Saipem in 2004

Eni
Presentation to the Financial Community
2004 Results
February 2005
Eni
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.
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Eni
Presentation Outline
• Saipem in 2004
• Market Trends
• Challenges
• IFRS Impact
• Conclusions
3
Eni
Saipem in 2004
4
Eni
Saipem in 2004 – Offshore
Operational Highlights
Libyan Gas Project - Libya - Agip Gas
Kizomba A/B - Angola - Exxon Mobil
HEAVIEST LIFT WORLD RECORD
Sabratha Top Side Weight 12,100 t
WORLD RECORDS:
! The largest rigid Oil Offloading Line (20" dia)
system between CALM buoy and FPSO
! Installation of the first system of SLOR (Single
Line Offset Riser)
! Installation of largest pipe-in-pipe system
in J-lay mode
Magnolia TLP - US GoM - Conoco
Prestige - Oil Recovery - Repsol YPF
INSTALLATION OF WORLD’
WORLD’s
DEEPEST TLP
1,432m – 4,700 ft w.d.
w.d.
DEEPEST OIL RECOVERY OPERATION WORLD RECORD
Extraction of fuel oil (cargo) from wreck of
sunken oil tanker "Prestige” at 3,850m w.d.
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Saipem in 2004 – Offshore
Eni
Commercial Highlights
Frigg - North Sea - Total
Kashagan - Kazakhstan - Agip KCO
DECOMMISSIONING
Offshore removal and transport
of 7 large platforms
Main Vessel Saipem 7000
2005/2008
Awarded Projects:
! Kashagan Pipelines
! Kashagan Piles & Flares
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Saipem in 2004 – Onshore / LNG
Eni
Operational Highlights
Karachaganak - Kazakhstan - KPO
Oil & Gas Facilities &
635 km Export Pipeline
Sakhalin - Russian Far East - SEIC
Guangdong LNG - China Guangdong Dapeng LNG Co.
‘Twin’ 800 Km Onshore
Oil & Gas Pipelines
Receiving Terminal, including
Containment & Maritime Works
Commercial Highlights
Soku De-bottlenecking Nigeria - Shell
De-bottlenecking
of Soku
Gas Supply
Plant Facilities
Fos Cavaou LNG - France Gaz De France
Receiving
Terminal,
including
Containment
& Maritime Works
77
Kashagan Field - North Caspian Sea - Kazakhstan
Eni
Unusual Construction Site Environment
! Isolated Area:
Lack of infrastructure
Lack of vessels/barges
! Environmental restrictions
State Natural Reserve Zone
! Winter Freezing: temperatures
! Very Shallow Water
below -20°
20°C (ice scouring, stamukha)
stamukha)
! Seasonal access to Caspian sea
! Access channel limitations
! Necessity to maximise local content
! Fast Track project schedule
from 4m in Kashagan East
to 0m near shore
Saipem Unique Solutions
LOGISTICS
LOCAL CONTENT
INNOVATIVE SOLUTIONS FOR SHALLOW WATER PIPELAYING & CONSTRUCTION
KASHAGAN
CASPIAN
SEA
Aktau
Construction Barge
KURIK
Operative Base
Pipelay Barge
Shallow Water
Post-Trenching Barge
“Ambaradan”
Very Shallow Water
Post-Trenching Barges
VSWC “Mondine”
OVERALL AWARDED CONTRACTS AMOUNT: ~ 1 BIL. USD
ESTABLISHING A LONG TERM PRESENCE IN THE CASPIAN AREA
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Saipem in 2004 – Financial Results
Eni
Contribution from Operations
450
404
400
350
54
9
406
24
49
70
23
83
350
19
300
20
250
11
9
Net Income
15
66
57
8
200
200
150
150
100
418
24
300
250
3
11
(Mln €)
221
226
100
226
50
50
0
0
2002*
2003
2004
Offshore
Onshore
Floating Production
LNG
Offshore Drilling
MMO
Onshore Drilling
191
196
197
2002*
2003
2004
Net Income
Net Extraordinary Expenses
Minority Interests
Net financial expenses
Income taxes
(*) Including BOS Figures from 3Q
Overcoming the negative impact of USD Devaluation on EBIT (-80 Mln € )
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Saipem in 2004 – Financial Results
Eni
Investments
(Mln €)
Sources and Application of Funds,
Net Debt & D/E Ratio
D/E = 0.71
976
1416
D/E =0.59
875
1206
272
10
25
5
180
2002
55
187
49
24
56
158
2003
450
260
107
2004
Fleet
FPSO
Project Related
Local Content
30
9
14
70
160
2005E*
Acquisitions
(*) Guidance Target excluding Capex on projects not yet acquired
13
363
65
76
437
199
Net Debt
@ Dec. 2003 *
Application
of Funds 2004
Sources of
Funds 2004
Outflows
Investments
Dividends
Working
Capital
Reduction in
Minority Interests
in Net Equity
Net Debt
@ Dec. 2004 *
Inflows
Share
Buyback
(*) Including Minority Interests
Cash
Flow
Disposals
&Others
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Saipem in 2004 – Contract Acquisitions & Backlog
Eni
(Mln €)
Backlog
New Contract Acquisitions
4500
4000
3500
4335
338
349
90
102
98
19
3000
273
3339
1500
193
2536
5500
305
344
5000
4500
4000
596
862
247
2500
2000
4298
4387
176
275
107
22
11
3500
550
61
250
5225
318
46
776
195
5306
447
763
179
499
170
63
142
317
296
117
2500
2000
2738
1500
1000
500
500
0
0
2003
656
3000
1000
2002*
5158
3276
3265
Dec. 2002**
2004
Dec. 2003
Offshore
Offshore Drilling
Onshore
Floating Production
Onshore Drilling
LNG
(*) Including BOS New Contract Acquisitions from July 2002 onwards
3303
Dec. 2004
MMO
(**) Including BOS
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Eni
Saipem Targets in 2004
REMINDER
2004 Guidance
"
• Revenues: further growth vs. 2003 record levels despite USD Devaluation
• Backlog at year end: higher than 2003
"
Achieved
• Avr. financial debt: lower than 2003 Avr., leading to a decrease in net
financial expenses
Results in line with or close to 2003 record
Achieved
"
Achieved
"
Achieved
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Market Trends
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Short Term Outlook: E&P Spending
Eni
International E&P Spending
Bil. $
Worldwide E&P Spending
+10.9%
120
+4.5%
+10.3%
+9.3%
100
+24.4%
Bil. $
180
+12.4%
+5.7%
60
+10.2%
160
+23.3%
140
80
-0.8%
40
20
120
2000A
2001A
2002A
2003A
2004A
2005E
North America E&P Spending
100
Bil. $
80
+8.0%
60
+21.6%
60
2000A
2001A
2002A
2003A
2004A
2005E
+15.5%
-17.0%
+10.1%
40
Forecast @ Dec. 2004
Source: Lehman Brothers
20
2000A
2001A
2002A
2003A
2004A
2005E
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Eni
Long Term Market Trend
- Major Oil Companies Capex Forecast 2005-2014: USD 450 Bln. RUSSIA &
CASPIAN
FRONTIERS
31%
OTHERS
30%
GAS
DEEPWATER
8%
Excl. FSU
31%
Source: Deutsche Bank,
Sept. ‘04
70 % Majors Capex on :
FSU Frontiers - Deepwater - Gas-to-Market
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Eni
Market Trend - Examples
RUSSIA &
CASPIAN
FRONTIERS
31%
Offshore
! Kazakhstan
# Kashagan - Installation, Hook up and Commissioning Agip KCO
# Kashagan - Inshore hook up - Agip KCO
! Russia
# Shtokman (Barents Sea) - Gazprom, Statoil
Onshore
! Russia
• CPC Extension - CPC
• Sakhalin (Russian Far East) - Several Phases
• Other Projects - Plants/Pipelines
! Kazakhstan
• Kashagan - Oil and Gas Treatment Plant - Agip KCO
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Eni
Market Trend - Examples
Drilling
! West Africa
# Akpo - Nigeria - Total
# Agbami - Nigeria - ChevronTexaco
DEEPDEEP-WATER
-WATER
8%
8%
# Rosa - Angola - Total
# Usan, Ukot - Nigeria - Total
Construction
Leased FPSO
! West Africa
! Brazil
# Kizomba C SURF - Angola - ExxonMobil
# Golfinho 2 - Brazil - Petrobras
# Marimba Tie-back Project - Angola - ExxonMobil
# Espadarte 409 - Brazil - Petrobras
# Block 17 Gas Gathering System & SURF - Angola - Total
! West Africa
# Negage - Angola - ChevronTexaco
# Various
# Akpo - Nigeria - Total
# Bosi SURF - Nigeria- ExxonMobil
# Usan - Nigeria -Total
# Moho Bilondo - Congo - Total
! Mediterranean
# Medgaz - Algeria to Spain Pipeline - Medgaz
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Market Trend - Examples
Eni
LNG
! Europe-Middle East
# Cartagena 4th storage tank - Spain - Enagas
# Yemen LNG - Yemen - YLNG
GAS
Excl. FSU
31%
! Asia Pacific
# Fujian LNG Project (Tanks and Receiving Terminal
Packages) - P.R.China - CNOOC Fujian LNG Co.,Ltd.
! North and Latin America
# Broadwater Energy FSRU - USA - Shell/Transcanada
Offshore
# Gulf Landing GBS Receiving Terminal - USA - Shell
! Asia Pacific
# Port Arthur Receiving Terminal - USA - Sempra
# Tangguh (Platform and Pipelines Packages) Indonesia - BP Berau
# Lazaro Cardenas Receiving Terminal - Mexico - Repsol
# Taishung/Tungshiao/Tatan Pipeline - Taiwan - CPC
# Block B-17 - Malaysia-Thailand JDA - CPOC
# Cakerawala Ph. 2 - Malaysia-Thailand JDA - CTOC
# Canaport Receiving Terminal - Canada -Repsol/Irving Oil
Onshore
! Middle East
# Peciko Ph. 5 - Indonesia - Total
# Yemen LNG Pipelines - Yemen - YLNG
! North Sea - Baltic Sea
# Pipeline from Hawiyah NGL Recovery Plant to Shedgum Saudi Arabia - Aramco
# Skarv (Export Pipeline and SURF Packages)
- Norway - BP
# Laggan - UK - Total
! Mediterranean
# Sabratha extension - Libya - Agip
! West Africa
# Gbaran Ubie Integrated Oil & Gas Project - Nigeria - Shell
# Several medium size plant /pipeline projects - Nigeria
! Asia Pacific
# Trans Territory Pipeline Project - Australia - Alcan
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Challenges
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Euro/USD Exchange Rate Devaluation Impact
Eni
Saipem hedging policy:
Hedge “currency exposure” (revenues less costs) at contract acquisition
Revenue
Revenue ‘Mix’:
‘Mix’:
(Typical)
(Typical)
Cost
560 Mil.
Mil. Euros
Euros ‘Structural’
‘Structural’
Cost Basis:
Basis: •• 560
~~ 70%
70% USD
USD
~~ 30%
30% Euro
Euro
Exchange
Exchange Rate
Rate EUR/USD
EUR/USD
Market
Market (Spot
(Spot Avr.)
Avr.)
Accounting
Accounting
Impact on Operating Income € Mln
(Milan
(Milan && Paris
Paris Operating
Operating Centres,
Centres, Depreciation
Depreciation etc.)
etc.)
• Remaining Operating Costs ‘Adjustable’
depending on Revenue ‘Mix’
2002
2003
2004
2005E
0,945
0,945
1,13
1,13
1,24
1,24
1,30
1,30
--
11
15%
15%
(on
(on Yearly
Yearly basis)
basis)
Of which:
Translation Effect
Margin Erosion
1,15
1,15
7%
7%
1,23
1,23
-80
-80
-38
-38
-30
-30
-50
-50
-14
-14
-24
-24
Actions for margin recovery
Volumes Increase
√
√
Improved pricing/efficiency
√
√
Cost Synergies (BOS acq.)
√
-
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The Learning Process in the EPIC Market
Eni
E&C Industry – A Risky Market
REMINDER
How to Improve Margins in EPIC?
Margins depending on:
PRICE
Bid should correctly price in:
!
!
!
!
!
EURO/USD exchange rate fluctuations
Risks assessment
Contractual terms and conditions
Contingencies
Price of raw materials
CONTRACT EXECUTION
Focus on:
! Improved Operational Efficiency
! Improved E-P-C-I Phase Integration
! Alliances
! Subcontractors and Suppliers
LEARNING PROCESS FOR FURTHER MARGINS IMPROVEMENT
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Eni
Impact of IFRS
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Impact of IFRS
Eni
Following European Parliament and Council Regulation no. 1606/2002, Companies with securities
listed in UE Capital Markets shall prepare their consolidated financial statements in accordance
with International Financial Reporting Standards (IFRS) starting from the financial year 2005.
Evaluation of IFRS Impact on Saipem Financial Statements
Main Effects:
NET EQUITY (one off)
Minor Upward Changes
NET INCOME (excluding IAS 39)
Increase mainly attributable
to discontinuance of the goodwill amortisation
IAS 39
“Financial instruments:
Recognition and Measurement”
• Still Under Evaluation
• Increased Quarterly Volatility
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Eni
Conclusions
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Conclusions
Eni
•
Revenues Increase
•
Pricing and Efficiency Improvement
2005
Guidance
Results at Least in Line with 2004
Despite
Despite Negative
Negative Impact
Impact of
of USD
USD Devaluation
Devaluation
• Deeper Knowledge
of Market Dynamics
Medium
• Deep-rooted
Presence in Areas
of High Growth
Potential
• Good Progress on
Operational
Efficiency and EPIC
Learning Curve
Improvement
Term
Managing Uncertainties, Exploiting Market Opportunities
and Strengthening Results
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