FIRST QUARTER 2020 RESULTS PRESENTATION
FORWARD-LOOKING STATEMENTS
Forward-looking statements contained in this presentation regrading future events and future results are based on current expectations, estimates, forecasts and projections about the industries in which Saipem S.p.A. (the "Company") operates, as well as the beliefs and assumptions of the Company's management.
These forward-looking statements are only predictions and are subject to known and unknown risks, uncertainties, assumptions and other factors beyond the Company' control that are difficult to predict because they relate to events and depend on circumstances that will occur in the future. These include, but are not limited to: forex and interest rate fluctuations, commodity price volatility, credit and liquidity risks, HSE risks, the levels of capital expenditure in the oil and gas industry and other sectors, political instability in areas where the Group operates, actions by competitors, success of commercial transactions, risks associated with the execution of projects (including ongoing investment projects), the recent Coronavirus outbreak (including its impact across our business, worldwide operations and supply chain); in addition to changes in stakeholders' expectations and other changes affecting business conditions.
Therefore, the Company's actual results may differ materially and adversely from those expressed or implied in any forward-looking statements. They are neither statements of historical fact nor guarantees of future performance. The Company therefore caution against relying on any of these forward-looking statements. Factors that might cause or contribute to such differences include, but are not limited to, economic conditions globally, the impact of competition, political and economic developments in the countries in which the Company operates, and regulatory developments in Italy and internationally. Any forward-looking statements made by or on behalf of the Company speak only as of the date they are made. The Company undertakes no obligation to update any forward-looking statements to reflect any changes in the Company's expectations with regard thereto or any changes in events, conditions or circumstances on which any such statement is based. Accordingly, readers should not place undue reliance on forward-looking statements due to the inherent uncertainty therein.
The Financial Reports contain analyses of some of the aforementioned risks.
Forward-looking statements neither represent nor can be considered as estimates for legal, accounting, fiscal or investment purposes. Forward-looking statements are not intended to provide assurances and/or solicit investment.
TABLE OF CONTENT
- 01 OPENING REMARKS
- 02 CURRENT SITUATION
- 03 1Q 2020 RESULTS
- 04 BUSINESS UPDATE
- 05 CLOSING REMARKS
- 06 APPENDIX
OPENING REMARKS
OPENING REMARKS
STARTING FROM A SOLID POSITION, NAVIGATING THE STORM
- Industry is experiencing unprecedented turmoil (COVID-19 and oil price collapse). We have adopted, and are planning, measures at all levels to protect health and to manage the situation
- Net debt pre-IFRS 16 at €632mn vs €1.2bn at 1Q 2019
- Solid and diversified backlog of c.€23bn1, providing good visibility
- Opex efficiency and capex rephasing; review of current strategic plan
- 1Q 2020 operational highlights:
- E&C Offshore: top-line reduction due to project re-phasing
- E&C Onshore: good margin progress
- Drilling: volumes and margin growth in offshore, weaker onshore
- FY 2020 guidance withdrawn
CURRENT SITUATION
MARKET ENVIRONMENT
NEW CONTEXT AND IMPACT ON ENERGY INDUSTRY
- COVID-19 generated an unprecedented challenge to the global economy:
- Restrictions on mobility of people
- Shut down of industrial/commercial activities
- Massive drop in GDP and energy demand
- Still limited visibility on duration and long-term implications of shock to global economy
- Market share battle among main oil producers exacerbated the dynamics
Context Short term impacts
- Oil price at record two-decade low
- Majors and NOCs reacted fast:
- Sharp capex cut in 2020 and possibly beyond
- FID and bid delays, projects suspended or re-priced (e.g. drilling)
- Greatest impact on upstream
- E&C market impacted
- Gas-related projects and regions like Middle East and Africa more resilient
- Drilling more impacted
FUNDAMENTALS OF ENERGY TRANSITION STILL STAND, OPPORTUNITIES STILL AVAILABLE
SAIPEM IS WELL STRUCTURED TO HANDLE COMPLEXITY
HEALTH AND SAFETY TOP PRIORITY, BUSINESS CONTINUITY A MUST
- Early activation of crisis response protocol by the Corporate Crisis Unit in coordination with 52 local units worldwide
- Proactive and fast communication towards all employees
- Health and safety top priority…
- travel halt and smart working for c.13,000 employees worldwide
- health monitoring of total workforce (e.g. restructured shifts, quarantine protocols)
- medical emergency and site-specific de-manning/re-manning protocols
- …while securing business continuity
- corporate Crisis Committee, chaired by the CEO, secures fast response and decision making
- coordination with clients, partners and supply chain
- long-standing cemented relationship with key clients
OVER 60 YEARS OF MANAGING COMPLEXITY
SAIPEM USED DOWNTURNS TO GROW STRONGER
WE ARE FUNDAMENTALLY WELL POSITIONED
- Sizeable and diversified backlog of €23.4 billion protects against turmoil
- Client quality and diversification (NOCs and Majors)
- Providing good visibility
- 68% in non-oil segments
- Strong balance sheet with significant liquidity
- No long-term debt maturity before 2022
- Sizeable liquidity with good cash position and committed undrawn RCF
- Covenant-light debt structures
- Opex efficiency steps and capex rephasing
1Q 2020 RESULTS
SOLID BALANCE SHEET AND LIQUIDITY
Strong liquidity
- Substantial available cash (€0.9 billion)1
- Committed and fully undrawn RCF (€1 billion)
- Additional €0.2 billion of uncommitted facilities
Conservative debt structure
- €2.5 billion gross debt
- Earlier redemption of 2021 bonds reduced risk and improved AVG maturity (c. 3 years)
- No financial covenants on bonds, which represent 60% of gross debt
- Average cost of debt c.3%2
1 In addition to this amount, the Group has c.€1.0 bn of restricted liquidity 2 Average cost of debt c.4% including treasury hedging
1Q 2020 RESULTS
YoY COMPARISON (€ mn – IFRS16)
1Q 2020 RESULTS – E&C YoY COMPARISON (€ mn – IFRS16)
143 1Q19 1Q20 1Q19 1Q20 E&C OFFSHORE 914 Revenues Adjusted EBITDA • Lower volumes in North Africa and Sub-Saharan, partially offset by Caspian and Italy • Margin reflecting mix and re-phasing 15.6% margin 12.8% 826 106
1Q 2020 RESULTS – DRILLING YoY COMPARISON (€ mn – IFRS16)
1Q 2020 NET RESULT RECONCILIATION ADJUSTED-REPORTED
Net Result (€ mn – IFRS 16)
Drivers of non-cash impairment
Market deterioration triggered a review of assumptions for drilling offshore, such as:
- Shifting of some activity
- Renegotiation of rates
- Possible contract cancellation for 1 unit
- Delay in awards
1Q 2020 NET DEBT EVOLUTION
(€ bn)
BUSINESS UPDATE
E&C - NEAR TERM BUSINESS EVOLUTION
IMPACTS OF COVID 19 AND OIL PRICE COLLAPSE
E&C OFFSHORE E&C ONSHORE
ONGOING OPERATIONS
- PROJECTS UNDER EXECUTION KEEPING PACE
- SMART WORKING EFFECTIVE FOR ENGINEERING
- CONSTRAINTS IN PEOPLE MOBILITY
- SUPPLY CHAIN CHALLENGES
- CAPEX REPHASING AND IMPROVING OPEX EFFICIENCY IMPROVING OPEX EFFICIENCY
COMMERCIAL OPPORTUNITIES
- FID AND PROJECT AWARD DELAYS
- MIDDLE EAST EXPECTED TO BE MORE RESILIENT
- OFFSHORE WIND AND BRAZIL ENCOURAGING OUTLOOK
SOME OPPORTUNITIES IN AFRICA
E&C OPPORTUNITIES SAME VISIBILITY, OVER A LONGER TIME SPAN
MAIN AWARDS YEAR-TO-DATE
CABAÇA AND AGOGO EARLY PHASE 1
Client: Eni
- Location: Angola
- Scope of work: EPCI of risers, production flowlines, jumpers and the installation of a Subsea Production System
LTA 53
- Client: Saudi Aramco
- Location: Saudi Arabia
- Scope of work: EPCI of a 36" carbon steel pipeline and brownfield activities on fixed platforms
ALEN PIPELINE
- Client: Noble Energy
- Location: Equatorial Guinea
- Scope of work: T&I of a 70 km gas pipeline connecting the Alen Platform to Punta Europa
DECOMMISSIONG & HEAVY LIFTING
- Various Clients
- Location: UK and USA
- Scope of work:
- Decommissioning of existing infrastructures located in the Thistle Field in the North Sea
- T&I of offshore structures in the Walker Ridge area in the Gulf of Mexico
1Q 2020 AWARDS - E&C OFFSHORE POST 1Q 2020 AWARDS - E&C ONSHORE
HIGH SPEED TRAIN BRESCIA-VERONA
- Client: Rete Ferroviaria Italiana (RFI)
- Location: Italy
- Scope of work: second construction lot of the 48 km high-speed railway line Brescia Est - Verona, encompassing completion of civil infrastructures and construction of the railway superstructure, transmission system and technological equipment
PROJECT HIGHLIGHTS: Highly-urbanised complex territory Diversification in the Infrastructures sector
ETHYDCO
- Client: Egyptian Ethylene & Derivatives Co. (Ethydco)
- Location: Egypt
- Scope of work: EPC of polybutadieneproducing facility with a capacity of 36,000 million tons per year
PROJECT HIGHLIGHTS:
First polybutadiene facility in Egypt, in partnership with Egypt-based Petrojet: consolidating strong presence in the Country
1Q 2020 BACKLOG NON-MATERIAL BACKLOG CANCELLATION
CLOSING REMARKS
2020 GUIDANCE WITHDRAWN
To date, operating activities have progressed in line with the four-year industrial plan1, supported by initiatives to manage the COVID-19 emergency and deliver business continuity
On 15 April, the BoD withdrew 2020 guidance2 due to rising business uncertainty caused by the pandemic
- Oil companies' capex contraction resulting in delays at certain projects
- Reduced ability to estimate the impacts on:
- commercial and operating activities
- economic and financial results
The BoD reserves right to issue new guidance, should the market conditions become more stable
CONTINUOUS MONITORING; MARKET WILL BE PROMPTLY UPDATED
TACKLING THE NEW MARKET ENVIRONMENT TO PRESERVE VALUE
Opex efficiency initiatives currently identified:
Efficiencies
across the
business |
Right-sizing support functions
Hiring freeze
Reducing overheads |
Extension of smart-working
Rephasing digital transformation |
|
|
|
|
|
| E&C Offshore |
Fleet management
Idleness management
Supply chain |
E&C Onshore |
Supply chain |
| Drilling Offshore |
|
Drilling Onshore |
Rig logistics optimization
Supply chain
Commercial selectivity |
Capex rephasing: 20-25%1 reduction in 2020E
FLEXIBLE TO ADAPT TO MARKET EVOLUTION; REVIEW OF CURRENT STRATEGIC PLAN
1Q OPERATING ACTIVITIES BROADLY IN LINE WITH PLANS
SAIPEM CAPITALIZES ON DOWNTURNS TO GROW STRONGER
SOLID BACKLOG, BALANCE SHEET AND LIQUIDITY SAME VISIBILITY ON OPPORTUNITIES OVER A LONGER TIME SPAN
OPEX EFFICIENCY AND CAPEX REPHASING REVIEW OF CURRENT STRATEGIC PLAN
SAIPEM IN A STRONG POSITION AS IT NAVIGATES THE STORM
1Q 2020 RESULTS
QoQ TREND (€ mn – IFRS16)
1Q 2020 RESULTS - DIVISIONS QoQ TREND (€ mn – IFRS16)
1 E&C Onshore including floaters business and XSight
Q1 2020 RESULTS – D&A, FINANCE CHARGES AND TAXES (€ mn – IFRS16)