Eni subsidiary Saipem is implementing a turnaround and US$1.4 million (€1.3 million) cost-cutting program from 2015-2017 that will downsize the company’s Brazilian and Canadian operations, vessels, and implement job cuts. The program also comes at the same time of Brazilian prosecutors accusing the Italian firm of being connected to the Petróleo Brasileiro (Petrobras) Lava Jato scandal.
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Image from Saipem. |
In its 2Q 2015 report, Saipem is maximizing its competitive capabilities and creating value to the new low oil price market scenario by launching its cost-cutting program to save millions of dollars, the company said.
“Clients are focused on cost reduction, which results in a more rigid approach to negotiations, constant pressure on supply-chain margins, delays in new contract awards, and in some cases in the cancellation of already approved projects,” Saipem said.
To achieve this, Saipem will rationalize its asset portfolio and refocus on higher value areas and businesses, which will lead the company to downsize in Canada and Brazil, including scrapping five vessels that are not viable in the current low-price oil market. The cost-cutting program will also yield a workforce reduction of 8800 employees through 2017.
Saipem’s net financial debt in 2Q 2015 is slightly above $6 million (€5.5 million), an increase of 16% or $1.2 million (€1.1 million) compared to December 2014.
Write-downs in net for 2Q are currently just above $784 million (€718 million) due to the increased rigidity of negotiating positions for change orders and claims by clients - both regarding existing issues and new circumstances that emerged or deteriorated during the 2Q 2015, in addition to the write-off of a portion of overdue receivables from Venezuela given the further worsening of the situation, the company said.
Saipem’s write-downs in capital assets are at $230 million (€211 million) in 2Q 2015 that relate to vessels that cannot be used to carry out projects in its backlog, and reduced use of logistics bases affected by rescheduling and/or cancellation of projects.
Saipem also took note in this quarter that its results were affected by the South Stream contract termination that came earlier this month from Gazprom, after the Russian company decided to move forward with other potential contractors to lay the first line of the South Stream replacement project, TurkStream.
Lavo Jato affects Saipem
Brazilian authorities are accusing Saipem of being involved in the Petrobras Lava Jato scandal this week, according to the Wall Street Journal.
The Italian firm’s sales representative João Bernardi and colleagues allegedly bribed Petrobras’ former director Renato Duque with $1 million in bribes using Swiss bank accounts in addition to $174,000 of art. Both Duque and Bernardi have been charged with money laundering and corruption, the Journal said.
Saipem is also being connected to a corruption scandal in Algeria in which the company paid bribes to secure nearly $9 billion in contracts in the country. Magistrates are seeking to charge several top former managers, including Eni chief executive Paolo Scaroni, the WSJ said.
Saipem is the latest to be added to the list of international companies to be connected to the Petrobras Lava Jato scandal.
Last week, Brazilian prosecutors presented formal charges against Marcelo Odebrecht, CEO of Odebrecht Oil and Gas, in addition to Otavio Marques Azevedo, CEO of Andrade Gutierrez; and 20 others for money laundering and criminal conspiracy for their alleged role in Lava Jato.
Other companies that have been linked to the scandal include: Braskem, Keppel FELS, and Jurong Shipyard.
Read more:
Saipem gets official South Stream axe
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