Sector News

Saipem cuts more jobs as crisis drags on

October 26, 2016

Italian oil contractor Saipem will cut 800 more jobs across Europe in the next four years as part of a plan to cope with a prolonged market crisis that will trim revenues next year.

Oil service companies around the world are finding business tough as weak crude prices force oil majors to cut billions of dollars in costs.

“The outlook remains uncertain … meaningful market recovery is now delayed to 2017 and beyond,” Saipem CEO Stefano Cao said in a conference call on third quarter results and a business plan to 2020.

Saipem, controlled by oil major Eni and state-backed fund Fondo Strategico Italiano (FSI), expects sales to be around 10 billion euros (9.02 billion pounds) in 2017 from some 10.5 billion euros this year.

Net profit, including reorganisation costs, will be more than 200 million euros next year from an adjusted net profit of 250 million euros this year.

The contractor, which last year announced job cuts of 8,800 in a business overhaul, posted a loss of 1.978 billion euros in the third quarter after asset writedowns and impairments.

Adjusted net profit in the period was 60 million euros, just below a Thomson Reuters consensus of 66 million euros.

As oil service companies compete for a dwindling number of contracts, some investors are concerned returns will suffer without further cost cuts or disposals.

Saipem, which is targeting cost cuts of 1.7 billion euros, completed a 3.5 billion euro rights issue earlier this year to boost its capital and fund operations.

The contractor, which employs some 45,000 people, is a market leader in subsea engineering and construction (E&C) work including the world’s most expensive oil field, Kazakhstan’s Kashagan.

But its onshore and offshore drilling businesses remain a problem and some analysts have said it might be prepared to sell part of the assets.

Cao told analysts offshore E&C would remain the core business of the group.

“We are still in the deep trough of crisis… I expect to see further industry consolidation or alliances,” he said.

He said Saipem was currently negotiating opportunities which could become contract acquisitions, including one or two with Saudi Aramco and one in Angola.

By Stephen Jewkes

Source: Reuters

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