Presentation to the Financial Community 2004 First Half Results

Transcription

1 Presentation to the Financial Community 2004 First Half Results September 2004

2 Forward-Looking Statements Forward-looking statements are based on a number of assumptions and expectations that could ultimately prove inaccurate, as they are subject to risks and variables, outside the company s control, that could cause actual results to differ materially, including currency fluctuations, the level of capital expenditure in the oil and gas industry as well as other industries, the timing of development of energy resources, construction and project risks, armed conflict or political instability in the Persian Gulf or other regions, the strength of competition and interest rate fluctuations.

3 Presentation Outline Business Environment Oil & Gas Industry Long Term Market Trends vs Saipem Strategy & Positioning Challenges Financials Conclusions 1

4 Business Environment 2

5 E&P Spending Outlook Bil. $ Worldwide E&P Spending +24.8% +3.4% +9.4% +7.5% +4.4% Bil. $ North America E&P Spending +31.6% -8.7% +11.9% +1.8% +0.7% 2000A 2001A 2002A 2003A 2004E 80 International E&P Spending A 2001A 2002A 2003A 2004E June 2004 Bil. $ % +10.7% +8.2% +10.2% +6.4% Dec Source: Saipem elaboration based on Citigroup S.B A 2001A 2002A 2003A 2004E 3

6 Mature Areas GOM North Sea Conventional Drilling Weakness Bottoming - Signs of Recovery at Frontiers 2003 Weak 1H 2004 Weakness Bottoming 2H 2004 Signs of Recovery OVERSPILL Frontiers Segment Deepwater West Africa FSU OPEC Resilient Mixed Resilient Recovering Project Development at Frontiers Largely Unaffected 4

7 Onshore - Upstream Plants & Pipelines - Examples North & West Africa! Algeria Block 208 Gas Dev. - Sonatrach/Anadarco Medgaz (Onshore Package) - Sonatrach Rourde Nouss Field Dev. - Sonatrach! Nigeria Escravos EGTL Project - Gas-To-Liquid Plant - - ChevronTexaco Rumuji-Bonny Gas Pipeline - NAOC Gbaran Ubi Integrated Oil & Gas Project - Shell Southern Swamp Associated Gas Gathering Plant & Facilities - Shell Several Plants/Pipeline Projects - NAOC LEGEND: Yellow: Not yet awarded Green: Awarded to Saipem Isolated Areas! Caspian Kashagan (Onshore Package) - Kazakhstan - KCO Karachaganak Extension - Kazakhstan - KPO CPC Extension - CPC - Russia Other Projects - Plants/Pipelines - Russia! Sakhalin " Sakhalin Several Phases - Russian Far East Middle East! Saudi Arabia Juaymah Fractionation Plant - Aramco Hawiyad Gas Plant Expansion - Aramco Several Pipeline Projects - Aramco! U.A.E. 4 th th LPG Train - Adgas Habshan Gas Expansion - Gasco Short Term uncertainty Short Term Lull - Good Medium Term Prospects 5

8 West Africa! Nigeria " Amenam AMD 3 - Total " Akpo - Total " Agbami - ChevronTexaco! Angola " Rosa - Total " Marimba - ExxonMobil " Kizomba C Phase 1 - ExxonMobil LEGEND: Yellow: Not yet awarded White: Awarded to others Green: Awarded to Saipem Offshore Field Development & Pipelines - Examples Isolated Areas! Caspian " Kashagan (several packages) - Kazakhstan - KCO " AGC Full Field Dev. Phase 3 - Azerbaijan! Sakhalin " Sakhalin Several Phases - Russian Far East Pipelines " Dolphin Pipelines - Qatar - Dolphin Energy km " Balgzand to Bacton Project - Holland to UK - Gasunie Gas Transp. Serv km " Medgaz - Algeria to Spain - Medgaz km " Tangguh GPF Pipeline - Indonesia - BP " Third Transmission Pipeline - Thailand - PTT km Good prospects for Large/EPIC projects in West Africa, Isolated Areas & Global Gas Pipelines 6

9 Eni GROUP LNG Receiving Terminals - Examples Europe " FOS LNG - GDF - France GoM & Caribbean Area " Port Pelican GBS - ChevronTexaco - USA " Freeport - Freeport LNG - USA " Zeebrugge LNG Expansion - Fluxys - Belgium " Milford Haven LNG I - Dragon LNG - UK " Milford Haven LNG II (South Hook) - ExxonMobil - UK " Golden Pass - ExxonMobil - USA " Long Beach, CA - Sound Energy Solutions - USA " Costa Azul - Shell/Sempra - Mexico " Cartagena LNG Expansion - Enagas - Spain " Barcelona LNG Expansion - Enagas - Spain " Canary Island - Gas Canarias - Spain " Lazaro Cardenas - Repsol - Mexico " Ocean Cay - AES Ocean Express - Bahamas " Livorno FRSU - Cross Energy - Italy " Brindisi - BG - Italy " North Adriatic Terminal - ExxonMobil (ex-edison) - Italy Asia Pacific " Fujian - CNOOC - China PRC " Shanghai - CNOOC - China PRC LEGEND: Yellow: Not yet awarded White: Awarded to others Green: Awarded to Saipem " West Java - BP - Indonesia " Hazira Phase 2 - Shell - India " Cochin - Petronet - India Strong Market Growth! 7

10 Oil & Gas Industry Long Term Market Trends vs Saipem Strategy & Positioning 8

11 Oil & Gas Industry Long Term Market Trends - Major Oil Companies Capex Forecast : USD 350 Bln. - GAS Excl. FSU 49% OTHERS 16% Middle East Piped Gas Other Oil LNG Re-Gas OPEC Oil LNG 6% 6% Excluding Regassification 1% 7% 15% Oil GTL Sands 6% 2 6% % Russia Oil 22% 4% FSU Pipeline 8% Caspian Oil 7% 10% Russia Gas Deepwater RUSSIA & CASPIAN FRONTIERS 25% DEEPWATER 10% Piped Gas Excluding FSU & Middle East More than 80 % Majors Capex addressed to : FSU Frontiers - Deepwater - Gas-to to-market Source: Deutsche Bank 9

12 Saipem Strategy and Positioning SAIPEM LEADING POSITION IN: Large/Deepwater Isolated Areas Traditional Oil Prov. Gas-to to-market Exploiting BU Synergies A Strong Model - Getting Stronger 10

13 Large/Deepwater Kizomba A/B Projects Saibos FDS : Large SURF projects located Offshore Angola in 1,100-1,200 m W.D. Project Challenges Include: Flow Assurance Export Line System Fatigue Deepwater Methods High Spec. Construction Vessel: Saibos FDS 11

14 Booster- Compression Station N. 1 PA-B PA-A LUN-A Isolated Areas Sakhalin - Russian Far East Sakhalin Island 7000 km East of Moscow (7 hours Time diff.) Minimal Infrastructure Scarce Local Manpower Min. Temperature -50 C Sea Ice (5-7 months) Seismic/ Environmentally Fragile Area Sakhalin Island LNG Plant & Oil Export Terminal Projects Ongoing Onshore 2003/2006! EPC Turnkey Contract for Twin 800 Km Onshore Oil & Gas Pipelines Offshore 2004/2006! EPIC Contract for Offshore Oil & Gas Pipelines (several segments 150 km total), Subsea Power & Communication Cables for Lunskoye and Piltun-Astokhskoye fields plus Oil Export Line at Aniva Bay! T & I of 2 Platform Topsides (LUN-A & PA-B) (Towing/ Floatover / Mating of 2 topsides, 20,000+ tons each) Aniva Bay Total Onshore & Offshore Combined Value: ~ USD 1 Bln. 12

15 Traditional Oil Provinces A Permanent Presence - Nigerian Example - Exploiting Business Units Synergies Port Harcourt, Nigeria M.M.O. Onshore Drilling 2003: Rumuolumeni Base Expansion Onshore 2,100 Local employees* in Nigeria About 2/3 of the total Saipem workforce Offshore Difficult Environment Offshore Drilling Leased FPSO (*) As of June 30, : AG Gathering Pipelines System 13

16 Gas-To-Market Greenstream Gas Sealine Libya to Italy Sabratha Platform & Bahr-Essalam Sealines LIBYA: SABRATHA Platform Saipem 7000 Castoro Sei World Record Pipelay DN m W.D. October

17 Challenges 15

18 Revenue/Cost Background: Euro/USD Exchange Rate Devaluation Impact AVG %* Revenue Mix : Cost Basis: ~ 70% USD ~ 30% Euro (Typical) 600 Mil. Euros Structural (Milan & Paris Operating Centres, Depreciation & Amortisation, etc.) Jan. Apr. Jul. Oct. Jan. Apr. Jul. Oct. Jan AVG Apr. Jul * Euro appreciation : AVG VS AVG Oct. Remaining Operating Costs Adjustable depending on Revenue Mix Devaluation Impact - Average Lag: 1 Year Exchange Rates Euro/USD : Average Exchange rate applicable to 2003: 1.00 Average Exchange rate applicable to 2004 : 1.15 (Est.) (75% Contract Awarded 2002) Estimated Hypothetical Effect on 2004 Operating Income (Based on Average Exch. Rate: 1.15) Dual Impact: Translation Effect Mln. Margins Erosion - 50 Mln. Overall Hypothetical Effect: - 80 Mln. Operating Income 16

19 Euro/USD Exchange Rate - Impact Absorption Positive Recovery Factors on 2004 Results: Cost Synergies from ex-bos Integration Increased Volumes Positive Pricing Effect (70% of Saipem business is exposed to weak USA competition) Most of Margin Erosion and Translation Effects Absorbed 17

20 FEED ( Months) 3 rd Party Typical FEED Endorsement Process FEED ENDORSEMENT (3 Months) SIGN OF EPIC TURNKEY CONTRACT EPIC Contract Risk - Example: Scope of Work - FEED Impact DETAILED ENGINEERING ADDITIONS ADDITIONS CAUSE DISRUPTIONS IN ALL PROJECT PHASES ORIGINAL SCOPE OF WORK C O S T B I D RESULT OF UNRELIABLE FEED Margin & Contingency Hook Up/Com. Installation Construction Procurement Engineering Disruptions due to Additions Costs of Additions Original Scope Margin Contract Loss Final Contract Revenues Delta to re-establish Contractor Profitability ENGINEERING DELAYED ACTIVITIES PROCUREMENT BUT EPIC REMAINS THE MOST EFFICIENT BUT EPIC DISRUPTION OF PLANNED SEQUENCES ADDITIONS EFFECTS PREFABRICATION LOSS OF EFFICIENCY TRANSPORT LOW IMPACT (ABSORBED EFFECTS) ASSEMBLY PROCESS HELPING TO PREVENT UNCONTROLLED COST OVERRUN! ERECTION CONTRACTOR TROUBLES STEM FROM UNBALANCED RISK/REWARD 18

21 E&C Industry - Current Status & Looking Forward 100% 80% 60% 40% 20% 0% Current Status 10 Relevant Subcontractors & Suppliers 30% Suppliers - Survey - 10 Major Offshore Oil Services Players 80% Oil Services % Reporting Loss in 2002 or 2003 Source: Saipem Looking Forward A Healthy Contracting Industry Requires: Contractors with appropriate Industrial Model (EPIC) Fair Contracting Strategy with appropriate Risk/Reward Balance Oil Services Contracting Sector:! Contractors: Large Losses imply very weak Universe! Subcontractors & Suppliers: Losses imply Unreliability A New Relationship 19

22 Financials 20

23 Results (Mln ) Contribution from Operations (*) EBIT ** ** H H H H 2004 Offshore Floating Production Offshore Drilling Onshore LNG MMO Net Income Minority Interests Income taxes Onshore Drilling (*) Contribution from Operations: EBIT before G&A (**) Contribution from Operations Before BOS Goodwill Amortisation Net financial expenses 21

24 (Mln ) 400 Investments Sources and Applications of Funds, Net Debt H H E* Net Debt Dec. 31, Application of Funds 1H Sources of Funds 1H 04 Net Debt June 30, 2004 Net Working Capital Fleet FPSO Acquisitions Cash Flow Investments Project Related Local Content Dividends (*) Guidance Target excluding Leased-FPSO Buy Back Delta Exch. rate Divestments Employee term. benefits 22

25 New Contract Acquisitions Contract Acquisitions & Backlog (Mln ) Backlog H H Dec.31, 2003 June 30,2004 Offshore Offshore Drilling Onshore Floating Production Onshore Drilling LNG MMO 23

26 Conclusions 24

27 Conclusions Revenues: further growth vs record levels despite USD Devaluation FY Backlog: higher than Guidance Avr.. financial debt: lower than 2003 Avr., leading to a decrease in net financial expenses Results in line with or close to 2003 record results Medium Term Saipem Strategy closely matches Industry Trends A Strong Model Getting Stronger Identified Risks:! Risk/Reward Unbalance! Weakened Industry! Euro/USD Exchange Rate Impact Strong Growth Potential Despite Increased Risk Environment 25