Saipem Spa

Good morning, this is the Coruscall conference operator. Welcome and thank you for joining the Saipem 9 months 2024 conference call. As a reminder, all participants are in listen-only mode. After the presentation, there will be an opportunity to ask questions. Should anyone need assistance during the conference call, they may signal an operator by pressing star and zero on their telephone. At this time, I would like to turn the conference over to Mr. Alessandro Puliti, CEO of CYPEM. Please go ahead, sir.

Good morning and welcome to the presentation of the CYPEM nine months 2024 results. I'm here with Paolo Calcagnini, our CFO, and with the rest of the top management team. I will start with the key highlights and then Paolo will cover the financial results in more detail. I will then wrap up with my closing remarks before starting the Q&A session. Let's start with the key highlights. I am pleased to report in the third quarter of 2024, SIPEM recorded an acceleration on all key metrics. In Q3, we posted the highest quarterly order intake since Q2 2019, the highest quarterly revenue ever, and the highest quarterly reported EBITDA since Q4 2015. Revenue stood at 3.7 billion euro, growing by 23% year on year, and 10% quarter on quarter, supported by the performance of our ENC activity. EBITDA stood at 340 million euro, growing by 48% year on year and 14% quarter on quarter, again supported by the ENC businesses. EBITDA margin stood at 9.2%, an improvement of 40 basis points compared to the previous quarter, supported by both our ENC business as well as drilling offshore. We generated 115 million euro of net cash flow, exceeding the cash flow generation of each of the two previous quarters. Net debt has decreased both on a pre- and post-IFRS basis, notwithstanding a net increase in lease liabilities of €91 million. The order intake in the third quarter was very strong, at €6.4 billion, corresponding to a book-to-bill of 1.7 times. The vast majority of the order intake related to offshore ENC. Our backlog currently stands at an all time high level of 33 billion euro. Considering the strong quarterly results and the increased visibility we have now on the rest of the year, we have upgraded our guidance for 2024. I will cover this aspect more in detail in the closing remarks. Let's now go through the key awards of the quarter. The bulk of the order intake relates to upstream offshore ENC projects in Saudi Arabia and in Qatar, two core markets for Saipem. The main factor that allowed us to secure these sizable awards are, first, Saipem's strong track record in the Middle East. Second, our critical mass in terms of ENC fleet already operating in the Gulf. Third, the know-how in the realization of solar hydrocarbon production facilities. Fourth, our yard in Saudi Arabia, which allow us to operate under the Saudi-made label. The strong offshore ENC order intake record post-summer contributes to further increasing the visibility on the level of utilization of our construction vessels, which now extends well into 2027 and 2028. It is important to highlight that currently our activity in the Middle East is mainly related to maintenance and optimization of existing offshore oil and gas fields. As we said many times, maintaining an adequate level of production from existing fields requires a significant level of CAPEX to counter the natural depletion. As such, this type of project represents a sizable and growing market for us. Let's now take a step back and look at the key themes around our order intakes this year. We are talking about more than 13 billion euros of awards in the first nine months. we are getting close to the record level of 18 billion euro achieved in 2023. There are three key features in our order intake this year. First, in line with our strategy, the order intake is mainly related to offshore ENC projects and integrated projects. We list we remain extremely selective in taking new standalone orders onshore. Second, the geographical footprint of our order intake is very diversified. On one hand, we are consolidating our strong presence in the Middle East and West Africa. And on the other hand, we are . On one hand, we are consolidating our strong presence in the Middle East and West Africa. And on the other hand, we are expanding also in Latin America. Third, the main awards so far are all related to upstream projects and more than half of them related to the optimization and maintenance of existing oil and gas fields. We list the remaining 40% related to production capacity expansion. We are currently working on the largest backlog ever for Saipem, and more than 60% of our projects are in the offshore ENC. The execution of the current backlog will keep us busy for several years. In fact, out of the 33 billion euro total backlog, almost 13 billion is expected to be executed in 2025 and close to 10 billion in 2026. And this gives us a substantial level of coverage of our expanded top line, expected top line for the next two years. our organization is running a full capacity our engineers will be very busy working on the current backlog for the next two years our main fabrication yards in saudi arabia angola and indonesia are currently running at more than 80 percent of their capacity Our ENC fleet is fully booked until the end of 2026 and is getting pretty busy for 2027 and 2028. For example, the offshore campaign for the APC-3 project we won in Qatar is expected to extend well into 2028. We are currently in the process of hiring more engineers and we are also expanding our fleet on a chartered basis. As you know, the JSD 6000 vessel that has entered the fleet in July is already fully booked until the end of 2026. and she has good visibility for the subsequent years. We are also looking to charter an additional core ENC vessel that should enter into the fleet early next year. We have seen a volatile oil price environment post-summer, with investors trying to make sense of the impact of a weaker oil price on E&P investments level. the complicated geopolitical macro scenario is also not helping. Nevertheless, we still see sizable demand from clients. The pipeline has kept on growing in the last three years, as well as in the last few quarters, and I believe that it is to a certain extent not correlated to oil price for the following reasons. First, About half of our commercial pipeline is related to upstream gas projects. Second, about a quarter is related to the energy transition and to other downstream activities. Third, only less than 30% is related to upstream oil projects, a segment that has suffered massive underspending in the period between 2015 to 2022. When I look at the composition of upstream oil and gas projects, I see that 40% of them relates to optimization and maintenance of existing fields. These projects normally carry better payout times and economics for clients compared to the new field developments. And for this reason, they are intrinsically more resilient to volatile oil price. Oil and gas fields typically deplete a significant rate each year. And as such, there is a substantial need for investments to offset the consequent production decline. Therefore, even in the most aggressive energy transition scenario, there will be still a massive need for investments in barrel of oil in the next decades. Let me now give you an update on Courcelles. I'm pleased to report that the drilling machine has been tested successfully in August and after an extensive commissioning phase during September-October is now drilling the first socket. The first casing was successfully run and now only few meters remain to reach the target depth. Several debunking actions were required to get there, leveraging on Saipem's extensive experience in drilling and offshore projects. We have a total of 64 sockets to drill and an equivalent amount of monopiles to install, so there is still quite a lot of ground to cover. The Saipem 7000 vessel is currently preparing the mobilization for the installation of the first monopile. We plan to keep you updated on a quarterly basis on the progress on Courcelles. Moving to another key project, I am pleased to report that our pipeline vessel Castorone has completed the installation of the 430 km trunk line that connects the Scarborough offshore natural gas field with the Pluto LNG onshore facility. This is amongst the five longest offshore pipelines ever laid by Saipem, and this was achieved in one of the most complicated seabed bathymetries, sharply dropping from very shallow water to a water depth of around 1,400 meters. As the world transitioned over to zero, Natural gas play a key role in supporting countries that still lack access to affordable and reliable energy, or they have a heavy reliance on coal to meet their energy needs. In this sense, we are proud having served the Scarborough project with Castorone. And let's now spend a few words on drilling offshore. A key thing so far has been the impact of Saudi Aramco's temporary suspension on our JICA fleet. I'm pleased to report that we have mitigated to a large extent the impact of these suspensions. And we have now done so mostly thanks to our capital light asset vessel strategy. For Perro Negro 7, the start of the suspension has been delayed to 2025 and it will coincide with the period of planned maintenance. The leasing of the Perro Negro 9 is expiring by the end of the year and the jack-up will be returned to its owner. The Perro Negro 10 will be redeployed in the Gulf of Mexico. On the deepwater side, I am pleased to report that we had two positive developments in the last few months. AKRBP has extended its contract for Scarabeo 8 for an additional 12 months. Therefore, the vessel is now committed until the end of 2026. The daily rate for 2026 represents a substantial premium compared to the current rate. Lastly, I am pleased to announce that we are entering in Namibia with GALP. In fact, GALP has hired the Santorini drill ship, taking advantage of a farm-out opportunity from ENI. Namibia represents a new strategic market for Saipem, considering its potential in terms of exploration, activity and future production. And let me now hand over to Paolo to cover the financials in more detail.

Thank you, Sandro. Good morning, everyone. We'll start from slide 13 with a financial summary for the first nine months of 2024. Group revenues grew by 21% year-on-year, and our EBDA rose by 41%, mainly thanks to our offshore E&C and drilling businesses. We also saw an improvement in the EBDA margin, reaching 8.9%, up from 7.7% last year, due to a more favorable business mix in our offshore ENC backlog. Our net result was €206 million, nearly triple last year's amount. Operating cash flow reached €731 million, more than three times the level in the same period of 2023, with cash flow conversion rising from 30% to 80%, showing the significant progress in delivering the legacy projects. Let's now go through the different business segments. Starting from the asset-based services on page 14, revenue reached 5.5 billion euros in the first nine months, a 34% increase from last year. This increase results from progress in traditional and subsea oil and gas projects, offsetting the decrease in wind offshore activities. EBDA was 635 million euros, up by 54%, with an EBDA margin of 11.5%, a rise of 150 basis points. Profitability has grown due to a better project mix, especially fewer wind offshore projects. For the last quarter of 2024, we anticipate continued growth in both revenues and EBDA, increasing the EBDA margin further. We'll now look at the drilling offshore on page 15. Revenues reached €669 million, reflecting a 25% rise compared to the corresponding period last year, while ABDA improved by 15% to €258 million. This growth was driven by the start of operations for both the DBD and the Perro Negro 12, an increase in operating days for the perro negro 11 and higher day rate for one of our deep water drill ships the strong operating performance was partially offset by the downtime the downtime for the scarabeo 9 then that underwent maintenance by the startup cost for the perro negro 13 and by the impact of the temporary suspension in saudi For Q4, we expect drilling offshore revenue and ABDA to slightly decline quarter on quarter, mainly due to the impact of the Saudi suspensions on Pedro Negro 9 and Pedro Negro 10, only partially offset by the positive contribution to the top line of Pedro Negro 13 and Scarabeo 9. Now we'll go through energy carriers on page 16. Revenue increased by 6% year-on-year, reaching €3.9 billion. The EBDA margin improved this quarter as the third quarter saw an EBDA of €14 million. This is a 1% EBDA margin on revenues. As we said before, our main goal is to complete the remaining legacy projects whilst we remain very selective about taking on new onshore projects. We anticipate the next year recent awards and the expected restart of the Mozambique LNG will lift energy carriers' profitability, reducing the effect of the older projects. The complete Group Income Statement is shown on page 17. We can highlight some of the key items below EBDA. DNA stood at 488 million euro and increased by 152 million euro compared to last year, mainly driven by the higher leases paid on the vessels that we added to our fleet this year. As already mentioned in the Q2 call, for the full year 2024, we expect a DNI of around €700 million, mainly reflecting the growth of the fleet on a chartered basis. Financial expenses were €104 million, down by €29 million from previous year. This is mainly due to the lower financing costs, which declined €11 million, and more favorable FX differences for €21 million, partially offset by the higher project hedging costs. Income taxes increased by 14 million euros compared to last year, to 131, implying a tax rate of 39%. As previously mentioned, we expect our implied tax rate to normalize towards a 30% level in the years to come. In the end, the net result was positive for 206 million euros, nearly tripling from last year's figures. On page 18, you can see the evolution of our net financial position. The cash flow we generated in the first nine months improved our net financial position by 293 million on a pre-IFRS basis, from 216 to 509 million euros, more than compensating for the 156 million increase in the lease liabilities. We achieved these results by generating 731 million euros of operating cash flow, or 588 million euros after repaying leases, and by generating 514 million euros of free cash flow, or again 371 million euros after repaying leases. As you can appreciate from the numbers, the strong focus on cash flows is paying off and allows us to upgrade our guidance for the year. Alessandro will expand more on this topic later. In the third quarter, our net cash flow was 115 million euros, rising from 110 euros in the second quarter and 68 million euros in the first quarter of 2024. On page 19, you can see the breakdown of our net financial position. As you can see, we have a comfortable level of liquidity on our balance sheet, which was more than 3 billion euros at the end of September. Our current level of available liquidity of 1.3 billion euro fully covers our gross debt maturities up to the full year 2028. We plan to repay this 275 million euros outstanding related to the January 2025 bond with the available cash. Lowering both gross and net debt remain a key priority for SIPEM, with the aim of further de-risking the company and facilitating future credit rating upgrades, both from S&P and Moody's. Let me now hand it back to Sandro for some closing remarks.