Saipem SpA Q1 2010 Earnings Call Transcript

Saipem SpA Q1 2010 Earnings Call Transcript
By Seeking Alpha ,

Saipem SpA (SAPMY.PK)

Q1 2010 Earnings Call Transcript

April 22, 2010 11:30 am ET

Executives

Pietro Franco Tali – CEO

Hugh James O'Donnell – Deputy CEO

Analysts

Mick Pickup – Barclays Capital

Alex Marie – Exane BNP Paribas

Andrew Dobbing – JPMorgan

David Phillips – HSBC

Tao Ly – Credit Suisse

Paolo Citi – Intermonte

Phil Lindsay – RBS

Martijn Rats – Morgan Stanley

Andrea Scauri – Mediobanca

Presentation

Operator

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Good afternoon and welcome to Saipem’s Q1 2010 consolidated results conference call. My name is Tina and I will be your coordinator for today’s conference. For the duration of the call, you will be on listen-only, and at the end of the call, you will have the opportunity to ask questions. (Operator instructions)

I am now handing over to Pietro Franco Tali, CEO to begin today’s conference. Thank you.

Pietro Franco Tali

Good afternoon everyone. Pietro Franco Tali speaking, we have come to the conference, and I will start making some comments on the results. The results for the quarter are, we think, good. Comparing Q1 this year with Q1 in ’09, we had a slight revenue increase, a 5% EBITDA increase, and 4% increase at EBIT levels.

Below EBIT levels in this quarter, financial expenses are likely up, and this is because over the higher level debt and the minority interest is higher than in Q1 last year, and this is mainly due to good profitability of our joint venture in Kazakhstan. Net profit for the quarter amounted to 182 million Euros compared with 186 million Euros a year ago.

Now, analyzing the results by business units, for offshore, it’s probably more appropriate to make a comparison between Q1 this year and Q1 ’09, because of the seasonality impact in this sector. While for the other business units, it is probably more appropriate to compare Q1 this year with Q4 in ’09. So, in the offshore, making the comparison between the two first quarters, we see very similar results. A very slight revenue increase and increase in idle costs deriving from the lower utilization fleets, the overall idle costs in Q1 this year amounted to 31 million Euros compared with 13 million Euros in Q1 of ’09, and the increase is mostly relating to offshore. So, offshore EBITDA and EBIT in terms of margins are fractionally lower than in Q1 last year.

Moving to onshore and making a comparison between Q1 this year and Q4 last year, we see a slight revenue increase while EBITDA and the EBIT margins are in line. In offshore drilling, the comparison between Q1 this year and the last quarter of ’09 shows a revenue increase of almost 17%. This is mainly due to a higher utilization of some shallow water rigs, which were idle or partially idle during Q4 of ’09. EBITDA margin in this sector fractionally higher than in the previous quarter and EBIT margin is fractionally lower.

Finally, in the onshore agreement, revenues are slightly higher than in Q4 of ’09, and those EBITDA and EBIT margins are fractionally higher than in the previous quarter, and this is due to a slight improvement in the fleet utilization. So, the results for the quarter, combined with a good operational efficiency on the projects under execution and a backlog which during the quarter has replaced, indeed actually exceeded the revenues otherwise to confirm the guidance for fiscal year. So, revenues in 2010 are expected to be in line with ’09, and the increase in EBITDA is expected to completely offset the depreciation increase deriving from the drilling fleet expansion. So, EBIT is expected to be in line with ’09.

Moving to CapEx, in the quarter, the overall CapEx amounted to 412 million Euros, and the overall amount expected for the year is confirmed at approximately 1.5 billion Euros. In case of the expected delivery of the units construction, there is not much change from what we announced in February. So, the drillship of Saipem 12000 is leaving the Samsung yard in Korea next week from West Africa. The trip will take 40 to 45 days. So, we should start working for Total in Angola in the first half of June. This cannot be erased vis-à-vis semisubmersible construction in Palermo, Italy is expected to leave the yard mid-July for the sea trial. The sea trials should last for a month or so, then we need an additional couple of weeks to complete commissioning of the drilling equipment and that is expected to leave for Norway by the end of August, early September.

Finally, Scarabeo 9, in this the units under construction in China, and the unit is expected to be ready by the end of November, and for the first year minimum of the five-year contract, really the rig is being assigned by Eni to Rexsol [ph], which would be using the rig in the current year. For the offshore unit, we expect to deliver for the offshore assets through 2011 remains as previously communicated.

Finally, market, in terms of market, it is probably better to go through the different sectors, just because our reading is that there are some differences between them. In the offshore drilling sector, as far as the deepwater segment, we do not see much change. The market was good and remains good. Even if I had to say that we are not active in the market because our units are already contracted on long-term basis. The shallow water drilling segment is improving in terms of utilization, but not yet, at least not yet significantly in terms of day rates. As we think of this higher demand, will – should soon translate in a more convincing increase in day rates. So, onshore drilling, the situation is similar to shallow water drilling. Demand is picking up, and then this is for the time being benefit in utilization with some day rates improvement expected during the second half of the year.

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