Italian Drilling Specialist Saipem Weighs Capital Increase After Profit Warning

By Alberto Brambilla, Chiara Albanese and Daniele Lepido (Bloomberg) —

Saipem SpA is evaluating a capital increase after issuing a profit warning and saying it will talk to its creditors, people familiar with the matter said. 

The oil drilling specialist is looking at a range of options, said the people, who asked not to be named as the discussions are private. Saipem could consider a capital injection of 1 billion euros to 1.5 billion euros ($1.7 billion), the people said. Discussions are preliminary and no final decision has been taken on whether to opt for the capital increase nor on its potential size, they said.

The Italian company said earlier on Monday that 2021 losses could amount to one third of its share capital — which is around 2.1 billion euros, according to filings. 

The company’s two main shareholders — Cassa Depositi e Prestiti SpA, the state lender which owns a stake via the finance ministry, and Eni SpA, which is also state-controlled — said they are closely monitoring the situation and evaluating scenarios. 

The warning Monday comes at a challenging time for the oil industry, where profits have been dented by a shift from traditional sources to renewable energy. It also took markets by surprise, after the Milan-based company had late last year presented an upbeat strategic plan under new Chief Executive Officer Francesco Caio. 

Saipem has struggled to cope with lower energy demand and sagging investments, with many oil projects delayed during the pandemic. Efforts to shift its portfolio toward green-energy projects have also faced delays. 

The company on Monday cited “significant deterioration” in some onshore engineering and construction operations as well as in offshore wind, “due to the persistence of the pandemic and the current and prospective increases in the cost of raw materials and logistics.” 

Saipem now sees consolidated adjusted earnings before interest, taxes, depreciation and amortization for the second half of 2021 down by approximately 1 billion euros. The company’s shares fell as much as 32% in Milan, their biggest drop on an intraday basis since January 2013. 

The company said it’s started preliminary discussions with creditors and controlling shareholders to “ascertain their willingness to support a financing package.” Those discussions are also aimed at assessing the situation and evaluating subsequent steps, according to people with knowledge of the process. 

© 2022 Bloomberg L.P.

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