No guidance from Saipem due to coronavirus, oil price slump

MILAN (Reuters) - The coronavirus pandemic and falling oil prices mean Saipem SPMI.MI is unable to give financial guidance for this year, the Italian oil services group said on Thursday as it swung to a first-quarter loss.

FILE PHOTO: A Saipem logo in seen on the bridge of the Saipem 10000 deepwater drillship in Genoa's harbour, Italy, November 19, 2015. Picture taken November 19, 2015. REUTERS/Alessandro Garofalo

Last week, the group withdrew its previous 2020 guidance, saying the pandemic might trigger a sharp fall in demand and a delay in projects.

“It’s a perfect storm ... at the moment the visibility for running operations is limited,” Chief Executive Stefano Cao said in a conference call on first quarter results.

Demand for oil and its products have tumbled as governments around the world impose lockdowns to prevent the novel coronavirus spreading, prompting oil majors to slash investments and defer projects to conserve cash.

On Thursday, Saipem said it swung to a net loss in the first quarter of 269 million euros ($291 million), from a profit of 21 million euros the previous year, blaming a writedown of offshore drilling assets.

It said it was looking at cost reductions and would cut investments this year by 20-25% from a previous estimate of around 600 million euros.

“The dividend is confirmed,” Cao added.

Saipem, controlled by Italian state lender CDP and oil major Eni ENI.MI, said in February it expected higher sales this year after it beat 2019 targets and introduced a dividend for the first time in seven years.

Cao, a former top manager at Eni, said the group was financially sound with no debt maturities until 2022 and around 2 billion euros in cash at the end of March.

“We have the capability and strength to seize market opportunities if they arise,” he said, asked about consolidation of the market.

Saipem, a market leader in subsea construction for the oil and gas industry, is looking to develop new lines of business to boost order books, including floating renewable energy farms.

Cao said there was a healthy pipeline of potential wind farm projects worth around 1 billion euros, mainly in Europe.

In the first three months of the year, Saipem won 917 million euros of orders compared with 2.5 billion a year ago.

The company also said it had approved a one-year renewal of the non-convertible notes issue programme for up to 3 billion euros, of which 1.5 billion euros remained outstanding.

At 1052 GMT Saipem shares were down 0.54%, while the European oil and gas index was up 1.6%.

Reporting by Stephen Jewkes; Editing by Susan Fenton and Mark Potter