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Annual Report 2009 Mission Pursuing the Satisfaction of Our Clients in the Energy Industry, We Tackle Each Challenge with Safe, Reliable and Innovative Solutions

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Annual Report 2009 Mission Pursuing the Satisfaction of Our Clients in the Energy Industry, We Tackle Each Challenge with Safe, Reliable and Innovative Solutions 001-096BilSaipem09Ing 27-04-2010 12:25 Pagina I Annual Report 2009 Mission Pursuing the satisfaction of our clients in the energy industry, we tackle each challenge with safe, reliable and innovative solutions. Our skilled and multi-local teams create sustainable growth for our company and the communities in which we operate Our core values Commitment to safety, integrity, openness, flexibility, integration, innovation, quality, competitiveness, teamwork, humility, internationalisation Countries in which Saipem operates EUROPE Austria, Belgium, Bulgaria, Croatia, Cyprus, Denmark, France, Germany, Italy, Luxembourg, Malta, Netherlands, Norway, Portugal, Principality of Monaco, Romania, Spain, Sweden, Switzerland, Turkey, United Kingdom AMERICAS Argentina, Brazil, Canada, Colombia, Dominican Republic, Ecuador, Mexico, Peru, Trinidad & Tobago, United States, Venezuela CIS Azerbaijan, Kazakhstan, Russia, Ukraine AFRICA Algeria, Angola, Cameroon, Congo, Egypt, Equatorial Guinea, Gabon, Ivory Coast, Libya, Morocco, Nigeria, Tunisia MIDDLE EAST Iraq, Kuwait, Oman, Qatar, Saudi Arabia, United Arab Emirates, Yemen FAR EAST AND OCEANIA Australia, China, India, Indonesia, Japan, Malaysia, Pakistan, Singapore, South Korea, Tahiti, Taiwan, Thailand, Vietnam Annual Report 2009 The forward-looking statements contained in this document 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. These include: currency fluctuations, interest rate fluctuations, the level of capital expenditure in the oil and gas industry, as well as other industries, political instability in areas where the Group operates, and actions by competitors. Moreover, contract execution is also subject to variables outside the Company’s control, such as weather conditions. Actual results could therefore differ materially from the forward-looking statements. General Shareholders’ Meeting of April 16 and 26, 2010 Notice of the Shareholders’ Meeting was published in the daily newspapers Il Sole 24 Ore, Corriere della Sera and La Repubblica on March 16, 2010 Saipem Group consolidated financial report 4 Letter to the Shareholders 6 Board of Directors and auditors of Saipem SpA 7 Saipem Group structure Directors’ report 12 Saipem SpA share performance 14 Glossary 17 Operating review 17 New contracts and backlog 19 Capital expenditure 20 Offshore 27 Onshore 32 Offshore Drilling 35 Onshore Drilling 37 Financial and economic results 37 Results of operations 40 Consolidated balance sheet and financial position 43 Reclassified cash flow statement 44 Key profit and financial indicators 46 Research and development 49 Quality, health, safety and the environment 54 Sustainability 57 Human resources 60 Information technology 62 Corporate Governance Report and Shareholding Structure 84 Risk management 90 Additional information 90 Buy-back of treasury shares 90 Incentive schemes 91 Consob regulation on markets 91 Disclosure of transactions with related parties 91 Events subsequent to year end 92 Management outlook 93 Reconciliation of reclassified balance sheet, income statement and cash flow statement to statutory schemes Consolidated financial statements 98 Consolidated balance sheet and income statement 103 Basis of presentation 103 Principles of consolidation 105 Summary of significant accounting policies 118 Use of accounting estimates 120 Recent accounting principles 122 Scope of consolidation 130 Changes in the scope of consolidation 132 Notes to the consolidated financial statements 178 Management’s certification 179 Independent Auditor’s Report SAIPEM ANNUAL REPORT / LETTER TO THE SHAREHOLDERS Marco Mangiagalli Pietro Franco Tali Hugh James O’Donnell Chairman Deputy Chairman and Managing Director Chief Executive Officer for Business Support (CEO) and Transversal Activities (Deputy CEO) Letter to the Shareholders Dear Shareholders, during 2009, the crisis spread from the financial With regard to the results achieved by Your sector to industry, causing a severe economic Company, it is important to bear in mind that while a recession in the United States, Europe and, to a lesser fall in oil prices has an immediate impact on the extent, Asia. Hydrocarbon consumption fell income statements of oil companies, the impact on significantly, causing a drop in investments by the Oil contractors like Saipem is delayed because of its Industry that had negative repercussions on the Oil backlog of orders. During 2009, Saipem in fact Services market. The sectors worst hit by the negative mainly executed contracts acquired in the previous market conditions were those related to the two or three years, when market conditions were development of marginal oil fields since, in conditions favourable. of weak demand and low prices, oil companies prefer The high quality of the order backlog and strong to focus on investing in developing resources that operating performance saw Saipem once again have a medium/long-term production life. Your achieve record results, with revenues up by 2% Company’s industrial model, which combines compared with 2008, operating profit up 6.7% and technology, an advanced fleet of vessels and a adjusted net profit up by 1.1%. long-standing local presence in the countries in which Specifically, in the Offshore sector, revenues it operates, affords it a strong competitive edge for increased by 12.4% and operating profit by 15.2%, the execution of major projects in frontier areas. with activities concentrated in West Africa, Saipem’s favourable competitive position in areas and Kazakhstan and the Mediterranean. In the Onshore sectors traditionally less exposed to the cyclical sector, revenues fell by 9.3% and operating profit by nature of the market enabled it to acquire new orders 4.3%, due to the slippage of activities on the Manifa during 2009 in quantities sufficient to retain a high project in Saudi Arabia. In Onshore Drilling, revenues level of backlog, which at the end of 2009 was close to rose by 27.4%, due mainly to the start of operations the record figures posted at year-end 2008. of new rigs in South America and Ukraine, while The Saipem share grew by 101% in 2009, benefiting operating profit fell by 20.3% due to a drop in from the good level of order acquisitions as well as utilisation rates and increased depreciation. Finally, from the recovery of oil prices seen in the second in Offshore Drilling, revenues rose 19.9%, due in part half of the year, which raised hopes of an to the expansion of the fleet, while operating profit improvement on its way in conditions in the Oil rose 11.6%. Services market. 4 SAIPEM ANNUAL REPORT / LETTER TO THE SHAREHOLDERS Jacques Yves Léost Luca Anderlini Anna Maria Artoni Director; Director Director Chairman of Saipem sa The level of operational efficiency achieved once Oil industry spending is expected to show signs of again placed your Company at the top of its industry, recovery in 2010, underpinning expectations of a while the LTIFR (Lost Time Injury Frequency Rate) gradual improvement in market prospects for the oil index, which provides a measure of safety services industry, despite continued weakness in performance, stood at 0.48 (against 0.5 in 2008). hydrocarbon demand in general and gas demand in The complex investment programme commenced in particular, which will lead oil companies to delay the 2006 and designed to strengthen and expand our launch of large infrastructure projects. assets in the Offshore Construction and Drilling Whilst in 2009, the oil services industry executed sectors continued in 2009, with a total outlay of contracts largely acquired in previous years, when o1,615 million. During the year, in the Drilling sector, the market was particularly favourable, in 2010, construction work was completed on a jack-up due to volumes and margins are expected to be affected by operate under a long-term contract with Sonangol, as the negative market conditions experienced in 2009. well as on ten onshore drilling rigs contracted to Saipem’s business model, which addresses a number various Clients, mainly in Latin America. of different market sectors, combined with its strong Construction and completion works continued on competitive position in frontier areas, which are three new vessels for ultra deep water drilling traditionally less exposed to the cyclical nature of operations (two new semi-submersible drilling the market, have enabled the company to retain a platforms and a new ultra-deep water drillship), high level of backlog. which are due to be completed during the second The size and quality of the backlog and the strong half of 2010. Also, in the Offshore Construction operating performance on projects, underpin sector, works continued on the realisation of a expectations for 2010 of again achieving largely pipelayer and a field development ship, both positive results. Revenues are expected to remain at equipped to carry out deepwater operations, and a the record levels attained in 2009; the increase in new fabrication yard for large offshore structures. EBITDA is expected to be sufficient to compensate These works are expected to be completed in 2011. the increase in depreciation resulting from new Finally, activities continued on the construction of a assets starting operations, and EBIT is envisaged to Diving Support Vessel, while work began on the remain at the record level achieved in 2009. conversion of an oil tanker into an FPSO vessel due Investments for 2010 are forecast to be in the region
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