presentation to the financial community 2005 results … · presentation to the financial community...

February 2006

Presentation to the Financial Community

2005 Results and Snamprogetti Acquisition

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 Arabic Gulf or other regions, the strength of competition and interest rate fluctuations.

3

Presentation Outline

• Conclusions

• FY 2005 Financial Results

• Offshore Construction and Drilling

• Saipem-Snamprogetti Combination

4

FY 2005 Financial Results

5

Financials

0

100

200

300

400

500

2005200520042004

294294

485485

44

2828

6565

5555

25251414

444444

5959

6262

244244

1111

2121

28281919

0

50

100

150

200

250

300

350

400

235235255255

2005200520042004

336767

2323

44

7676

3030328328365365

0

1000

2000

3000

4000

500043064306

27072707

4747289289

609609158158

208208288288

45284528

26212621

302302

748748

299299321321

2727210210

2005200520042004

EBIT Before G&A(Mln €) EBIT and Net Income

Net Income

Income taxes

Minority Interests

Net financial expensesBoth 2004 and 2005 figures are IAS Compliant

Onshore Drilling

OnshoreOffshore DrillingOffshore

Floating Production LNG

MMO

Revenues

Proposed dividend per share € 0.19 (dividend ref. FY04 € 0.15) +26.7% Y/Y

6

Financials

Depreciation

Net Income

2005

Fleet

Project Related

FPSO

Local Content

(Mln €)

680

292292

198198

2006E

Saipem Capex

Snamprogetti Acquisition

130130

200200

6060

190190

892

190

490

Large 2006 Capex and Acquisition Commitments significantly offset by expected strong Cash Flow

Equity Purchase

Price

2006 Total Cash Out

Flow

Net Cash Enterprise Value

Additional Cash from

NWC

Cash out

580

No Planned Capital IncreaseNo Planned Capital Increase

Cash Flow

255255

199199

1012

454

Financial Debt @ Dec. 2005

Snamprogetti Capex

7

New Contract Acquisitions

2005 Contract Acquisitions & Backlog

Onshore Drilling

OnshoreOffshore DrillingOffshore

Floating Production LNG

MMO

(Mln €)

Backlog

0

1000

2000

3000

4000

5000

6000

0

1000

2000

3000

4000

5000

6000

2005200520042004 Dec. 31, 2005Dec. 31, 2005Dec. 31, 2004Dec. 31, 2004

53065306

33033303

317317

763763

6363

117117

296296

447447

55135513

31043104

382382

555555

155155

589589

298298

430430

24222422

47354735

367367

540540212212

282282413413

27382738

43874387

2222

596596275275 107

344344305305

499499

8

Saipem-Snamprogetti Combination

9

Saipem to acquire Snamprogetti for € 680 Mln in cash (*) (Enterprise Value € 490 Mln)

Effective end March ‘06 (upon approval of 2005 financials)

No regulatory approvals


(*) to be adjusted according to approved consolidated equity (no material impact expected)

Transaction’s highlightsTransaction’s highlights

10

Enhance competitive position in a growing market through:Complementary business portfolio

Wider client base and geographical presence

First class technology and proven competence

Expected cost synergies of € 30 Mln by 2008

Transaction immediately eps accretive


Strong industrial and financial rationaleStrong industrial and financial rationale

Creating a Global Leader for Design and Execution of Very Large Complex On-shore and Off-shore Projects for the O&G Industry

11

0

2

4

6

8

10

12

2002

2003

2004

2005

2006

2007

2008

2009

E&P Spending Trends - Onshore

Saipem Current Position (pre-acquisition)

LNG Liquefaction + GTL

Sources: Douglas-Westwood for LNG and GTL; UBS for Oil Sands

Total Capex12.9 Bil.US$ +135%+135%

2006-2009Total Capex

30.4 Bil.US$

2002-2005

Oil Sands (Canada)

GTS 4GTS 4OKPAI OKPAI SOKU II SOKU II

Execution of Big Projects in Frontier Areas as ‘Constructor Only’ (Karachaganak, CPC…)Execution of Big Projects in Frontier Areas as ‘Constructor Only’ (Karachaganak, CPC…)

Undertake Medium EPC Projects up to US$ 500 Mln.(Gbaran, Soku II, Gts 4, Okpai Power Plant, Rod…)Undertake Medium EPC Projects up to US$ 500 Mln.(Gbaran, Soku II, Gts 4, Okpai Power Plant, Rod…)

Engineering Capacity and Track Record limit access to Large EPC Projects esp. Gas MonetizationEngineering Capacity and Track Record limit access to Large EPC Projects esp. Gas Monetization

CPC PIPELINES & TERMINAL CPC PIPELINES & TERMINAL KARACHAGANAKKARACHAGANAK

Bil. C$


23.4 Bil.C$ +48%


34.5 Bil.C$

11

3.3

6.0

2.51.1

11.5

6.75.4

2.62.2

2.0

Africa Asia PacificMiddle East Latin America

FSU & Eastern Europe Western Europe

12

28%

72%

2005 Revenues ~ 2,000 Mln €

Oil & Gas

Others (mainly High Speed Train project)

Snamprogetti is a Leading International E&C Contractor for the design and implementation of large-onshore projects in the Oil & Gas Industry

Founded in 1956, 100% owned by Eni

Participated in the design and construction of:70 grass-root plants (refining, petrochemical & gas processing)Over 1,400 process unit74,500 km of onshore pipelines 21,500 km of subsea pipelines

Recent years profitability depressed by a few loss-making projects completed in 2005

Strong backlog and first-class engineering competences

4,300 employees out of which ~ 2,800 engineers

31.12. 2005 Backlog ~ 4,400 Mln €

79%

21%


Snamprogetti at a glanceSnamprogetti at a glance

13

SAUDI ARABIA- Saudi AramcoKhursaniyah Oil Production Facilities

SAUDI ARABIA- Saudi AramcoHawiyah NGL Recovery Program

Major Snamprogetti Projects OngoingMajor Snamprogetti Projects Ongoing


CANADA- Canadian Natural Resources Ltd.

Oil Sands treatment plants

NIGERIA – Nigeria LNG Limited Fourth, Fifth and Sixth LNG trains

ABU DHABI- GascoThird NGL Train

ABU DHABI- AdcoBu Hasa Oil Facilities Development

NIGERIA- Chevron Nigeria Ltd.Escravos Gas-to-Liquids Complex

QATAR – Ras Laffan Liquefied Natural Gas CompanyFifth LNG train

14

60%

26%14%

Americas

1%1%

59%

5%8%

26%


New/Wider Client BaseNew/Wider Client BaseMiddle East PresenceMiddle East Presence

Upstream/Midstream (plants & pipelines)Gas monetisation (LNG,NGL,GTL)Downstream (Oil Sands, Refining/Deep Conversion)

Upstream/Midstream (plants & pipelines)Gas monetisation (LNG,NGL,GTL)Downstream (Oil Sands, Refining/Deep Conversion)

Proven CompetencesProven Competences

Increased Resilience ref. Business Cycle

Increased Resilience ref. Business Cycle

Complementary Capital Requirement

Complementary Capital Requirement

First-Class TechnologyFirst-Class Technology

Proprietary

Affiliates - owned (i.e. Haldor Topsøe)

Licensed

Proprietary

Affiliates - owned (i.e. Haldor Topsøe)

Licensed

RationaleRationale

MAJOR & SUPERMAJOR NATIONAL OTHERS

Snamprogetti O&G Backlog 31.12.2005

34%55%

11%

Saipem Backlog 31.12.2005

Middle EastAsia and Far EastAfrica Italy

Europe

Snamprogetti O&G Backlog 31.12.2005

15

4%6%

44%

10%

8%

3%

18%

11%12%

56%100%

7% 6% 2%

31%

54%

Group BusinessGroup Business

Balanced exposure to Oil & Gas Industry


SnamprogettiSnamprogetti

Strong “E” & “P”~2,800 engineersTrack record in liquefactionTechnology base

SaipemSaipem

Strong “C”Significant Offshore-oriented Engineering CapacityDecentralisedLocal contentLow cost

CombinationCombination

Powerful EPCMega projects (>500 Mln US$)Access to liquefactionInternationalTechnology base

++

SnamprogettiSnamprogetti SaipemSaipem CombinationCombination

Onshore - Combined strengthsOnshore - Combined strengths

DrillingOnshore Leased FPSOBacklog @ 31.12.2005 Offshore MMO

Onshore

LNG

OnshoreLNG

Snamprogetti++

16

30

-3-10

5158

25

-10

0

10

20

30

2006 2007 2008

Saipem-Snamprogetti Combination Synergies

Expected cost synergies of € 30 Mln by 2008Improved efficiency potential, mainly as results of combining:

• “E” & “P” Competences (Snamprogetti) with • Decentralised “C” Competences (Saipem)

Revenue synergies potential

Sources of cost synergiesSources of cost synergies

Staff (Milan and RoW)

Group reorganisation

Procurement

Bidding and Commercial

SAP & IT

Facility management

R&D

€ Mln

Gross cost synergiesNet cost synergies

Reorganisation Costs

17

€ Mln 2006ERevenues ~ 2800

Ebit before G&A

Net Income

Snamprogetti ~ 90

~ 30

Net impact after taxes 18

Synergies before taxes 5

Tax impact on interests and synergies 4

Interests on acquisition price before taxes (*) (21)


Transaction immediately eps accretivePurchase consideration exceeding the underlying net assets (~ 460 Mln €) deducted from Saipem Equity (**) Gearing ~ 110% at time of acquisition(**) according to the International Accounting Standards

Acquisition financial impactsAcquisition financial impacts

(*) Net interests accrued on 9 months only

18

Offshore Construction and Drilling

19


36.1 Bil.$

+ 39%


50.2 Bil.$

E&P Spending Trends - Offshore

Saipem Current Position

Nigeria Angola Kazakhstan

Frontier Areas - ExamplesDeepwater

Sources: Douglas-Westwood for Deepwater; Wood MacKenzie for Frontier Areas


48.5 Bil.$

+ 51%


73.0 Bil.$

Africa Asia PacificNorth America Latin AmericaOthersWestern Europe

Fleet PrimacyFleet Primacy

New Vessels - Kazakhstan

New Vessels - Kazakhstan

Engineering Concepts

Engineering Concepts Cost EffectivenessCost Effectiveness

Saipem 7000Saipem 7000

ROV FleetROV Fleet

TRBTRBErsai 1Ersai 1Castoro 12Castoro 12

• Kizomba A-B• Rosa• Akpo

‘SLOR’‘BHOR’‘SLOR’‘BHOR’

‘‘OOLOOL’’

Saipem10000

Local ContentLocal Content

Kurik, Kazakhstan

Soyo, AngolaSharjahU.A.E.

SPS, Azerbaijan

Rumuolumeni, Nigeria

SMSRijeka-Croatia

SIPS Chennai - India

PT SOFJakarta

IndonesiaBatam, Indonesia

Hassi Messaoud,

Algeria

Kurik, Kazakhstan

Soyo, AngolaSharjahU.A.E.

SPS, Azerbaijan

Rumuolumeni, Nigeria

SMSRijeka-Croatia

SIPS Chennai - India

PT SOFJakarta

IndonesiaBatam, Indonesia

Hassi Messaoud,

Algeria

Saipem 3000

Yards/BasesYards/BasesLEGEND

Cost-Effective Engineering Centres

18.7

21.1

15.1

22.07.1

2.3

20.8

17.2

8.3

1.2 1.018.6

29.5

14.6

8.6

1.5 0.2

20

Best-in-Class Vessels - Continuous Improvement Best-in-Class Vessels - Continuous Improvement

Offshore

Saipem Worldwide Offshore Fleet Saipem Worldwide Offshore Fleet

Currently Evaluating Investment in a New Offshore VesselCurrently Evaluating Investment in a New Offshore Vesselto Reinforce Saipem Leadership in Core Areas

~ 200 Mln € Maintenance Capex - 2003-2005~ 200 Mln € Maintenance Capex - 2003-2005 ~ 80 Mln € Capex - To Date~ 80 Mln € Capex - To Date

Ersai 1Ersai 1 Castoro 12Castoro 12

TRB TRB

Semac 1Semac 1

Saipem 3000Saipem 3000

Castoro10Castoro10

Saibos FDSSaibos FDS

Castoro SeiCastoro Sei

Saipem 7000Saipem 7000 Bar ProtectorBar Protector

Castoro OttoCastoro Otto

‘Caspian Fleet’ Investment- Already in Place -

‘Caspian Fleet’ Investment- Already in Place -

21

Drilling

Shifted Impact on P/LShifted Impact on P/LExploiting Current Favourable Cycle

for Medium Term AdvantageExploiting Current Favourable Cycle

for Medium Term AdvantageImmediate Impact on BacklogImmediate Impact on Backlog

Booming Market

2003 2004 2005 2006 2007

Sharp Increase in Market DayratesConcerns over Rig Availability beyond ‘07

Sharp Increase in Market DayratesConcerns over Rig Availability beyond ‘07

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q

High End Vessels* ExampleIntermediate Vessels** Example

AVG Dayrates

LOCKING IN HIGH DAYRATES

LOCKING IN HIGH DAYRATES

??

??

Negotiations Already OngoingNegotiations Already Ongoing

Long-Term Contracting

Policy

Positive Effects of current market felt when Ongoing Contracts Expire

Positive Effects of current market felt when Ongoing Contracts Expire

500

250

0

US$

*Worldwide Competitive Floaters >5001ft** North Sea Heavy Duty Jackups

Source: ODS-Petrodata

22

Jackup Semisub Drillship

45 14 2

Only if backed by Long-term Contract (according to Saipem’s policy)Only if backed by Long-term Contract (according to Saipem’s policy)

- conditions -- conditions -

Onshore: Saudi Arabia* Offshore: West Africa Floaters**

Saipem High-Quality Niches in Selected Areas - Examples:

13%20%

Offshore Rigs Presently Under Construction

Currently Evaluate Investment:Currently Evaluate Investment:2 Land Rigs1 state-of-the-art deepwater Offshore Rig

Drilling Market Expanding

High-Quality FleetMarket Share in Selected Areas

Maintaining:Saipem Drilling Rationale

** Competitive Semisub and Drillship considered

Drilling

to exploit Synergies with Construction activities leveraging on Cost Effectiveness and Local Content

* Based on Number of Active Rigs in the Country Source: ODS-Petrodata, Saipem

Source: ODS-Petrodata

23

Conclusion

24

Conclusions

Entry in the A-class onshore contractors

Slight Revenue Increase

15% Net Income Improvement2006 Guidance

Enhanced Industrial Model for Strong Market Prospects Significant Improvement

Enhanced Industrial Model for Strong Market Prospects Significant Improvement

Medium Term

RobustIndicators

Market Key Geographic Areas

Wider Saipem Exposure

Offshore Strategy

Further Reinforcement

Onshore Strategy

Saipem stand alone

Acquisition expected to be € 18 Mln Net Income accretive

Snamprogetti stand alone

From Q1 20065 Business Units:

• Onshore (incl. Snamprogetti*, Saipem Onshore and LNG)• Offshore • Drilling• Leased FPSO • MMO (*) Separate Report Through Q4 ‘06

presentation to the financial community 2005 results … · presentation to the financial community...

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