Saipem S.p.a. · MIL:SPM
Saipem — Investor Day (April 2013)
47 slides from Saipem's investor day presentation, Apr 24, 2013
Slide 1: Operational Review & Strategy Update
Operational Review & Strategy Update Positioning Saipem for Margin Recovery London Stock Exchange, April 24, 2013
Slide 2: Forward-Looking Statements
Forward-Looking Statements By their nature, forward-looking statements are subject to risk and uncertainty since they are dependent on upon circumstances which should or are considered likely to occur in the future and are outside of the Company’s control. These include, but are not limited to: fore
Slide 3: Presentation Outline
Presentation Outline 1. New CEO First 100 Days Umberto Vergine 2. Operational Review I. Introduction Umberto Vergine II. Risk Management System Hugh O’Donnell III. E&C Business Unit Giuseppe Caselli IV. Summary of Key Actions Umberto Vergine 3. Outlook for Saipem Umberto Vergine 4. Conclusions Umber
Slide 4: New CEO First 100 Days
1. New CEO First 100 Days Umberto Vergine - CEO 4
Slide 5: New CEO – initial impressions of Saipem
New CEO – initial impressions of Saipem Saipem business model founded on unique combination of notable strengths: Large/complex EPC project management State-of-the-art offshore fleet, continuously upgraded Several deep-water and heavy lift records Unique and valuable local content footprint
Slide 6: New CEO – immediate steps
New CEO – immediate steps Initiated process of scrutiny all key projects, financial forecasts and operations - Particular emphasis on client relationships Identification of some E&C shortcomings Appointment of new E&C COO with strong operational experience Revision of 2012 and release of 2013 guidan
Slide 7: Operational Review
2. Operational Review Umberto Vergine - CEO 7
Slide 8: Operational Review – Two objectives
Operational Review – Two objectives 1. Comprehensively review E&C operations to identify causes of margin reduction and necessary actions, with a focus on: I. Risk management rules and guidelines II. Approach to new business DRIVE MARGIN III. Execution quality/performance RECOVERY IV. Client relatio
Slide 9: What went wrong – analysis of shortcomings
What went wrong – analysis of shortcomings Context • Aggressive NOC-dominated Market (2009-2011) Shortcomings during Commercial Phase: • e.g. Accepted Contracts with Low Margins and Onerous Terms & Conditions • => deviations from Golden Rules, without counterbalance of adequate actions and compensat
Slide 10: 2(i) Risk Management System
2(i) Risk Management System Hugh O’Donnell – Deputy CEO 10
Slide 11: Saipem Risk Management System: History and Background
Saipem Risk Management System: History and Background Up to 2005 a few ‘bad’ contracts in Saipem’s portfolio mix impacted the value generated by the remaining order book Profit from Large Projects Typical Portfolio of Large Projects carried out during the period Profit Profit AVG Average Average w
Slide 12: Successful Tool in eliminating 'Bad' Contracts: focus now on 'Poor' Contracts
Successful Tool in eliminating ‘Bad’ Contracts: focus now on ‘Poor’ Contracts ‘Poor’ contracts in E&C Portfolio Evolution of portfolio mix in E&C 20% 40% 65% ONSHORE 80% 60% 35% 2012 2013E 2014E OFFSHORE New Contracts Contracts Completed Existing Lower Margin Contracts Risk Management system success
Slide 13: Saipem's General Approach to Risk
Saipem’s General Approach to Risk TYPICAL TYPICAL RISKS TO BE TYPICAL CLIENT’S CONTRACTOR’S RISKS NEGOTIATED RISKS • Engineering quality • FEED quality • Geo-politics • Procurement • Soil conditions • Country politics • Subcontractors • Weather, climate • Overall/Project • Commodity pricing profitab
Slide 14: Saipem takes a highly proactive approach to risk management
Saipem takes a highly proactive approach to risk management There are typical contractor risks inherent in Oil & Gas contracting ► Saipem is structured to manage/control these with a particular focus on Project Risk Engineering Procurement Construction Installation Saipem’s industrial model enables:
Slide 15: Saipem Risk Management System
Saipem Risk Management System CLEAR STRUCTURED PROPRIETARY COMPREHENSIVE 15
Slide 16: Risk Management System: CLEAR
Saipem’s Risk Management System: CLEAR Project based: covering Commercial and Execution phases and expanding to Operations The body of “Golden Rules” articulates Saipem Risk Tolerance and provides guidance and thresholds on risk acceptance “Golden Rules”: No deviations, unless approved by CEO/
Slide 17: Risk Management System: STRUCTURED
Saipem’s Risk Management System: STRUCTURED Supports analysis and management at Corporate/Business Unit level: Individual project Risk category Opportunity category Portfolios Risk Breakdown Structure 17
Slide 18: Risk Management System: PROPRIETARY
Saipem Risk Management System: PROPRIETARY Initiative launched in 2006 (with analysis of loss-making projects) Incorporates several years of project-by-project ROKM experience and regularly updated Aligned with the main Global Standards of Risk Management 18
Slide 19: Risk Management System: COMPREHENSIVE
Saipem Risk Management System: COMPREHENSIVE Categories: From “Arbitration” through to “Vendor Selection” Global – utilized throughout Saipem world thanks to dedicated, secure intranet databases and workflow support tools Golden Rules & Silver Guidelines: Examples (partial texts) NUMBER OF GOLDE
Slide 20: Optimisation of risk management system
Optimisation of risk management system Fine tuning of existing Golden Rules (GR) and Silver Guidelines (SG) More rigorous approval of GR deviations New authorization level for deviation from most important GR Across-the-board GR SG Conformity report (commercial phase) prior to contract award
Slide 21: 2(ii) E&C Business Unit
2(ii) E&C Business Unit Giuseppe Caselli - E&C COO 21
Slide 22: Operational review – Analysis of shortcomings
Operational review – Analysis of shortcomings The E&C Operational Review revealed the following shortcomings: Organisational • Overly centralized organization, large number of direct reports to former COO of E&C, creating: Bottleneck in decision-making process Lack of integration ► poor communic
Slide 23: Operational Review – Actions
Operational Review – Actions As a result, the following actions are being taken: 1 Reorganize the E&C BU 2 Revise commercial approach 3 Enhance execution efficiency 4 Improve relationship with clients 23
Slide 24: Reorganization of E&C Business Unit - Principles
1 – Reorganization of E&C Business Unit - Principles Cross product Empowerment Focus on each Simple, clear & Balance synergies - of key local and product line's accountable globalization vs. Commercial central core capabilities organization decentralization opportunities managers • Integration of •
Slide 25: Reorganization of E&C Business Unit - Structure
1 - Reorganization of E&C Business Unit - Structure E&C COO 3 Central Profit Centres Functions Offshore Onshore Floaters S. Porcari E. Magnani F. Pallavicini Commercial Engineering Onshore Offshore Floaters Managers Managers (e.g. PD) (country X) Tendering Cost Centres Eng. 8 Regional Managers RECs
Slide 26: Revised commercial approach
2 – Revised commercial approach New initiatives to focus on profitability vs. turnover: more selective approach leverage unique Saipem strengths stronger and more distinctive competitiveness more effective risk mitigation measures: ensure expected margins are achieved actions with client
Slide 27: Enhanced Execution Efficiency - Immediate
3 - Enhanced Execution Efficiency - Immediate In addition to our Organization Overhaul, we must be more rigorous in: ‘Optimisations’: only with Client pre-agreement Partners, Subcontractors: more careful selection (when in doubt, direct hire etc.) Project Management: Rigorous, continuous res
Slide 28: Enhanced Execution Efficiency - Continuous
3 - Enhanced Execution Efficiency - Continuous Contract Award MORE FRIENDLY OPERATING ENVIRONMENT LESS FRIENDLY Office (High Quality) Multiple Offices Factories/Suppliers Yard/site Offshore EFFICIENCY Efficiency RISK Risk Time Enhance Execution Efficiency through Powerful Engineering & Constructio
Slide 29: Improved relationship with Clients
4 - Improved relationship with Clients Regional Managers reporting directly to COO as key contact points to: Increase proximity to Clients Manage critical issues ‘on the spot’ Support commercial strategy Clear, early agreement on allocation of respective client-contractor risks to: Improve r
Slide 30: 2(iii) Summary of Key Actions
2(iii) Summary of Key Actions Umberto Vergine - CEO 30
Slide 31: Actions Driving Margin Recovery
Actions Driving Margin Recovery Organisational Commercial Execution Shortcomings Shortcomings Shortcomings Clear set of actions to remedy shortcomings already under implementation: • Reorganized structure to improve efficiency and clarify responsibility and reporting lines • Fine-tuned commercial ap
Slide 32: Positive Outlook for Saipem
3. Positive Outlook for Saipem Umberto Vergine - CEO 32
Slide 33: Saipem remains an industry leader
Saipem remains an industry leader Unique industrial model, carefully developed over years, ideal for frontier Oil & Gas Challenges of the future Saipem franchise not impacted by recent events Continuous good relations with major clients Invitation to tender flow not affected No key personn
Slide 34: The market opportunities support margin recovery
The market opportunities support margin recovery Market outlook over the next 24 months BY GEOGRAPHY BY PRODUCT MEDITERRANEAN MARINE WORKS NORTH ONSHORE SEA PIPELINES UPSTREAM RUSSIA ONSHORE MIDDLE EAST SURF/SUBSEA CASPIAN OFFSHORE SOUTH AMERICA CENTRAL AMERICA DOWNSTREAM ONSHORE ASIA PACIFIC OFFSHO
Slide 35: Strongly positioned to capture global market opportunities
Strongly positioned to capture global market opportunities Surf subsea offshore Onshore pipelines Offshore fixed facilities LNG onshore Downstream onshore Offshore pipelines FLNG Upstream onshore Marine works Floaters 35
Slide 36: Capex outlook
Capex outlook Recent evolution of Capex Robust Capex program of recent years has put Saipem at the forefront of the industry today in terms of best-in-class assets Short term Capex outlook No requirements for significant new investments Maintenance and upgrading /enhancement to maintain high s
Slide 37: View on Drilling: integral part of Saipem business model
View on Drilling: integral part of Saipem business model Drilling activities exceed pure economic value for Saipem: Competence and international track record enhance Saipem’s reputation Client relationships complement E&C Synergies from overall fleet management Expansion of Saipem drilling fle
Slide 38: Conclusion
Conclusion Umberto Vergine - CEO 38
Slide 39: Conclusion
Conclusion Comprehensive review of our business Honest analysis of shortcomings and actions taken Confirm robust business model based on distinctive strengths Assessed market potential in our core businesses Saipem optimally positioned for margin recovery 39
Slide 40: Q&A
Saipem Q&A ws, saipem
Slide 41: Appendix
Saipem Appendix ws, saipem
Slide 42: Umberto Vergine's background
Umberto Vergine’s background Appointed CEO in December, 2012 Career background: Civil engineer Three decades of corporate and operational management experience in the Oil & Gas sector Previously Country and Senior Regional Manager in key regions 2009: EVP of Eni E&P division 2010: Seni
Slide 43: Giuseppe Caselli's background
Giuseppe Caselli’s background Appointed COO of E&C BU in January, 2013 Career background: Mechanical Engineer 27 years at Saipem Over 20 years in Engineering & Construction 6 years as Head of Drilling Business Unit Project Director in the most critical phases of the design and construc
Slide 44: Stefano Porcari's background
Stefano Porcari’s background Appointed Executive Vice President Offshore Business Line, E&C BU, in March, 2013 Career background: Mechanical Engineer 26 years at Saipem, mainly in the Offshore business Managerial positions in different companies within the Group Significant contribution
Slide 45: Ettore Magnani's background
Ettore Magnani’s background Appointed Executive Vice President Onshore Business Line, E&C BU, in February, 2013. Career background: 25 years at Saipem, mainly in the Onshore business Tendering Department Manager for almost 10 years Saipem Senior Vice President since 2010 45
Slide 46: Fabio Pallavicini's background
Fabio Pallavicini’s background Appointed Senior Vice President Floaters Business Line, E&C BU, in March, 2013 Career background: Civil Engineer 18 years at Saipem; 28 years in the Oil & Gas Industry Project Director in the Sabratha Platform project, the first offshore gas platform in Libya
Slide 47: Egidio Palliotto's background
Egidio Palliotto’s background Appointed Senior Vice President, Drilling Business Unit in December, 2012 Career background: Mining Engineer 22 years at Saipem, mainly in the Drilling business Managerial positions in different companies within the Group Extensive experience in Drilling act