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Italy’s Saipem says low oil price could force it to redraw plans

Italy’s Saipem says low oil price could force it to redraw plans

MILAN: Italian oil service group Saipem said it had trimmed its sales guidance for last year and might have to review its recent four-year business plan targets if oil prices remained at current low levels.

In the prospectus for its upcoming 3.5 billion euro ($3.8 billion) rights issue, Saipem said that due to a slowdown in work in Venezuela in the final quarter, 2015 revenues were now expected to be between 11 and 12 billion euros, compared with a previous estimate of around 12 billion.

While it remained on track to meet its other 2015 targets for the time being, there was a risk results could be worse than expected, while a “significant update” to 2016 estimates might also be needed, it said.

The company said its 2016-2019 plan had been based on an oil price that went from $55 per barrel in 2016 to $80 in 2019. Prices this week hit 13-year lows, and Brent crude closed at $32.18 on Friday.

“If the price of oil stays at present levels for another 3-4 months and there is a marked drop in the order portfolio the company will have to acknowledge the further worsening of market prospects and so draw up an updated business plan,” Saipem said.

The company, controlled by oil major Eni and state lender fund FSI, has seen about 14 billion euros wiped off its balance sheet in three years, after a corruption probe in Algeria, two profit warnings and a glum business outlook.
The 3.5 billion euro rights issue, approved last year as part of a four-year turnaround plan aimed at ensuring its survival, was priced on Friday. ($1 = 0.9267 euros)

Copyright Reuters, 2016

Courtesy : BRecorder



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