After Warning, Saipem Shares Slide to Lowest Since 1992

February 1, 2022

For Illustration: Saipem 10000 drillship - Image by Runar Mork - MarineTraffic
For Illustration: Saipem 10000 drillship - Image by Runar Mork - MarineTraffic

Shares in Italian energy services group Saipem slid to their lowest level in three decades after a shock profit warning left leading shareholders scrambling to find a way to bolster the company's finances.

At 1045 GMT the shares were down 4% after falling more than 30% on Monday and having earlier touched their lowest point since October 1992.

The company, controlled by energy group Eni and state lender Cassa Depositi e Prestiti, warned on Monday it expected to post a 2021 loss of more than one-third of the company's equity and could need funding.

Two sources said Saipem may need to seek more than 1 billion euros in cash by selling new shares and also look for new funding to help roll over debt maturities.

Saipem, which operates in over 60 countries around the world with 32,000 employees said on Monday it was talking with Eni and CDP over a possible "appropriate financing package".

Italy's top two banks Intesa Sanpaolo and UniCredit are working on the package, a third source familiar with the matter said on Tuesday. The lenders declined to comment.

CDP, which holds 12.5% of Saipem tied in a pact with Eni, will hold an extraordinary board meeting on Wednesday to discuss the situation, a source close to the matter said, confirming a report in Italian daily Il Messaggero. CDP declined to comment.

Saipem has struggled to regain traction after pandemic lockdowns throttled demand for oil and gas, prompting energy companies to cut investment and defer fossil fuel projects.

Its efforts to pivot into renewable energy have been set back by supply chain disruptions that made parts unavailable.

OUTLOOK DARKENS

After a weekend board meeting, Saipem on Monday withdrew an outlook issued only in October, putting pressure on Francesco Caio, who took over as CEO last May.

The yield on Saipem's April 2022 bond steadied at a record high of 13.7% on Tuesday after a 1,000 basis point jump the day.

Mediobanca Securities said there were questions "whether the current capital structure is tenable; and whether a new equity injection, or debt-to-equity swap is required".

Saipem's problems began as far back as 2013 when it got caught up in corruption proceedings in Algeria and then issued a series of profit warnings relating to margins on contracts. In 2016 it needed a 3.5 billion euro capital hike.

(Additional reporting by Danilo Masoni Editing by Keith Weir)



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