 Financial Results
4 Financials (Mln €)
Revenues EBITDA EBIT Net Profit Adjusted 51585158 802802 46194619 % on 582 % on Revenues 582 Revenues 164164 (6.8%) 652652 % on % on 489489 138138 (5.7%) 24062406 Revenues Revenues 81 (30.1%) 154 (6.3%) 81 374374 24422442 154 131131 (5.4%) 3131 (11.5%) (51.0%) (30.3%) 146146 (35.0%) 6060 (16.7%) 100100 269269 3333 286286 123123 (51.7%) 198198 9191 (38.2%) 321 238238 (14.2%) 411 (18.7%) 313313 21972197 411 17411741 315315 (18.1%) 234234 (13.4%)
1H 2008 1H 2009 1H 2008 1H 2009 1H 2008 1H 2009 1H 2008 1H 2009
Saipem Group Business Units Offshore Offshore Drilling Onshore Onshore
5 Financials (Mln €) Capex Sources and Application of Funds, Net Debt & D/E Ratio 2044 60 D/E =0.87 2751 425425 1600 30 D/E = 0.74 110110 2032
796796 700700 979 880 1348
229229 239239 629 763763 760760 35 880880 594594
Net Debt Application Sources of Net Debt 1H 2008 2008 1H 2009 2009E* @ Dec. 2008 of Funds 1H’09 Funds 1H’09 @ June 2009 Outflows Inflows Offshore Onshore Working Capital and Others Cash from Disposals Drilling Offshore Onshore Dividends Cash Flow (*) Amount does not include Euro 100 Mln approx. (Net Profit + Depreciation) Capex related to new possible FPSO initiative 6 Contract Acquisitions & Backlog (Mln €)
New Contract Acquisitions Backlog
1901519015
1619116191 54715471 50685068 91359135 10551055 56165616 784 784 2340*2340* 12871287 213213 17271727 34463446 533533 38043804 34193419 331331
18641864 58425842 43494349
1H 2008 1H 2009 June 30, ’08 June 30, ‘09
(*) Net of the Euro 100 Mln reduction from the Manifa contract
Saipem Group Business Units
Drilling Offshore Offshore Onshore Onshore
7 Market Outlook
8 Oil & Gas Industry Market Outlook What’s Changed?
High Oil Price Volatility E&P Spending Outlook
USD/bbl Weekly All Countries Spot Price Source: EIA +29.8% 145 -11.8% 500 125 Forecast @Dec.’08 105 -15.2% 400 Forecast @Jun.’09 85 +28% 65 300 45 Source: 25 Barclays
8 8 8 8 8 8 8 8 8 8 8 8 8 9 9 9 9 9 9 9 9 9 9 9 9 9 200 8 8 0 0 0 0 Capital 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 , , , , , , , , , , , , , , , , , , , , , , , , , , , , 3 7 1 5 8 2 5 9 3 7 1 4 8 2 6 9 3 6 0 6 0 3 7 1 5 9 2 6 0 2 0 1 3 0 2 0 1 0 1 2 1 2 1 2 0 1 1 2 1 2 0 2 0 2 1 2 l l t t t c c r r r r n n g g p p c c c v v n n b b a a p p y y y n n 2006 2007 2008 2009E u u u u u u e e o o e e a a e e a a a u u J J J J O O O D D J J F F M M A A J J A A S S N N M M M Weak Demand - Oil Services market still challenging - Uncertainty to continue
Our ‘Hunch’:
Short Term: ¾ E&P Investments Suffer, with Few Exceptions (Algeria, Middle East, Kazakhstan, etc) Medium Term: ¾ Economy Recovers, Oil Price stabilizes at a level compatible with new large-field development ¾ Oil Co. Shareholders - ‘irritated’ at Production and Reserve Replacement declines - demand action Oil Companies will ‘rush’ to make up for lost time…
…Except that new ‘Frontier Projects’ will be tougher than before 9 Oil & Gas Industry Market Outlook What’s Changed? (continued)
Future Tough Trends:
Hydrocarbons in Developing Countries => Focus on Onshore This Presentation Slide 15
Drilling Fleet can explore beyond 3,000 meter water depth Development Fleet hasn’t kept pace This Presentation Slide 16-17
Pipelines are More Extreme: Longer, Larger, Deeper, Colder, etc. This Presentation Slide 18
‘Artic’ development Equipment & Methods largely neglected
Challenges require Long-term View 10 Saipem’s Strategy for Current (Weak) Market
11 Saipem’s Strategy for Current (Weak) Market
- Market Background -
Past: 2003-2008 ¾ Schedule vs. Cost Emphasis – ‘rush to make up for lost time’ (from previous downturn) Present: 2009 - ? ¾ Recession: Cost vs. Schedule Emphasis
Future: ¾ Tougher Projects: new ‘Rush to Make up For Lost Time’
-Caveats -
Avoid the ‘Cut Prices & Hope for the Best’ Syndrome ¾ Aggressive Contracting Last Downturn brought ‘Twin Curses’: ¾ Key People Layoffs Hugely Weakened Contractors, well beyond Downturn
-- SSaipem’aipem’ perspectiveperspective --
¾ Implement short term improvements in efficiency (‘low hanging fruit’) ¾ Work with Clients to eliminate project redundancy, ‘nice-to-haves’ etc ¾ Contract so that Contingency is stripped out => Clients take the ‘what-if’ risks ¾ Maintain Strong Bidding Discipline – Avoid Bad Contracts (helped by record-level backlog) ¾ Nurture Core Competencies But Mainly: ¾ Invest for ‘Tough Future’
Saipem Choice: Improve, Nurture Competencies, Work with Clients, Invest in Future 1212 Saipem’s Strategy for Current (Weak) Market (continued)
€Bln Backlog 2.90 2.83 Backlog 3 2.52 2.58 2.55 2.58 @ Sep. 30, '08 @ Jun. 30, '09 2
19.0419.04 1 19.0119.01 €B€Bllnn 0 €B€Bllnn Q4 08 Q1 09 Q2 09 New Contract Acquisitions Revenues
Record Backlog Maintained: Better than Expected
Saipem Exposure to High Quality - Resilient Markets
Major & by Client Backlog € 19.015 Bln by Year of Execution 2009 Supermajor 20% 2010 National 59% 3%2% @ June 30, 2009 25% 2011 Independent 2012+ 36% 25% 30% Others* (*) Mainly-downstream, Smaller and Others by Geo Area by Country – Local Content Focus North Africa Alg eria 39% 12% 7% 3% West Africa Saudi A rabia 6% More than 60% 12% Middle East of present backlog Ang ola 7% America 8% in Countries where 35% Europe Nig eria 9% 31% Saipem has a strong 15% CIS Kaza khstan Local Content 16% Asia Pacific Ot hers Commitment
Maintain a Strong Bidding Discipline during Downturn 13 Saipem Medium/Long Term Strategy - Focus on ‘Tough Trends’
14 Saipem Medium/ Long Term Strategy - Focus on ‘Tough Trends’
1. Hydrocarbons in Developing Countries Focus on Onshore
Saipem Onshore Advantage
Products & Services Segments Context WHAT Most Comprehensive Upstream, Midstream, Large, Complex, in Industry Downstream, Infrastructure ‘The Tougher, The Better’
Integrated E-P-C Model HOW Unique to Industry GLOBAL
ENABLERS People Local Content Technology Track Record
Country-Specific Needs
Examples Algeria Saudi Arabia Nigeria
Reserves: 21,378 mm BOE Reserves: 201,712 mm BOE Reserves: 32,183 mm BOE Country’s Production 2008 Production: 3.5 mm BOE/d 2008 Production: 11.9 mm BOE/d 2008 Production: 2.9 mm BOE/d & Reserves * ’08-’13 Prod. Estimate Change: -9% ’08-’13 Prod. Estimate Change: +14% ’08-’13 Prod. Estimate Change: +63%
LOCAL Since 1975. Since late 1960s. Rumuolumeni Since 1976. Saipem Presence Hassi Messaoud Logistic Base. Base-Yard. Several partnership Dammam Logistic Base. Algiers Engineering Centre. with Nigerian Indigenous Co. Saipem Onshore E&C Backlog € 5.9 Bln €1.4 Bln € 0.6 Bln (*) Source: Wood Mackenzie and Deutsche Bank
Global Capacity Applied Locally 1515 Saipem Medium/ Long Term Strategy - Focus on ‘Tough Trends’
2.a. Deep/Ultra-Deep Water: Drilling
Saipem Deep/Ultra-Deep Drilling Fleet
Start of Activities for Vessel Delivery 5-Years Contracts
Saipem 12000 Ultra-deepwater Drillship March 2010 May 2010 WD 3,600 m Saipem 10000 Ultra-deepwater Drillship WD 3,000 m
Scarabeo 8 6th gen. Semisub March 2010 June 2010 WD 3,000 m
Scarabeo 9 Scarabeo 5 Scarabeo 7 6th gen. Semisub April 2010 June 2010 4th gen. Semisub 4th gen. Semisub WD 3,600 m WD 1,800 m WD 1,500 m
By Mid-2010 Saipem Drilling Fleet Geared for Toughest Challenges 16 Saipem Medium/ Long Term Strategy - Focus on ‘Tough Trends’
2.b. Deep/Ultra-Deep Water: Field Development
Saipem Track-Record: the Toughest Challenges in the Largest Fields
Kizomba A Kizomba B Marimba Kizomba Canyon Rosa SURF Akpo Field West Delta Sequoia USAN Express Tie-Back Tie-Back Development North EPC3 Development Deep Marine Satellites* System System System Ph. IV 533m 850m 1,200m Max WD: 2,200m 1,200m 1,100m 1,400m 1,400m 1,350m Angola 1,000m Egypt West Block 15 US Gulf of Angola Angola Angola Angola Nigeria Nigeria Egypt Delta Deep *Awarded Mexico Block 15 Block 15 Block 17 Block 15 OML 130 Marine Conc. OML 138 in Q3‘09 (not included 2000-2002 2001-2004 2002-2005 2003-2007 2005-2007 2005-2009 2006-2008 2008-2009 2008-2011 in 1H’09 Figures)
Unique Assets Engineering R&D Local Content Subsea Construction Vessels Engineering Centres: Examples: Fabrication Yards SaipemSaipem FDSFDS SaipemSaipem 30003000 •Paris (Saibos) •Risers •Fano In Nigeria: •Flow Assurance •Milan • Rumoulumeni •Emerging centres Technologies In Angola: •Subsea Production • Ambriz 12 Support 76 ROVs Tailored for our • Soyo Vessels Yards and Vessels
Ready for the Future
Saipem FDS 2 ‘Step-Change’ DP3 Vessel with J-lay tower, max Vessel for emerging capacity 2,000 t for Ø 36” pipe, Delivery in water depths of up to 3,000 m. Q2 11 UNDER Ultra-Deep Frontier CONSTRUCTION Also designed for S-lay.
A Primary Player for Break-through Projects 17 17 Saipem Medium/ Long Term Strategy - Focus on ‘Tough Trends’
3. Extreme Pipelines - Longer, Larger, Deeper, Colder, etc.
Awarded Q2 2008 (sample) Saipem Offshore Track Record Laying start in 2010 Offshore Market Prospects Examples: Blue Stream Green Stream Dolphin Medgaz Nord Stream Galsi: Algeria-Sardinia 285km - 1 line
NC 41 Ø 26” Max WD 2,880 m
516km of 32”pipeline in Gela water depths up to 1127 metres Galsi: Sardinia-Tuscany 275km - 1 line Ø 32” Max WD 850 m Mellitah ©NordStream AG Shtokman Ph.1: Barents Sea Russia-Turkey Libya-Sicily UAE (Ras Algeria-Spain Russia- 550km x2 lines Ø 42” Max WD 370 m 380 km 520 km Laffan-Dolphin) 210 km Germany 350 km x 2 lines 1 line 1 line 1,220 km South Stream: Russia-Bulgaria 1 line 920km x2 lines Ø24” Ø32” Ø24” x 2 lines Ø48” Ø 24” Max WD 2,200 m Max WD 2,150m Max WD 1,120m Max WD 2,160m Ø48” Max WD 50m Max WD 100m More ‘Extreme’
EngineeringEngineering OffOffsshorehore FleetFleet R&DR&D CapCapaabbilitiesilities
Castoro Sei DP3 Vessel designed to Examples: Castoro Sei Castoro One Castoro One S-lay large-diameter Engineering SaipemSaipem 70070000 pipelines up to 48” . • Welding Capable of operating in Centres: harsh environments and • Field Joint CastoroCastoro 77 ultra-deepwater. • Milan Coating High productivity, high • Trenching transit speed (14 knots). • Fano Delivery Q3 11 Pipe storage capacity of • Repair 25,000 t.
Leader in Pipelines Focused on ‘Extreme Pipelines’ Market 18 18 Conclusions
19 Conclusions
• Short Term: E&P Investments Suffer, with Few Exceptions Oil Services Market Still Challenging
Context • Medium Term: Economy Recovery, Oil Price to stabilize at a level compatible with New Large-Field Development E&P Investment Accelerated Recovery: to mitigate Reserve Replacement Declines to tackle New ‘Tougher’ Frontier Projects
• Short Term: Proven Execution Capability, Record Backlog, Superior Industrial Model for Large/Complex Projects More Resilient in Downturn Improve Efficiency, Nurture Competencies, Work with Clients Updated Guidance for 2009: Saipem Revenues and EBIT to reach 2008 Record Level
• Medium Term: Continued Saipem Investment for ‘Future Frontiers’: including Ultra-Deepwater and Large/Difficult Pipeline Projects Accelerated Growth as Market Recovers 20