Saipem's 2026 forecast is a sign of a Middle East blow for energy contractors
Saipem lowered its core earnings forecast for '2026 on Tuesday. This sent shares of the Italian oilfield service group?down by more than 8%, as disruptions linked to the Gulf Conflict drove costs up and created logistical difficulties. The Milan-based company now expects to earn adjusted earnings before taxes, depreciation, and amortization (EBITDA), of EUR1,75 billion ($1,99 billion) in this year. This is down from an earlier forecast of EUR1.9billion. Oilfield service firms were seen as potential winners from the conflict between United States and Iran. Damage to energy infrastructure was expected to boost demand for repair and reconstruction. Saipem, and its U.S. rival Baker Hughes, warned this week about the impact of the conflict on their operations. Energy companies were delaying some projects, and service providers faced increased costs and disruption. CAUTIOUS BUYERS AND EXTRA CHARGES
Baker Hughes announced on Monday that it expects global spending by oil producers to?decrease modestly this coming year. It cited weaker activity across Europe and the Middle East, as customers take a cautious approach.
The group also said disruptions linked to the conflict would reduce revenue at its industrial and energy technology division by 1% to 2%, as well as increase logistics and inflation-related pressures in the third quarter. The?U.S. group said that disruptions related to the conflict will also reduce revenue in its industrial and energy division by 1 to 2 percent and increase pressures on logistics and inflation during the third quarter. Saipem's customers include Saudi Aramco and QatarEnergy, as well as Abu Dhabi's ADNOC. The company said that it had incurred additional costs of around EUR70m in the first six months to improve security for staff and resolve logistical difficulties. The company expects to incur similar costs in the second quarter, but is confident that it can recover some of these costs next year. Alessandro Puliti, CEO of Saipem, told analysts that the intermittent closures of Strait of Hormuz had complicated the delivery of equipment to clients in the Gulf.
Saipem is planning around 10 crossings along the strategic waterway for the remainder of the year. They are working closely with their customers to coordinate the project, he added. Saipem's shares fell 8% by 1130 GMT at the Milan Stock Exchange. Baker Hughes shares are up nearly 6% after the company exceeded quarterly profit expectations.
Saipem has confirmed that it will generate a full-year operating cash flow of EUR1 billion. It also said that it was already carrying out repairs in the Gulf. However, Saipem declined to give any details due to contractual confidentiality obligations. According to LSEG, the second-quarter adjusted EBITDA dropped by nearly 3%, to EUR402 millions, falling short of analysts' expectations of EUR464million.
(source: Reuters)
