Saipem Spa

Good morning. This is the conference operator. Welcome and thank you for joining the SIPEM full year 2024 results and strategy update presentation. 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 and General Manager. Please go ahead, sir.

Good morning and welcome to the presentation of the SIPEN full year 2024 results and strategy update. I'm here with Paolo Calcagnini, our CFO, and with the rest of the top management team. I will start today. with the key highlights, and then Paolo will cover the financial results in more detail. We will then cover our strategic update, including 2025 guidance and medium term targets. After our presentation, there will be time for Q&A. Let's start with the key highlights. I'm pleased to report In the fourth quarter of 2024, SIPM recorded a further acceleration on all key metrics. In Q4, we posted the highest quarterly revenue ever and the highest quarterly reported EBITDA since 2012. Revenue stood at 4.4 billion euros. growing by 26% year-on-year and 19% quarter-on-quarter. EBITDA stood at 424 million euro, growing by 48% year-on-year and 25% quarter-on-quarter. EBITDA margin reached 9.6%. an improvement of 40 basis points compared to the previous quarter. The strong results achieved are even more remarkable considering they incorporated additional provisions on Courcelles and Thai Oil projects. We reduced our net debt position by 174 million euro in Q4. Net debt has decreased both on a pre- and post-IFRS basis. We are now in net cash territory, even post-IRFS 16, which is a remarkable achievement. The order intake in the third quarter was very strong, at 5.3 billion euro, corresponding to a book-to-bill of 1.2 times. and was mostly concentrated in offshore ENC. Our backlog currently stands at an all time high level of 34 billion euro. On slide number five, you can appreciate the growth trajectory over the last three years. Revenue has more than doubled from Q1 2022 to Q4 2024. And EBITDA has increased by a factor of four. In addition, our EBITDA margin has increased by four percentage points. This impressive trajectory in EBITDA is also reflected in our operating cash flow. which has steadily increased in the last three years, achieving a conversion rate of 80% in 2024. On slide six, we have summarized our results compared to our guidance. For the third consecutive year, we have overperformed the guidance. In particular, in 2024, despite various headwinds, such as the Saudi Aramco suspensions, we met or exceeded our guidance, in particular on cash flow generation. The performance of SIPM in 2024 was remarkable, especially in terms of cash flow generation. In 2024, we have generated €505 million of free cash flow post repayment of lease liabilities, a significant outperformance compared to our guidance at the beginning of the year. This outperformance allows us to propose a dividend which is more than three times higher than the initial indications. It is important to note that we are retaining an equivalent cash buffer compared to our initial expectation. We will cover shareholders remuneration in more detail later in the presentation. Let's now take a closer look to the 5.3 billion euro order intake in the last quarter. Four major awards significantly contributed to this figure. Each one holds a unique significance for Saipem. The Suriname project presents a great opportunity for Saipem to enter into a promising new oil and gas development area. The project in Indonesia embeds a specific CO2 management scope of work. Again, the 143 km of CO2 transportation sea line project in the UK represents an important award in relation to the energy transition. The new project in Nigeria further strengthens our position in sub-Saharan Africa. Moving to page nine, we are currently managing the largest backlog ever at Saipem. More than 60% is in offshore engineering and construction. Thanks to this level of backlog, we have a strong visibility on our top line for the next two years. around 90% of expected 2025 revenues are covered by existing backlog. And this number is 70% for 2026.

Now, let me provide you with an update on Courses.

We are pleased to announce that we have completed the drilling of four sockets. Our learning curve has significantly improved, reducing the numbers of days required for each socket. With the four sockets, we have substantially reached the target of seven days per socket. The Saipen 7000 has already successful the installation of the first monopile, and it is currently working on the installation of the other monopiles in the driller's sockets. Regarding logistics, the Volo 1 jack-up vessel will be soon replaced by the bold turn vessel. The replacement will start next week with the sailing of the Volo 1 to Rotterdam. The transfer of the drilling machine to the new vessel will require around five months. We therefore expect to resume the drilling activity in the summer. We expect to complete our scope of work within 2026. And now I will hand over to Paolo to provide more details on our 2024 financial results.

Thank you, Sandro. Good morning, everyone. We will start from slide 12, which presents a financial summary for the full year 2024. Group revenue increased by 23% year-on-year, and our EBITDA grew by 44%, primarily driven by our offshore ENC business. We also observed an improvement in the EBITDA margin, which reached 9.1% up from 7.8% last year. due to a more favourable business mix in our offshore ENC backlog. Our net result was €306 million, 71% higher than last year's results. Operating cash flows stood at €1,061,000,000, nearly doubling the level achieved in the same period of 2023. Cash flow conversion rose from 63% to 80%, clearly demonstrating the significant progress made on legacy projects. Let's now review the different business segments. Starting with asset-based services on page 13, revenue reached €8.1 billion for the full year 2024, marking a 33% increase from last year. This growth was primarily driven by progress in traditional and subsea oil and gas projects, which offset the decline in offshore wind. EBITDA stood at 954 million euros, up 55%, with an EBITDA margin of 11.8%, an increase of 170 basis points. Profitability improved due to a better project mix, particularly a lower incidence of offshore wind. In Q4 2024, the EBITDA margin stood at 12.5% despite the extra provisions recorded on CURSEL. For 2025, we expect mid to high single-digit growth in revenues. and double-digit growth in EBITDA, leading to an improvement in the EBITDA margin. Let's now look at the drilling offshore at page 14. Revenue stood at 918 million euros, reflecting a 24% increase compared to the same period of last year. EBITDA improved by 11% to 335 million euros. We achieved double-digit growth thanks to the start of operations for the DVD, the Perro Negro 12, and the Perro Negro 13, as well as an improved day rate for one of our deep-water drill ships, which more than offset the impact of the temporary suspensions in Saudi Arabia and the maintenance of the Scarabeo 9. For 2025, we expect a high single-digit decline in revenue and a low single-digit decline in EBITDA, reflecting the reduction of the size of the fleet. As you know, both the Peronegro 9 and the Pioneer jack-ups will be returned to their respective owners. Let's now look at the energy carriers on page 15. Revenue increased by 10% year-on-year, reaching 5.6 billion euros. EBITDA margin improved year-on-year, reaching 0.7 for the full year 2024. and 1.1% in Q4 2024. This result was achieved despite additional provisions taken on Thai oil, both in Q2 and in Q4 2024. As we have already emphasized, our primary goal is to complete the remaining legacy backlog while being very selective about new onshore projects. Sandro will provide more details about our strategy to reposition our onshore ENC business. For 2025, we anticipate low single-digit growth in revenue and a significant increase in EBITDA, with EBITDA margin approaching 2%. The complete group income statement is shown on page 16. We can discuss some of the key items below EBITDA. DNA stood at €723 million and increased by €234 million compared to last year, mainly reflecting the growth of the fleet on a chartered basis and the leases associated with them. DNA is expected to grow in 2025 to about €820 million, mostly reflecting the expected increase in lease liabilities and associated lease repayments. Financial expenses stood at 85 million euro in 2024, almost half from the previous year. This is mainly due to the reduction in net financial expenses, also helped by the interest income on our cash, as well as to a reduction in project hedging costs. For 2025, we expected the financial expenses to be around 160 million euros, mainly due to the expected increase in the interest component of lease repayments. Income taxes increased by €45 million compared to last year, to €190 million, implying a tax rate of 38%. As previously mentioned, we expect our implied tax rate to normalize towards the 30% level in the years to come. For 2025, we expect income taxes to be around €240 million, mainly due to the expected growth in profitability and profit before tax. On page 17, you can see the evolution of our net financial position. The cash flow generated in the full year 2024 improved our net financial position by 467 million euros on a pre-IFRS basis, increasing from a net cash position of 216 million euros to 683 million euros. This is more than compensated for the €183 million increase in lease liabilities. That is a direct consequence of expanding the fleet on an asset-light approach. We achieved these results by generating €505 million of free cash flow post repayment of lease liabilities. Achieving a net cash position post IFRS 16 has been a strategic objective for CYPEM since the beginning of 2022. and we are extremely proud of this achievement. Looking ahead to 2025, we expect lease liabilities to almost double from the level at the end of 2024, reflecting the growth of the fleet on a chartered basis. This increase in lease commitments will result in a doubling of the expected repayment of lease liabilities in 2025 from the 2024 level. The actual level of lease liabilities and repayments will ultimately depend on the timing of the effective date on the various lease agreements. This will be clearly offset, at least in part, by the expected cash flow generation of 2025. On page 18, you can see the breakdown of our gross debt and liquidity. We have a comfortable level of liquidity on our balance sheet, which exceeded 3 billion euros at the end of 2024. Our current available liquidity of 1.7 billion euros fully covers our gross debt maturities almost up to the full year 2029. I'm also proud of the new RCF line, which we signed in February. which stands at €600 million and has better terms and conditions compared to the previous one. Since the beginning of 2025, we have also repaid an additional €351 million of gross debt with the repayment of the 2025 bond and one ECA credit line. Lowering both gross and net debt remains a key priority for CYPEM. Let me now hand it back to Sandro for our strategic update.

Thank you, Paolo. For the next four years, our strategy will be built upon four main pillars. The first, strong focus on execution excellence. The second, capitalize on the positive upstream oil and gas upcycle. The third, Change paradigm for onshore engineering and construction and roll out a profitable PMC business. The fourth, broaden our offering in the energy transition. These pillars are underpinned by three cornerstones. A clear and disciplined capital allocation with investment-grade credit rating target. a corporate simplification and operational flexibility, and a continuous improvement in health and safety. Let's now go through our pillars one by one. Execution excellence for SIPEN means, first of all, zero tolerance for safety hazards. We leverage on AI-driven tools and specific safety equipment, such as drones, smart nurses, and cameras to prevent accidents. Our workforce is our most valuable asset, and we are dedicated to ensure their safety. Second, we strive to maintain a state of the art fleet and to complement our own vessels with younger, modern tonnage chartered vessels from the market. Third, we aim to reduce risk through an execution oriented engineering process. Fourth, we use modularization on construction and fabrication as a key factor to reduce execution risk. By effectively applying this principle, we can position SIPM as the trusted partner for choice for both customers and employees. Moving to the second pillar, I can assure you that wherever there is a growth, SIPM will try to be there. This is exemplified by our entry into two promising new markets, Suriname and Namibia. In Suriname, we are actively engaged in a large surf project for Total, which marks a significant milestone for us as we establish our presence in this emerging country. In Namibia, our Santorini vessel has been drilling for GALP over the past few months. We expected that APC works in the country will be tendered in the coming quarters, presenting us new opportunities to expand our operation and contribute to the development of the Namibia energy sector. Moving to the third pillar. Onshore ENC business is being repositioned based on four key drivers. We aim to prioritize value over volume in our portfolio by being very selective in acquisition. We are moving away from the lump sum EPC contracts and increasing the share of de-risk contracts. We plan to expand the portion of operation and maintenance services within our portfolio, which not only offer higher margins, but also provide a recurring revenue stream, making the business line more predictable and stable. And then we aim to enter in the project management consulting market. which is particularly appealing for CYPEM as it represents a high value added service that leverage on our APC track record and can guide clients from feasibility to implementation. Our selective approach has already resulted in a materially lower order intake in the last three years compared to the 2019-2021 period. In addition, the order intake already features a material portion of the risked EPC contracts, and more de-risking is expected in the next few years.

And let's now move on the energy transition market.

We already have several projects in place in the area of carbon capture, utilization and storage, fertilizers, ammonia and biorefineries. In addition to this, we have an intense business development activity that covers floating wind, hydrogen and geothermal. Carbon capture, utilization and storage will remain a key pillar of our energy transition strategy. encompassing CO2 capturing, transportation, and reinjection. We aim to expand our presence in the fertilized value chain, as well as in Bufuel and SAF. When it comes to LNG, we will be selective in choosing both partners and projects to ensure alignment with our strategic goals. In offshore wind, we are aiming to establish collaboration with the main turbine manufacturers with the aim of having an integrated wind turbine and foundation design to reduce cost and making the offshore wind more sustainable.

Let's now move to page 25.

Our current backlog provide us with an eye level of visibility for the next two years. In addition, to execute in the existing backlog, we expect securing approximately 50 billion Euro worth of projects between 2025 and 2028. This assumption is consistent with the level of order intake that has assumed in our previous plan and might even look conservative considering the record level achieved in 2023 and 2024 in the current commercial pipeline. More than half of the anticipated order intake is expected to come from offshore engineering and construction projects. We're also foreseeing 15 billion Euro of order intake being related to low carbon projects, which will be well distributed across various sectors, including offshore wind, sustainable infrastructure, blue solution, CO2 management, and biorefineries. And now moving to the 2025 guidance and medium-term targets. Revenue in 2025 is expected at the level of approximately 15 billion euro. and EBITDA at approximately €1.6 billion, implying an increased in EBITDA margin of more than 100 basis points from last year. Operating cash flow generation is expected to grow in 2025 and free cash flow after repayment of lease liabilities will be above €500 million, When it comes to our medium-term targets, we expect a substantial increase in EBITDA and margins, driven by a further shift of our backlog toward offshore E&C and the completion of the remaining legacy projects. Accumulated operating cash flow post-repayment of lease liabilities for the next four years is expected to exceed 3.7 billion euro. A net of accumulated CAPEX budget of 1.5 billion euro, it is leading to accumulated free cash flow of more than 2.2 billion euro.

Finally,

let's take a closer look at our capital allocation and financial policy. For 2025, as already discussed, we will propose a dividend of €333 million. For 2026, we expect to propose a dividend of at least €300 million. More broadly, we have upgraded our shareholder remuneration policy and we expect to distribute shareholders at least 40% of free cash flow after repayment of lease liabilities. Regarding our financial policy, we are committed to maintaining the minimum level of available cash of 1 billion. Additionally, we plan to reduce gross debt pre-lease liabilities by €650 million by 2027. These commitments will help us to achieve an investment-grade rating in the medium term, which is now a clear target for our company. We can now move on to the Q&A session regarding our results and strategic plans.

Thank you. This is the Coruscant Conference operator who will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on the touch-tone telephone. To remove yourself from the question queue, please press star and two. Please pick up the receiver when asking questions. Anyone who has a question may press star and one at this time.

We will pause for a moment as callers join the queue. The first question is from Mick Pickup of Barclays.

Please go ahead.

Hi, everybody, and thank you for that. It's nice to see you performing despite the concerns that have been in the market. First question, if I may, can I just ask about obviously the two problem contracts. I know you're not going to give me a number. Can you give me an idea of the order of the extra provision and potentially what is the cash outflow in the next two years on the legacy projects is the first question.

Hi Mick, this is Paolo. Well, you know that we don't give details of single contracts. What I can tell you, though, is that the provisions we have against those two projects are the best estimate based on the schedules of the two works to be done, and that all the cash out is already included in the numbers we gave for 2025 onwards. So the cash projections that... Alessandro just presented, include the cash out for those two projects. And I mean, it's a number that we feel it's in line with the projections and it's a material number.

Okay, thank you. And then can I just go to the onshore E&C, please? And obviously you're talking about this new value over volume de-risking strategy, which I think some of your peers have done of late. If I look at that 25 to 28, it looks like you're building a billion-dollar O&M and PMC business, and then half your business is in EPC. Can you just talk how you get to that mix? Because it only takes one de-risked EPC contract of a couple of billion dollars coming in, and it's still going to be a bigger portion of the business. Can you just talk about your ambitions? Because that sort of looks like one project a year, de-risked EPC you're going for.

Okay.

So I believe that it is likely more than an ambition, and we have already increased in the operating and maintenance level because, as you certainly recall, the Camino FPSO, that was awarded to Saipem last year was also including the operating and maintenance contract for the FPSO. So operating and maintenance is already growing and has already grown and we do expect that if in the future to increase this quantity for sure. both for activity, again, offshore, and also we are expanding the operating and maintenance to the onshore portion of this work. We are actually tendering now for this opportunity in the Middle East and North Africa. So there are in the pipelines bits that we are participating in. And this is what, this is why I'm saying that this is slightly more than an ambition. It's a strategy that it is under execution. On the PMC, you know, we did so many EPC contracts that we believe that we are naturally qualified to enter into this segment. It is a segment that it is very important, as you know, just on the Middle East, The entire PMC market is a multi-billion kind of market. We are getting qualified from many clients for which we are now doing APC contracts also for this kind of services. So again, we are participating in tenders for PMC activity. So this is the way we are implementing the strategy. The other side, as you've seen, we are clearly reducing the order intake of the pure APC contracts, and whatever kind of contracts that include the execution, it will have a contractual scheme that is much more deristed compared to the traditional lump sum Turkey contract.

Thank you.

The next question is from Alessandro Pozzi of Mediobanca. Please go ahead.

Thank you for taking my questions. When I look at the last couple of years, it's been an extraordinary period for the order intake with big volumes being booked. When I look at the guidance, the $50 billion commercial pipeline is not different from what you gave before, but I would like to reconcile with the revenues in the mid-term, because I think you have a guidance of over $15 billion, whereas the $50 billion of order intake implies a book-to-bill of less than one. But I'm sure that there is some level of conservatism built into the commercial pipeline. So I was wondering how should reconcile the implied, say, 12.5 billion of water intake per year versus the revenue above 15 billion that you have in the mid-term. Also, second question on onshore EMC, I was wondering if you can maybe give us a bit more color for 2025 how much will be or even for now in terms of backlog how much are those projects are zero or low margin versus those projects that carry a higher margin and final question on thai oil We've seen, we've seen Samsung announcing the security bonus being called. We don't know whether Thai Oil is going to change, potentially the contractor or not. So I think there's a lot of uncertainty there. Can you give us a bit more color on what you think is the way forward for the Thai Oil project? Thank you.

Thank you. Okay. So first of all, to reconcile, I believe that we should take into account that our commercial pipeline that we presented is expected in the last 18 months. So if you take this timing, then you will better reconcile the the numbers. So let's go straight on the Thai oil and then Paolo will give you a more detailed on your second question. So yes, we confirm what Samsung announced. And we also record that recently the General Assembly of Thai Oil voted in favor of a budget increase in time for completion the projects. And so we are currently waiting for client feedback for recognition of extra cost and time required to complete the project. Nevertheless, as Paolo said, we are located adequate provisions to cover both scenarios, continuation with the same consortium or termination of the contract. That's the situation. Paolo, then if you want to give a call around the... Yes, I understand.

I have a question on the projects with zero margin. We expect in 2025 to be in the area of 1.2 billion in terms of revenues, roughly.

Okay, thank you. And just going back to the order intake, I just wonder if you can... You've been just a bit conservative with that 50 billion estimate you have provided, and maybe can you give us a bit more color where you see more, let's say, area of activities in the next four years? And I'm sure probably Suriname and Namibia is going to be key areas, but as well as probably Middle East is going to continue to be a big region for SACRAM.

We do expect clearly continuous activity in the Middle East. There are several bids that are announced there and to which we are participating. So, therefore, Middle East will remain, it is, and will remain a very strategic area. of acquisition of new backlog for SWIPEM, especially in the offshore ENC. This is what really I can confirm. But we are seeing also target coming from the Far East where we can have, let's say, also participating to important bids for new floating units. And the other pipeline project coming from West Africa and coming from South America. You see that we have also being recently awarded for Suriname, and we are expecting on the other side of the Atlantic new bids coming also for Namibia. So you see, still plenty, plenty of opportunities.

Okay, thank you.

Thank you.

The next question is from Daniel Thompson of BNP Paribas. Please go ahead.

Hi, good morning. Thanks for taking my questions. Just two, please. Firstly, I was wondering if you could run through the drivers of the margin uplift in the final year of this plan, which I think implies just over 13% EBITDA margin versus 12% in 2027 under the prior plan. Is that mainly just pricing? Because I would expect the There wouldn't be any legacy projects in the backlog by then. And then secondly, I was just wondering on the onshore EMC side, where the new or adjusted onshore EMC strategy leads your FPSO business. I still see quite a few floater opportunities on there, so just wondering if you could run through how you de-risk those particular projects.

Thank you.

Okay, so marginal lift across the plan. Clearly, the marginal uplift is driven by two main factors. First, the continuous shift of our revenues more on the offshore activity that it is more profitable than the onshore one. So this is a continuation of of the strategy we put in place back in March 2022. Second, as you rightly said, also will be driven by the completion of many of the projects, of many of the legacy projects by end of 2025. And the beginning or the very beginning of 2026, for example, we are planning to complete many, many projects, for example, land in Sierra Iremia. So just to give you an example. The risking floaters, FPU and FPSO, this is going through several actions. For example, now in many situation where we are going through a converted hull for the vessel, this is delivered by the client. Several, let's say, item are directly purchased by the client, and then they are innovated to ourselves. And basically, the client is retaining the procurement risk on those items. And then we're also taking into account that we activity, that we did on conversion of floating unit, P729 for Brazil, Scarborough 5 for Congo, ENI, Caminho for Total, Balen that we did also for Total, we cumulated a very important experience in the sector, both in terms of yard selection and when it comes to our own yards, and also third-party yard in the Far East. Jobs we are expecting, for example, coming in Indonesia, we will leverage on our own Karimun yard, a yard that is directly under our control. So this is another de-risking initiative, because when we work in our own yard, we have full control of the activity and full control of the cost, and then this is making us very much more comfortable. So you know, de-risking is not coming with just one or two actions. It is a full new approach to the project where item by item we look at the project in a under a different light, the derisking light. And this is also connected to the initial proposition that we will never ever enter it into a volume over value. Our driver now is value over volume And this is what it means being selective as well. So I hope I clarified you a bit the strategy there and the way new activity we are taking is substantially different from the one that we used to take.

Yeah, thanks for the clarification. Just coming back on the first question. It's more on the 2028 on 2027 uplift where, you know, the backlog has already shifted to offshore quite a bit by then. So I was just wondering, is there an element of pricing surprise that maybe what, you know, in those out years that wasn't factored in under the previous plan that is coming into the back end of this plan? You know, is pricing surprise to the upside plan on plan? Thank you.

We leverage more than pricing surprise. We leverage on our efficiency because that's the only thing that we can really control. Pricing is also depending on clients, and clients, generally speaking, they're not willing to pay higher pricing. You also have to consider that most of our clients, the international oil company, are basing their decision investments on a very conservative level of oil price or gas price or commodity price. So we always keep in mind this when we are bidding. So we do not rely on pricing surprise. We tend to rely in our forecast on... better efficiency, better mix, better way of realizing projects. For example, I was stressing during the presentation the modularization that this is really what can bring to a more efficient way to control project schedule and cost of the projects as well. because we increase the building in areas like yards when we can control progress and cost and reduce the amount of stick-built construction. Sometimes it occurs in areas where logistics or... or for other reason are making more difficult to control the stick builds vis-a-vis the modules that you can build in a very known yard. Then the other model is the competitive feed model. So we tend to enter into this kind of tendering so that being in control of the feed, We know exactly the project. We don't have to endorse engineering done by other contractors. And so we can build a construction strategy that is more efficient and less risky.

Alessandro, if you may add something to answer your question. Today you see the margins are... As I said before to Alessandro Pozzi, that still reflects a significant portion of the revenues that come with a zero margin. That's the tale of the legacy portfolio. And as I said before, this is more than 1.2 billion euros for 2025. So if you replace the zero margin on the 1.2 billion and you make an assumption on a fair margin for that portion of the portfolio, you're already... you already add up a significant EBITDA margin to 2024 and 2025 figures. And that explains part of the growth you were asking about. And then, obviously, there's also part of the portfolio which is not zero margin, but still would be replaced by contracts that have been acquired in the last couple of years that come with better margins.

Got it. Thank you.

The next question is from Mark Wilson of Jefferies. Please go ahead.

Thank you. Good morning, gents. I'm not going to ask you about the current projects because I think those have been well covered and well done on that execution considering. What I would like to ask is looking forward across the plan, you speak to one of the points as being the fleet seeing constant upgrades to maintain the technology. So I'd like to ask within that CAPEX outlook 25 to 28, do you think that the current fleet and higher ring vessels can deliver against the outlook to 2028? And indeed, are there any scenarios where you would see a requirement or a need to expand the fleet beyond what you currently have? That's my first question. The second one is, that you at the last quarter, Alessandro, you emphasized how the fleet's fully booked in 25, 26, and 50% covered in 27, 28, but you expected that to fill, that spare capacity. Could you give us an update on where you stand on that fleet capacity in those outer years? Thank you very much.

The question on the fleet. Well, first you look at the CAPEX and you can see that there is 1.5 billion of CAPEX from 2025 to 2028, which is mostly maintenance and upgrades on the own vessels. And we think that covers the needs to keep the fleet fully operational and best performing. But also, you should also look at the lease liabilities Because those are, in fact, CAPEX and the fleet expansion. And the fact that, as we said before, the lease liabilities are growing and will be growing in 2025 tells you that, in fact, we are adding capacity to the fleet and we are doing it through lease vessels rather than own vessels. So you can argue that part of the lease liabilities are CAPEX, in fact, because we are putting more capacity in our fleet. And the combination of the two is what we feel it's required to deliver against the backlog. And your second question, I think that Alessandro will cover.

Okay. Regarding fleet utilization, 27 and 28, we are currently participating to significant tendering in West Africa. that they may give us results in the next month. So if it is not for the first quarter presentation, we may have a proper update for sure within the first half of this year presentation because several tendering activities ongoing and so then we will continue really update with signed contracts regarding the percentage of utilization of the fleet toward the end of the strategy plan. Whether or not we will require new vessels, I believe that we are in a very good position. We rented last year JSD 6,000. This is part of our asset life strategy. And this vessel has a rental contract of five years plus two years optional. So really, we don't see any major addition to the fleet. other than renting supporting vessels for the sake of the operation and the various contracts. But this is, I would say, is normal. It's business as usual, business as usual activity. We also rented the Shinda unit. that is another vessel to support our surf operation in connection to the contracts that we already signed. So I would say the fleet in terms of measureship will remain pretty constant. As Paolo said, our CAPEX is mainly no, it's mainly, it's entirely devoted to the stay in business issue, so means recertification on the vessel and upgrading of the system on the vessels to the best available technologies that by time to time they come to the market and they keep improving performance of our tonnage.

Thank you very much. It's very clear. If I may have one follow-up, maybe I could ask a bigger picture view then on global capacity. There's been a lot of commentary about overall market capacity for subsea installation, particularly in SLA and JLA. Do you see any new tonnage or capacity coming to the global market that is currently under construction?

Could you speak to that?

To be honest, we are not aware of this kind of tonnage being under construction in these days, at least to the market that we know and we can have access. I do not have 100% as I believe no one what is going on in the Far East. As far as we know, there are no under-construction, both JLA for sure, which and that are entering in the market. And up to the point, and maybe we'll give you a bit of a secret, that we may think to reinstate the JLA tower on our site in 7,000 for certain years. for sent and planned activity that this was since it was not used at least since 10 years. This gives you also a feeling of how much the market is tight on this and there are new vessels coming into the market. Thank you very much. Appreciate the call.

I'll hand it over.

The next question is from Massimo Bonisoli of Equita. Please go ahead.

Good morning. Two quick questions. One on Mozambique LNG project. Can you give us some color on the assumption included in 2025 guidance? And the second on onshore strategy, you mentioned the intention to grow and expand into low carbon fertilizers and biofuels. Do you need any acquisition of technologies in this area to support your plan? Thank you.

Okay, I will start to the very end. No, we do not plan to have any acquisition of technology. You know, on fertilizers, we normally bid with the topsoil technology for ammonia. and then we have our own patent for the urea. Regarding biofuels, we are very much exposed to the plan of ENI to convert refinery into biorefinery, and then we serve the client utilizing their own ENI ecofining technology. So, we don't see the need of acquiring technology. Then the first question was on Mozambique, if I recall well. And, you know, regarding Mozambique, we're clearly ready to restart as soon as the client will give us the green light. I believe the total CEO was pretty clear in his last call. So the issue of security is substantially over. They have to clear certain issues on the financing, and then when this will be done, we expect them to press the button, and we're ready. Now regarding exact planning, I will leave to Paolo. to complete the answer.

As far as the 2025 projections are concerned, we don't expect any major difference in terms of financial impact on our accounts compared to 2024. So we're not assuming, let's say, full restart very soon. So if you want to have a comparison between 2024 and 2025, we're not assuming any major difference in the amount of activity that we will be performing.

Very clear, thank you.

The next question is from Sebastian Elskin of Redburn Atlantic. Please go ahead.

Yeah, hi, good morning, and thanks for taking my questions. A few. Just on the margin side, I'd be curious if you could give an update as to where margins are tracking at the leading edge, kind of the subsea, the surf side. Obviously, the business is indexed to conventional kind of shallow water, but yeah, just maybe an update given kind your peers and how they're reporting. Second, on the Middle East, obviously, a key part of your commercial pipeline. Perhaps an update on some of the projects you expect to materialize over the coming kind of 12 to 18 months. Obviously, we know obviously Qatar in 2024, but clearly there's a Comp 4 work scope that you potentially would be involved in. So perhaps an update on that region. And then finally, on the offshore drilling side, I mean, just to guess on terms of the into 26 and as some of the vessels roll off through existing contracts, there's a wider concern, obviously, on, you know, well publicized on kind of white space and pressure on day rates. I mean, I guess an update on that business potential, perhaps maybe if there's more suspensions from Aramco on the shallow water side. You know, it's a nice, as a business, it's a nice margin contribution. But obviously, kind of how do you view the business long term into 26 as well? That would be very helpful. Thank you.

So I will start from the end, from the drilling. We are actively tendering in several tender issues by the clients, so we expect then to utilize our fleet in 2026 and beyond. Regarding possibility of further change of strategy, in Saudi Arabia, you know, we will keep leverage on our asset light so that we have further vessels that are on rental so that we can manage in case there is a further request or reduction. So for us, yes. It is just matter eventually to downsizing, but we will not have idle cost of the vessel. It's not reduced. In the area, we are also participating to tenders with other operators, so it may be also possible that we will move some unit in the same region, but on other field development. Then your first question was on margins. If I were, I will leave it to Paolo. Okay.

Well, on the margins, I mean, today the subsidy market is an healthy one, so we think that there is a fair balance between clients and contractors, and we think that going forward the margins will remain where they are. been for the last couple of years. But as Alessandro said, we think that the degree of efficiency in managing our business will make an important contribution to the higher margins for the offshore segment. And on the commercial pipeline, I don't know if you want to take it, but it's been discussed already before, and we still see a good client demand. Now, what you call backlog for us is the capex for the clients. So, obviously, after two years where we piled up 30 billion of contracts offshore, obviously, there is some time needed to plan for new investments from our clients and for us to give capacity to realize new projects because, as we discussed a few times, 2025, 2026, we will be pretty busy already. So demand remains benign and market conditions remain good. And even though we need to acknowledge that acquiring 16, 15, 16, 17 billion per year has been quite an extraordinary achievement. And so we're targeting a more prudent, possibly realistic 12, 13 billion going forward.

Thanks very much. Thank you. Thanks very much.

Thank you.

The next question is from Guillaume Delaby of Bernstein. Please go ahead.

Yes, good morning. So most of my questions have been answered. Maybe a very open one for you, Alessandro, globally if you look at the past six to eight months uh what has been i would say the main surprise you've seen when looking at the energy scene you know something which basically you you were not expecting could you maybe provide us some color about that if there is any you know in the

In the energy world, it's very complex. What it is surprising and what not in a world where every single day there is a surprise, it's a bit difficult for me to answer. I can tell you the truth. Certainly, what for me is surprising in the six to eight months is what is happening on the offshore wind, where you see that really there starts to be a clear difference between ambitions that are declared by by countries in terms of gigawatt to be installed and tendered, and then the actual work is awarded, and the fact that many of the, in many cases, the contractors, they do not apply for the offered capacity. This means that there is still a mismatch in terms of cost expectation between the demand and what it is they're offering. And the offering, unfortunately, is linked to the actual cost of the projects. So that's a, if you want, this is what is surprising me still, there are still expectations that offshore wind can be done, can be cheap. It's not. This is the, this is what is surprising me. Offshore wind is complex operation. Foundations are linked to soil, to the bedrock condition on the seabed, so they cannot predict exactly at the very beginning, so all these things, they cannot be done, they cannot be cheap. But it seems then when auctions are offered, then this element is not yet considered in the value of the energy that is offered. That's the surprise. if you are asking me about a surprise.

Thank you very, very much.

The next question is from Guilherme Levi of Morgan Stanley. Please go ahead.

Hi, good morning. Thank you for taking my questions. I have two, please, if I may. The first one, there has been a press article recently mentioning that Petrobras is considering contracting themselves a pipeline vessel to carry out installation of rigid pipes in the pretzels. Could you perhaps comment on that? Maybe tell us a little bit about other types of new initiatives that oil and gas producers are taking in order to circumvent the current tightness in this market. And then the second one Om could say, you have now achieved the target of seven days per socket in the fourth one. For us to estimate in which part of 2026 that project is going to be completed, is it as simple as just assuming seven days for the other six sockets or are there any other which is our challenge there that I might be missing.

Thank you. Petrobras, yes, we acknowledge.

We acknowledge their willing. To be honest, it's not a surprise because this is Petrobras made also expressed this willingness also a few years ago, so it is not a surprise for us. We are really observing the situation and we are ready to offer Petrobras a solution for this whenever it is appropriate. There has been always discussion with Petrobras about a model for laying rigid pipe. They have a fleet of long-term rented PLVs, and they may think to have a similar strategy also for laying rigid. However, at the moment, it's something that we are just... we're just working around it and we will let you know if in the next months there are some evolution. If the seven days per week, No, the seven days per week is normal. Sorry, I'm a bit tired. But the seven days per socket is really a target of the project because this is, yes, we do expect that the next 60 sockets that can be drilled with that rate. Remaining part of the project, as far as regards our scope of work, the scope of work of Saipem. So I'm not commenting at all the rest of the scope of work. It is the installation of the monopiles. The first done was done by Saipem 7000 in an extremely seamless way, even taking less time than expected. And now the vessel is working on the installing the monopiles on the other sockets we drilled. So we do not expect being installing monopiles really a complex activity or an activity that can impact further the shed.

Perfect. Thank you. And a third one, if I may, just a follow-up on Thai Oil, just for me to make sure that I got the accounting correctly. But the security bonds from our estimates are over 100 million euros. Has that already been provisioned? So that's why we didn't see a big impact in terms of provisions from this project this quarter?

Well, I mean, the evaluation we typically make on projects include all the factors we know. At the moment, we close our accounts, and so it's not only the bonds. It's the overall estimated cost over the entire life cycle of a project. So the answer I can give you is that today we have accounted for all the costs that we expect going forward, which include all the elements.

Understood. Thank you.

Obviously, the cash out was already happening in Q1, so it's a cash effect that has been already included, obviously.

This concludes our Q&A session and our call. Thank you for joining. You may now disconnect.