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Saipem expects low impact from Saudi Aramco's contracts suspension

Reuters
·2-min read
A Saipem logo in seen on the bridge of the Saipem 10000 deepwater drillship in Genoa's harbour

MILAN (Reuters) - Italy's Saipem said on Tuesday that a temporary suspension of oil drilling contracts by Saudi Aramco would have a low impact, leaving its 2024 targets within reach.

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 goal announced in 2020.

As a result more than 20 jack-ups, or shallow water drilling rigs, were expected to be suspended in the coming months, said Oslo-based firm Esgian which tracks drilling rigs.

Saipem said that the three jack-ups it was using for Aramco's projects would be suspended in 2024, but added it had alternative plans for them.

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"For the first jack-up, our budget for 2024 already incorporated the assumption of delivering it back to the owner around the middle of the year," Saipem Chief Financial Officer Paolo Calcagnini said in a post-results conference call.

The group planned to cover most of the suspension of the second jack-up with planned maintenance works and would redeploy the third in a different geographical area, Calcagnini added.

"The flexibility provided by our strategy coupled with the good market conditions for premium jack-ups will substantially mitigate the impact of the temporary suspension from Saudi Aramco in 2024," the CFO said.

Saipem's shares were up 2.25% at 1115 GMT after falling more than 3% in early trading as investors waited to hear whether its 2024 guidance would be confirmed.

The group said on Monday its adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) rose 40% to 268 million euros ($286 million).

Saipem expects its 2024 sales to be between 12.7 billion and 13.3 billion euros. The EBITDA margin is seen at around 10% and operating cash flow is expected at 740-780 million euros.

($1 = 0.9386 euros)

(Reporting by Francesca Landini; additional reporting by Nerijus Adomaitis; editing by Alexander Smith)