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Saipem expects Aramco orders to drop 20% after capacity target cut

Saipem expects Aramco orders to drop 20% after capacity target cut

 

Italian energy contractor Saipem's CEO said on Thursday it expects a 20 per cent drop in average annual orders from Saudi Aramco to 2027 as a result of the state oil company's decision to drop its capacity expansion plans.

Saipem, which in 2020 signed a 12-year deal with Aramco for onshore engineering and construction activities, had annual average orders of around 1.5 billion euros ($1.63 billion) from the Saudi group between 2021 and 2023.

"(Saipem's) new business plan already includes a 20 per cent cut in orders from Saudi Arabia compared with the previous period ... we do not expect effects on our medium-term strategy," its CEO Alessandro Puliti told a post-results conference call.

Saudi Arabia's government in January ordered Aramco to halt its oil expansion plan and to target a maximum sustained production capacity of 12 million barrels per day (bpd), one million bpd below a target announced in 2020.

Saipem said late on Wednesday that after five years it would likely restart paying dividends in 2025, in a sign that a restructuring plan started in 2022 was bearing fruit.

In a new business plan to 2027, Saipem said it would pay investors between 30 per cent and 40 per cent of its operating cash flow, triggering a 13.7 per cent rise in its shares by 1500 GMT, along with the upbeat tone of its management.

"We are experiencing a booming market in the offshore engineering and construction business," Puliti told analysts.

In the 2024-27 period, Saipem expects to win orders worth around 50 billion euros, a third of which will be in low or zero-carbon projects.

Saipem returned to profit last year, with net income of 179 million euros, its highest in a decade.

It expects to start working on a liquefied natural gas (LNG) terminal in Mozambique for France's TotalEnergies around mid-2024, Puliti said, adding the remaining part of the contract is worth 3.3 billion euros.

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Published: 01-03-2024

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