Saipem S.p.a. · MIL:SPM

Saipem — Q3 2015 Earnings Presentation

45 slides from Saipem's earnings presentation, Oct 28, 2015

1. Slide 1: Third Quarter 2015 Results and Strategy Presentation

   THIRD QUARTER 2015 RESULTS AND STRATEGY PRESENTATION London, 28 October 2015 mercoledì 28 ottobre 2015 Saipem. Engineering Energy

2. Slide 2: Forward-Looking Statements

   Saipem. Engineering Energy FORWARD-LOOKING STATEMENTS By their nature, forward-looking statements are subject to risk and uncertainty since they are dependent upon circumstances which should be or are considered likely to occur in the future and are outside of the Company’s control. These include, b

3. Slide 3: Chairman's Opening Remarks

   Saipem. Engineering Energy CHAIRMAN’S OPENING REMARKS A new chapter in Saipem’s History Saipem Board of Directors’ resolutions:  Approval of the new Strategic Plan  Recapitalisation and debt refinancing  Call a Shareholders’ Meeting to approve a €3.5bn capital increase  3Q 2015 Results Acknowled

4. Slide 4: Chairman's Opening Remarks

   Saipem. Engineering Energy CHAIRMAN’S OPENING REMARKS Ensure a best in-class corporate governance system  Independence of the Board from the controlling shareholder  Pivotal role of the Board in the Company’s key decisions  Checks and balances system: — Internal Audit function direct report to Ch

5. Slide 5: Building a Stronger Saipem

   Saipem. Engineering Energy BUILDING A STRONGER SAIPEM World-class fleet Reduced cost base Focus on Improved governance core business and processes Robust Clear targets balance sheet 6

6. Slide 6: Today's Presentation

   Saipem. Engineering Energy TODAY’S PRESENTATION 1 Third Quarter 2015 Results Highlights 2 Strategy Presentation 3 Q&A 7

7. Slide 7: 9M 2015 Results: Highlights

   Saipem. Engineering Energy 9M 2015 RESULTS: HIGHLIGHTS Highlights  3Q Reported EBIT at €150mn, in line with previous year — E&C Onshore returning to breakeven — E&C Offshore impacted by South Stream — Slowdown in Drilling  9M Reported EBIT at -€640mn, underlying at €282mn  Net debt at € 5.7bn  N

8. Slide 8: Today's Presentation

   Saipem. Engineering Energy TODAY’S PRESENTATION 1 Third Quarter 2015 Results Highlights 2 Strategy Presentation 3 Q&A 9

9. Slide 9: Context and Positioning

   I SAIPEM CONTEXT AND POSITIONING

10. Slide 10: Our Market Environment

    Saipem. Engineering Energy OUR MARKET ENVIRONMENT  Delayed FIDs, especially in deepwater Complex offshore E&C projects  Offshore fleet overcapacity delay/cancellation  Offshore NOC activity less affected Strong competition on onshore  Price pressure on least complex projects E&C projects  Middl

11. Slide 11: Recovery Expected from 2017

    Saipem. Engineering Energy RECOVERY EXPECTED FROM 2017  E&P spending to recover from 2017 Pick-up in upstream capex  OFS demand/supply to rebalance  Near term opportunities in Egypt  West Africa, Caspian and GoM mid-term opportunities Offshore E&C  FLNG and deepwater activity  Industry efficie

12. Slide 12: The Saipem Model: Well Positioned Through the Cycle

    Saipem. Engineering Energy The SAIPEM MODEL: WELL POSITIONED THROUGH THE CYCLE Resilient in current markets, capturing evolving trends E&C Offshore E&C Onshore  Solid track record on breakthrough projects  Recognised expertise in Downstream  Strong asset base addressing varied business mix  Well

13. Slide 13: Current Flagship Projects (1/4)

    Saipem. Engineering Energy CURRENT FLAGSHIP PROJECTS (1/4) Shah Deniz Stage 2 – Azerbaijan  Client: BP (on behalf of Shah Deniz Consortium)  Scope of work: T&I of jackets, topsides, subsea production systems and structures; over 360 km of pipelines  Delivery: end of 2017  Saipem Caspian Fleet Em

14. Slide 14: Current Flagship Projects (2/4)

    Saipem. Engineering Energy CURRENT FLAGSHIP PROJECTS (2/4) Kaombo FPSOs – Angola  Client: Total  Scope of work: EPCI of 2 turret-moored FPSOs and 7-years contract for operation and maintenance services  Delivery: 1st FPSO 1Q2017, 2nd FPSO 2Q2017  Large Floater EPC – West Africa  Fast track proj

15. Slide 15: Current Flagship Projects (3/4)

    Saipem. Engineering Energy CURRENT FLAGSHIP PROJECTS (3/4) Lakach Subsea Development Layout Lakach – Mexico  Client: Pemex  Scope of work: EPCI of 2 18” gas flowlines 140 Km-long, 4” coiled line pipe 58km long, 50 Km-long umbilical and SURF facilities  Delivery: end of 2017  First deepwater fiel

16. Slide 16: Current Flagship Projects (4/4)

    Saipem. Engineering Energy CURRENT FLAGSHIP PROJECTS (4/4) Saipem 10000 - Worldwide  Client: working for eni since 2010, current contract ending 2019  5th generation Ultra Deepwater DP class 3 Drillship  Dual Activity operation system  Water depth: up to 10,000 ft (3,048 m)  April 2001: deepest

17. Slide 17: E&C Business Opportunities

    Saipem. Engineering Energy E&C BUSINESS OPPORTUNITIES Central Asia/Europe Americas  Lukoil Filanovsky Phase 2 – offshore fixed facilities  Transcanada Prince Rupert – offshore pipelines  BP Shah Deniz Ph. 2 Operational Construction Vessel – subsea  CFE Gulf Mex – offshore pipelines  TAP / TANAP

18. Slide 18: Strategy

    I SAIPEM STRATEGY

19. Slide 19: Strategic Pillars

    Saipem. Engineering Energy STRATEGIC PILLARS 1 Business portfolio refocus 2 De-risking the business model 3 Cost optimisation and process efficiency 4 Technology and innovation 5 Debt reduction and capital discipline 20

20. Slide 20: Business Portfolio Refocus

    Saipem. Engineering Energy BUSINESS PORTFOLIO REFOCUS 1 E&C E&C Drilling Drilling Onshore Offshore Onshore Offshore Investment  Maintain state of the  Maintain state of the strategy art fleet art fleet  FLNG  Harsh environment  Diversify into value- and deepwater  Consolidate presence Commerci

21. Slide 21: De-risking the Business Model

    Saipem. Engineering Energy DE-RISKING THE BUSINESS MODEL 2 Reduce risk across the portfolio Commercial discipline Rebalanced Service mix  Top management engagement on any significant  More engineering and design, less construction commercial decision  Alternative contractual schemes  Selectivene

22. Slide 22: Cost Optimisation Programme

    Saipem. Engineering Energy COST OPTIMISATION PROGRAMME 3 Programme ongoing, progress as scheduled €480mn EBIT improvement by 2017 Staff & Central Costs 480 €0.45bn 370 Variable €1.3bn Project & Operation 150 Cumulative costs Fixed Cost Savings €0.55bn 2H2015 2016 2017 Avoided costs  Scrapped vessel

23. Slide 23: Four Main Work Streams and Over 150 Ongoing Initiatives

    Saipem. Engineering Energy FOUR MAIN WORK STREAMS AND OVER 150 3 ONGOING INITIATIVES E&C Offshore E&C Onshore Drilling  Reduce presence in regions with  Reduce presence in regions with  Rationalise supporting and least potential least potential execution centres Geographical  Rationalise local c

24. Slide 24: Technology and Innovation

    Saipem. Engineering Energy TECHNOLOGY AND INNOVATION 4 Technology and innovative solutions Business opportunities  Heat Traced Pipe-in-Pipe, Risers & Ultra Deep Water risers (SIR, BIRDS) and flowlines Plastic lined pipes (FBJ) for J-lay installation  Best-in-class welding and coating technologies

25. Slide 25: Debt Reduction and Capital Discipline

    DEBT REDUCTION AND CAPITAL DISCIPLINE

26. Slide 26: Strengthening the Balance Sheet

    Saipem. Engineering Energy STRENGTHENING THE BALANCE SHEET 5 Transaction Rationale Current gross debt: €6.7bn* Capital Increase  Reduce leverage to industry standards €3.5bn rights issue  Improve financial and strategic flexibility Fully underwritten New Credit Facilities  Achieve financial indep

27. Slide 27: Capital Increase: Key Features

    Saipem. Engineering Energy CAPITAL INCREASE: KEY FEATURES 5  €3.5bn rights issue Size  Net leverage reduced from 4.6x (Dec-2015) to 1.7x (pro forma)* Strategic  Irrevocable commitment for ~43% of total offering (or €1.5bn) by eni, or eni Shareholder and FSI Support Syndicate  Commitment to under

28. Slide 28: New Credit Facilities

    Saipem. Engineering Energy NEW CREDIT FACILITIES 5 Summary terms and conditions Bridge to Bond Term Loan RCF Size €1.6bn €1.6bn €1.5bn Tenor Up to 24 months 5 years (amortizing) 5 years Margin (bps p.a.) Initial margin: 80bps Margin:110bps Margin: 80bps Ranking Senior unsecured Senior unsecured Seni

29. Slide 29: Capital Discipline

    Saipem. Engineering Energy CAPITAL DISCIPLINE  Working capital normalization process, through: — Continued effort to monetise unbilled revenues and outstanding amounts on legacy contacts Target working Working Capital — Project cash flows management since early capital: Management commercial phase

30. Slide 30: Business Plan Targets

    Saipem. Engineering Energy BUSINESS PLAN TARGETS Metrics (€) 2016 2017 Mid Term Targets  >11bn  >11bn  >12bn Revenues  >65% covered by  >40% covered by backlog backlog EBIT  >600mn  ~700mn  >900mn by 2019  ~5.5%  ~6.5%  >7.5% EBIT Margin  Disciplined pursuit of CAPEX  <600mn  <600mn gr

31. Slide 31: Divisional Targets

    Saipem. Engineering Energy DIVISIONAL TARGETS  Backlog coverage: ~70% in 2016 and ~30% in 2017 Offshore  Contribution to group revenues: modest reduction  Profitability trend : exceeding mid single digit E&C  Backlog coverage: ~60% in 2016 and ~55% in 2017 Onshore  Revenue contribution: moderat

32. Slide 32: Takeaways

    I SAIPEM TAKEAWAYS

33. Slide 33: A Stronger Saipem

    Saipem. Engineering Energy A STRONGER SAIPEM  Distinctive E&C offshore capabilities  Strong expertise in E&C onshore Differentiated business model  High-quality drilling  Longstanding relationships with key clients  Financial and strategic flexibility Robust balance sheet  Investment grade rat

34. Slide 34: Today's Presentation

    Saipem. Engineering Energy TODAY’S PRESENTATION 1 Third Quarter 2015 Results Highlights 2 Strategy Presentation 3 Q&A 35

35. Slide 35: Appendix A: Third Quarter 2015 Results Highlights

    APPENDIX A: THIRD QUARTER 2015 RESULTS HIGHLIGHTS

36. Slide 36: 3Q 2015 Financial Results

    Saipem. Engineering Energy 3Q 2015 FINANCIAL RESULTS YoY comparison (€ mn) Revenues EBIT Net result 3,509 3,072 150 150 76 47 3Q14 3Q15 3Q14 3Q15 3Q14 3Q15 E&C Offshore E&C Onshore Drilling Offshore Drilling Onshore 37

37. Slide 37: 9M 2015 Financial Results

    Saipem. Engineering Energy 9M 2015 FINANCIAL RESULTS YoY comparison (€ mn) Revenues EBIT Net result 9,475 443 8,981 8,445 878 282 810 251 (436) 212 810 232 73 (662) 9M14 9M15 9M15 9M14 9M15 9M15 9M14 9M15 Underlying Adjusted Underlying Adjusted Adjusted E&C Offshore E&C Onshore Drilling Offshore Dri

38. Slide 38: 9M 2015 Financial Results

    Saipem. Engineering Energy 9M 2015 FINANCIAL RESULTS (€ mn) EBIT Net result 282 (718) (436) (204) (640) (866) 9M15 Working 9M15 Non-cash 9M15 9M15 Underlying Capital Adjusted Items Reported Reported Items 39

39. Slide 39: 3Q 2015 Net Debt Evolution

    Saipem. Engineering Energy 3Q 2015 NET DEBT EVOLUTION (€ bn) 0.36 0.03 (0.09) 5.74 5.53 (0.23) 0.14 4.42 Net Debt Net Debt Net Debt 1 @ Dec. 2 @ June 3 4 5 6 7 8 @ Sept. 31, 2014 30, 2015 30, 2015 Cash Flow Forex on Hedging Capex Δ Working Capital Others (Underlying NI + D&A) Derivatives 40

40. Slide 40: 9M 2015 Backlog and New Orders

    Saipem. Engineering Energy 9M 2015 BACKLOG AND NEW ORDERS (€ mn) 22,147 8,445 5,357 17,750 Backlog 9M15 9M15 Contracts South Stream Backlog @Dec. 31, 2014 Revenues Acquisition Termination Impact, @Sept. 30, 2015* SC5 and S12000 E&C Offshore E&C Onshore Drilling Offshore Drilling Onshore * Includes €

41. Slide 41: Backlog by Year of Execution

    Saipem. Engineering Energy BACKLOG BY YEAR OF EXECUTION (€ mn) 7,610 7,677 414 610 920 1,080 2,150 3,313 2,463 228 136 4,126 671 2,674 1,428 2015 2016 2017+ E&C Offshore E&C Onshore Drilling Offshore Drilling Onshore 42

42. Slide 42: Appendix B: Cost Cutting Initiatives

    APPENDIX B: COST CUTTING INITIATIVES

43. Slide 43: Cost Optimisation Program: Ongoing Initiatives by Region

    Saipem. Engineering Energy COST OPTIMISATION PROGRAM: ONGOING INITIATIVES BY REGION E&C Offshore E&C Onshore Drilling Angola, Brazil, Congo, Nigeria, Yards Canada, Iraq Far East Geographical Emirates, United Kingdom, Romania, India, Mexico, Engineering centers footprint Brazil Canada United Kingdom,

44. Slide 44: Appendix C: Refinancing

    I SAIPEM APPENDIX C: REFINANCING

45. Slide 45: Refinancing

    Saipem. Engineering Energy REFINANCING Evolution of Saipem’s Gross Debt (€bn) 6.7 >95% inter- 3.2  Meaningful reduction company debt with 1.6 in total indebtedness 1.6 eni 1.6  Diversification of sources Pre Post Dec. Rights Issue Rights Issue 2017 Eni and other existing Term Loan Bridge to Bond B

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