Precise takes a look at how Saipem will be affected by the proposed demise of the South Stream project.
The bosses at Saipem will likely be glad to see the end of 2014. The beleaguered Italian company has been dealt a further blow this week with the loss of its lucrative South Stream project, after Russia announced it was shutting it down.
Earlier this year Saipem thought it was on to a winner when it secured a contract to supply 10% of the pipe’s offshore section. But the project’s demise, caused by plunging energy prices and European opposition, may unwind up to $3 billion of contracts.
CEO Umberto Vergine said the financial consequence of Russia’s decision will be considerable. He forecast losing $1.55 billion in 2015 sales, and warned more time was needed to recover profitability and cut debt.
The news comes as the oil contractor struggled to cope with two profit warnings last year, a cut to this year’s profit forecast in July and in the last two months alone, plunging oil prices have shaved off almost half of its market value.
On Thursday Eni, the country’s oil major, put the sale of its 43% stake in Saipem on hold. It wants to raise 6 billion euros to strengthen its books – yesterday Saipem’s shares closed at 8.685 euros, compared with a peak in September 2012 of 40 euros, giving the company a market capitalisation of 3.8 billion euros.