Saipem Spa

Good morning. This is the Coral's Call Conference Operator. Welcome and thank you for joining the SIPM First Quarter 2026 Results 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 Saipem. Please go ahead, sir.

Good morning, and thank you for joining the presentation of Saipem first quarter 2026 results. I'm here in Milan today with our CFO, Paolo Carcagnini, and with the other members of Saipem top management team. The agenda for this session is the following. I will start with an overview of the key operational and financial highlights of the quarter. Paolo will then deep dive in the financial performance, and I will conclude the presentation with few closing remarks. We will then open the floor to your questions. Let me begin with the key highlights of the first quarter. Saipem reported revenue of 3.5 billion euro, in line with the same period of last year. Despite the conflict in the Gulf, we made strong progress on all our projects in the region, recording 1.1 billion euro revenue in Q1 in the Middle East. EBITDA in the first quarter stood at 434 million euro, a year-on-year growth of 24%. EBITDA margin stood at 12.3%, representing an increase of 2.3 percentage points year-on-year and an increase of 0.9 percentage points quarter on quarter. The strong performance at EBITDA level is the result of the strong level of utilization of our construction fleet, as well as the improved project mix. Thanks to the generation of almost 200 million euro of cash flow, our balance sheet has further improved in Q1. we end the quarter with a net cash position of €1.2 billion on a pre-lease basis. Order intake for the quarter amounted to €1.7 billion, corresponding to a book-to-bill of 0.5 times. As previously mentioned, we expect our order intake to accelerate in the coming quarters. as already demonstrated by the awards announced in the last few days. The performance recorded so far this year, notwithstanding the conflict in the Middle East, has been one of the key elements which led us to confirm our 2026 guidance. We will come back to this in more details later in the presentation. In the context of the typical seasonality of our business, our delivery in Q1 has continued to be very consistent and resilient. As already mentioned, the conflict in the Middle East has not had a material negative impact on our operational and financial performance in Q1. While revenue growth is moderating, the growth trajectory remains very evident at EBITDA and cash flow level, also reflecting the improved quality of our portfolio. Also, EBITDA margin has more than doubled in the quarter since the beginning of 2022. Notwithstanding the very strong cash flow generation in 2025, we continue to generate a substantial amount of cash in Q1, with operating cash flow reaching almost 400 million euro. Let us now turn to the recent EPC awards. A big portion of our order intake to date has come from the Middle East, confirming the resilience of the commercial activity in the region. Since the start of the year, we have been awarded by Aramco three CRPOs for a total of $900 million. These projects are aimed at maintaining the production level of Safania, one of the largest offshore oil fields globally. The offshore operation for this project in Saudi Arabia will be carried out by construction vessels that are currently dedicated to the Middle East. The fabrication activities will be executed at Saipem Sodhi Fabrication Yard in Daman, minimizing the risk of potential disruption in the traffic through the Strait of Ormos. In addition to the work from Aranko, we have recently announced a further project for ENI in the biorefinery space, this time in Sicily. This contract strengthened the collaboration launched in 2023 between IENAI and CITEM for the development of biorefinery in Italy. The new Priolo biorefinery will have a capacity of 500,000 tons per year, offering high operational flexibility to produce SAF biogas fuel and HVO diesel fuel. All in all, since 2023, we have totaled more than €1 billion of EPC awards in biorefineries. Lastly, Exxon has assigned us Lone Tail, the eighth project in a row in Guyana, confirming the trust in our deepwater EPCI capabilities. We expect our order intake to accelerate further in Q2, in particular with additional activity in the operating and maintenance space. Let me now turn to the recent commercial activity in drilling offshore. In the first quarter, we managed to sign contracts aimed at filling several gaps in our schedule for 2026. and to start building visibility for 2027 and beyond. For the SIPEN 12,000, we secured three contracts, ensuring high level of utilization for the next two years. In particular, we signed an extension of the contract with Azul in Angola, a new contract with Rhino in Namibia, and a new contract in joint venture with ENH in Mozambique. For the Santorini, we have signed a contract with ENI in ivory cost. In the first quarter, we have also finalized the extension of the contract with Aker BP for the Scarabeo 8, which will now operate in Norway till March 2029. Lastly, we extended the operation of the Peronegro 4 that will continue to work for Petrobras in Egypt till the end of 2027. Let me now take a closer look at Saipan's operations in the Middle East. At the end of Q1, Saipan's backlog in the region amounts to €11.5 billion, mainly in the offshore segment. As you know, we have a dedicated fleet of construction vessels and drilling J-caps in the Gulf. It is important to note that this fleet is largely dedicated to the area, meaning that there is no need for additional vessels to enter in the Gulf, nor for these units to transit through the Strait of Hormuz to execute projects outside the area. Project execution in Q1 has been steady, with only minimal and temporary disruption being recorded. Considering the progress made in Q1, and the expectation that the traffic on the Strait of Hormuz will normalize in the coming weeks, we decided to confirm the 2026 guidance. It should be noted, a further prolonged closure of the Strait of Hormuz could impact the delivery of certain components which are critical to SIPEN projects globally, in addition to disrupting worldwide logistics and potentially driving up inflation. However, Current crisis is also likely to further reinforce the already positive outlook for energy investment globally, on top of requiring additional investment needed to repair certain energy infrastructure in the Middle East. Let me now give you an update on Courcelles-sur-Mer. We are making steady progress on the project. To date, we have successfully drilled 24 sockets and installed 15 monopiles. This means that since our last update late in February, we drilled further 6 additional sockets and installed 5 additional monopiles. We confirm the completion is expected in Q1 2027. Let me now give you an update on our commercial activity. As you can see from the numbers, our pipeline remains robust. In terms of mix, we continue to see a solid set of opportunities in offshore ENC, across both conventional and deep water. At the same time, we are seeing encouraging prospects in FTSOs, upstream, as well as in fertilizer, biorefinery, and operating and maintenance segments. Geographically, our pipeline is largely concentrated in Middle East and Africa, while we see attractive potential for growth in the Far East. And now let me hand over to Paolo to cover the financial results in more details.

Thank you, Sandro. Good morning, everyone. I'll begin with slide 12, which provides an overview of Saipem's main results for the first quarter of 2026. Revenue was largely unchanged from the same period of last year at 3.5 billion euros, while EBITDA grew by 24% to reach 434 million euros. The EBITDA margin showed notable improvements year-on-year, rising to 12.3% compared to 10% in last year's first quarter and 11.4% in Q4. The strong performance was mainly due to the expanding margins in the offshore ENC segment, which more than compensated for reduced profitability in the drilling business line. Net results and operating cash flows stood at 78 million euros and 392 million euros respectively, broadly in line with last year. The growth of the chartered fleets year-on-year across all business lines increased lease-related DNA, offsetting EBITDA gains and keeping EBIT flat. This effect is more pronounced in Q1 due to the typically lower volumes in the first quarter of the year. The increase in the lease component of the DNA was both driven by the growth of the fleet of construction and support vessels, but also due to the DVD lease accounting treatment change in 2025. Let me now turn to the performance of our three business lines, starting from asset-based services on page 13. Revenue in the first quarter of 2026 exceeded €2 billion, representing a 2% increase year-on-year. Such performance was mainly driven by strong progress of our projects in the Mediterranean Sea. In terms of specific projects, the most relevant ones that materially supported the top line were Com3 in Qatar, Buri in Libya, and Neptune in Romania, which more than offset the impact of the completion of Sakaria II in Turkey. EBITDA stood at €333 million in the first quarter, an increase of 33% year-on-year, with a margin expansion of 3.7 percentage points versus the same period of 2025, and 80 basis points quarter-on-quarter. The margin expansion was mainly driven by a better utilization rate of the owned construction fleet. The growth in EBITDA more than compensated the increase in the least portion of the DNA, leading to an expansion of the EBIT margin of 50 basis points year-on-year from 5.8% to 6.3%. Now, assuming no major disruptions in the Middle East or Strait of Hormuz, we expect low single-digit revenue growth and double-digit EBITDA and EBIT growth for 2026, along with improved margins year on year. Let me now move to drilling offshore on page 14. The year-near decline in both revenue and EBITDA mainly reflects. First, the reduction in the size of the fleet, following the exit of the Pioneer and the Peronegro 12 jackups in 2025. Second, a lower activity by the Peronegro 7 and Peronegro 8, the latter undergoing ordinary maintenance in Q1 2026. Third, marginally lower day rate for the second 10,000, Santorini and Scarabeo 9. These were partially offset by an higher day rate for the Scarabeo 8, higher utilization of the Serpent 12,000 and the Peronegro 10. All in all, we continue to believe that 2026 will be a transition year for our drilling offshore business, and we anticipate double-digit decline in both revenue and EBITDA compared to 2025, with EBITDA margin declining year-on-year. This is mainly due to the concentration of maintenance activities, some white spaces related to floaters, and lower day rates on selected rigs. Let's now conclude our review with energy carriers on page 15. Revenue remained broadly stable in Q1. This was the result of an increased contribution by projects such as Mozambique LNG and biorefineries in Italy. fully offset by lower contribution by projects such as Berry, Marjan and Jafura in Saudi Arabia, as well as Bonny in Nigeria. EBITDA margin almost doubled compared to the same period of last year and grew by 20 basis points quarter on quarter, reflecting the improved project mix. Assuming no major disruptions in the Middle East or Strait of Hormuz, we expect revenue to decline slightly, while EBITDA margin to improve in 2026 compared to 2025. The restart of the Mozambique LNG project will contribute positively to the results, while project completion in various regions will partly offset the gains. Let's now look at the figures below EBITDA as shown on page 16. DNA increased by more than 40% in 2026 compared to 2025. As discussed several times already, this reflects the growth of the fleet on a charted basis. In particular, DNA related to the leases almost doubled year on year, from around €90 million to around €870 million. The overall level of DNA recorded in Q1 2026 is a good proxy for the following quarters, for a total of approximately €1.1 billion expected in 2026. Financial expenses stood at €41 million in Q1, a decline of €14 million year-on-year, reflecting mainly a decline in the net financing cost X IFRS 16, partially compensated from the higher interest due to leases and exchange differences, as well as lower hedging costs due to a reduction of the interest rate differential between the euro and the US dollar, and lower volume of traded derivatives. Financial expenses for the full year 2026 are expected to be slightly lower than 2025. Income taxes rose year on year by 15%, implying an effective tax rate of 37% compared to 34% a year ago. Tax rate is expected to decrease in 2026 from 40% reported in 2025 towards the 33% to 38% area. Let's now focus on cash flow and net financial position on page 17. In Q1 2026, the pre-IFRS 16 net cash position improved by €218 million to more than €1.2 billion. This is primarily due to the cash generation totaling €199 million. Cash flow was especially strong in Q1. because it was not aided by advance payments, which actually fell by €80 million since the end of 2025, following a better-than-expected and above-budget performance in 2025. Least liabilities declined by €31 million in the first quarter, and they are expected to continue to decline in the next few quarters, as we release some chartered support vessels back to the owners, with expected completion of some specific projects. Lease repayments in Q1 2026 amounted to €138 million, broadly stable compared to Q4 2025. We expect lease liabilities to decline to approximately €900 million at the end of 2026, from approximately €1.3 billion at the end of 2025, while to expect lease repayments to be around €650-700 million for the full year 2026. To wrap up, let's quickly look at the staff and debt and liquidity position at the end of March. Our liquidity position is very solid and stands at 3.6 billion euro. This is made of 1.4 billion euro of available cash, 1.6 billion euro of cash in JVs and 600 million euro related to the undrawn RCF. As anticipated 12 months ago, we are looking to reduce gross debt by repaying all maturities that fall in 2026, for a total of 271 million euro. We are in fact repaying, using the available cash, 30 million euro related to ECA facilities today, and we are planning to repay 241 million euro worth of EMTN bonds at maturity in July. We also have a clear target to achieve an investment-grade credit rating in the medium term, a target which is well supported by the conversation we are having with the rating agencies. I'll now hand it back to Sandro for his closing remarks.

Thank you, Paolo. Let's wrap up with some closing remarks before we turn into the Q&A session. In Q1, we clocked another strong quarter of delivery growth, and cash flow generation. The Middle East activities are currently running with limited disruption. The guidance for 2026 is confirmed based on the performance in the first quarter of the year, the steady progress on the execution in the projects in the Middle East since the start of the year, the supportive attitude of clients toward project execution, and the expectation that the traffic through the Strait of Hormuz will normalize in the coming weeks. As previously mentioned, it should be noted the further prolonged closure of the Strait of Hormuz could impact the delivery of certain components which are critical to Saipan's project globally, in addition disrupting worldwide logistics and potentially driving up inflation. However, in the medium to long term, The current crisis is also likely to further reinforce the already positive outlook for energy investment globally, on top of requiring additional investments needed to repair certain energy infrastructure in the Middle East. Thank you for your attention, and we are now happy to take your questions.

Thank you. This is the Coral School Conference Operator. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and 1 on their touch-tone telephone. To remove yourself from the question queue, please press star and 2. Please pick up the receiver when asking questions. Anyone who has a question may press star and 1 at this time. The first question is from Alessandro Pozzi, Mediobanca.

Good morning. Thank you for taking the questions. And let me start by saying that we all know that this situation is very volatile and it's very difficult to provide any forward guidance. And I appreciate that you are reiterating the 2026 guidance. Having said that, there are three topics that I would like you to discuss in more detail. And the first one is the short-term impact you mentioned, delivery. of critical components. When, if the situation doesn't improve, when is the timing of those critical components that will be delivered and that needs to go through the Strait? The second question is, of course, higher oil prices will, as you pointed out, will further support the outlook for orders. Are you really seeing a change in attitude from oil majors and do you think there is going to be an even more focus now on deep water projects outside the Gulf than before? Last question on repair. You mentioned potential opportunities there, but also, I guess it's more onshore ENC, so you have a lot of competition from domestic players as well in the Middle East, as well as from maybe Indian or Chinese. Can you quantify the size of the opportunity for repair work in the Middle East on the back of the conflict? Thank you.

Okay. So I will try to answer. So let's start from the short term possible impact. Basically, we will start to see some impact if Ormot does not reopen by end of May, July. That's where we have some, let's say, important crossing for the Strait of Ormots for equipment that are, some of them, they are going out from the region of the Gulf and some has to be imported in the region of the Gulf. So, our other reason is for your, regarding your question, is late May, July. Then, regarding the deep water possible increase in activity, is early, let's say, to comment on that. Clearly, if we recall the past cycle of the industry, high price of commodity has always driven high demand in terms of the quarter activity. So I believe it's fair to accept that continuing the high price of the commodity, then there will be an increase of the demand for the quarter activity. Regarding the repair on the shore, as you all know, there are certain facilities that have been damaged. Yes, true. As far as we know. Although this information, as you can imagine, is pretty confidential, are located on shore. Regarding our... position in terms of competitiveness, of being competitive, let's say, sorry for not being able to pronounce it properly, of being competitive on those kind of activity, yes, there will be competition, but we also have to recognize that several of those facilities have been built in the past by Seipen, so this gives us clearly an advantage in terms of knowledge, in terms of understanding of the plants, And coupled with the fact that in several cases we are already mobilized in the region, so for us it would be easy to add this additional scope of work to our current activity. So we believe that we are well positioned in case we are called from our clients to do this kind of activity.

Okay, thank you. And I guess you're also having maybe an increase in costs, maybe in insurance as well, and potentially we'll see more inflation coming through. Do you think you can sit down with your clients and say, hey, this is not our fault, potentially can we renegotiate some of the terms of the contracts?

So, let's start from inflation. It is possible to predict that there will be some inflation. Clearly, the high cost of the commodity tries on one side the demand for infrastructure projects but on the other side clearly in increased inflation. Some of the contracts that we signed recently they have provision for to take care of increased inflation so part of that that will be for sure covered Insurance costs, yes, will be increased, but they are, let's say, to date manageable within the contingencies we normally carry within the projects that we are doing. So inflation can be an issue on the long run, on the very long run. but not in the medium term. You have also to consider that most of the activity in the Gulf in 2026 is supported by materials already present in the area that they were purchased in the previous years. So we are not depending on, let's say, largely on items that should be purchased now. What we are going to install in the next six months is definitely already in the area. And that's something that has to be taken into account also.

Okay, thank you very much.

The next question is from Nick Pickup at Barclays. Please go ahead.

Good morning. Thank you for everything today. Can I just follow up from Alessandro? Sorry to be on the same subject. Can you just talk about a few practicalities? Maybe for Power of Hope milestones on contracts likely to slip. How does this affect working capital? Are your clients still paying? And secondly, on the pipeline, obviously 34% of your pipeline is in the Middle East and it's good to see you winning stuff for that Saudi captive work. But what's happening on those conversations and the projects to be awarded later this year? And do you at some stage decide to refocus some of your efforts elsewhere?

Mike, thank you. So I would say that our clients are very strong and resilient in the area and definitely we didn't recall any problems in payment, zero. So this is reflected also in the very positive cash flow figures we presented. And the signals that we are collecting is also that the pipeline of expected award is going ahead as per plan. To date we are not recording situation of project awards incurring in delay because of the situation, commercial activity. All the signals we have on commercial activities, the commercial activity is going ahead normally, apart maybe some meetings being postponed between few days, or in certain situations, and maybe difficulties in traveling that we experienced during the month of March, but that is now over because even commercial flights are fully back operational in the area. So beyond that, we didn't see any change of attitude of the client. And I personally made a trip 10 days ago in the Middle East, visiting our major clients, and I can confirm they are all very strong and resilient.

Thank you, and let's hope it sorts itself out soon.

The next question is from Guillaume Delaby, Bernstein. Mr. Delaby, we cannot hear you. Maybe the line is on mute.

Oops.

Yes, now we can hear you. Please go ahead. Mr. Golabi, we cannot hear you again. Please check your microphone, please.

Oh, sorry.

Yes, good morning.

In fact, I'm going to pass it over because the questions I had have already been answered, so no reason to keep the mic open now.

The next question is from Mark Wilson Jeffries. Please go ahead.

Thank you. I'd like to ask Paolo actually specifically regarding the onshore ENC, the energy carriers. Only 8% of backlog in the Middle East for energy carriers. You spoke last quarter about finishing the remaining or most of the remaining legacy contracts. Mozambique has restarted. I just wondered about your guidance for slightly improved margins this year. and whether there is any inflation cost within that expectation. I'm just wondering where you think energy carriers margin could be going to given new set of projects starting up and finishing the other ones versus that guy you talked about. Thank you.

Yeah, thanks Mark for the question. So the first comment is in the projects in Saudi. Yeah, it's true that most of them will be completed by this year, all of them actually. And this is also what drives up the margins for the business line. As you can remember, two of the big projects in the area were behind the profit warning. And yes, obviously, the new projects are being acquired with better contractual terms and better conditions. We remain convinced that the business line can deliver at least a mid-single-digit margin, provided that the risk profile of the projects is very different from the old lump-sarn, turnkey type of contractual agreements. So with contractual terms that provide us protections against certain risks, So to answer your question on price escalation, etc., many items today are protected against those cases. Then a general comment is that large EPCI projects, especially onshore, tend to suffer if there are disruptions in the global value chains, late delivery of critical items, etc. Even though today we don't see any major problems coming from the situation in the Gulf and from the logistics worldwide, this is a comment that we've made a few times. Obviously we are hoping and we assume that situations will get better soon as deliveries of items on site remain for any PCI contractor quite an important precondition to execute the projects. But when it comes to the Middle East, having most of the projects completed or very close to completion, we think that we already have all the materials needed at site, so we foresee limited disruptions even if the situation in the Middle East remains as it is today.

Okay, thank you. And if I may have one follow-up. Could I ask, of the three large Qatar The first of those, the first gas compression, is that platform now inside the Gulf or is that one of the large pieces or transit items you're talking about? Thank you.

So I will give you an answer. As you know we have basically four main projects. The PCOL project is in the final stage and so we are doing commissioning so activities are being carried out within Qatar. EPC2 is mainly being under construction out of the country and this is the same that goes for COM3 while EPC5 is just started basically the engineering and procurement so it's not affected by the situation on the Gulf. The first crossing of the Ormuz, as I said before, with some jackets and decks for APC-2 and COM-3, they will be across, as we said, June-July time. By that time, high demand in terms of the water activity, so I believe it's fair to accept that continuing the high price of the commodity, then there will be an increase of the demand for deepwater activity. Regarding the repair on the shore, as you all know, there are certain facilities that has been damaged. Yes, true. As far as we know, all those disinformation, as you can imagine, are strictly confidential, are located on shore. Regarding our position in term of competitiveness, of being competitive, let's say, sorry for not being able to pronounce it properly, of being competitive on those kind of activity, yes, there will be competition, but we also have to recognize that several of those facilities have been built in the past by Saipem, and so this gives us clearly an advantage in terms of knowledge, in terms of understanding of the plants. and coupled with the fact that in several cases we are already mobilized in the region, so for us it would be easy to add this additional scope of work to our current activity. So we believe that we are well positioned in case we are called from our clients to do this kind of activity.

Okay, thank you. And I guess you're also having maybe an increase in costs, maybe in insurance as well, and potentially we'll see more inflation coming through. Do you think you can sit down with your clients and say, hey, this is not our fault? Potentially, can we renegotiate some of the terms of the contracts?

So let's start from inflation. It is possible to predict that there will be some inflation. Clearly, the high cost of the commodity tries on one side the demand for products, infrastructure projects, but on the other side, clearly an increase in inflation. Some of the contracts that we signed recently, they have provision to take care of increased inflation. So part of that will be for sure covered. Insurance costs, yes, will be increased, but they are, let's say, to date manageable within the contingencies we normally carry within the projects that we are doing. So inflation can be an issue on the long run, on the very long run. but not in the medium term. You have also to consider that most of the activity in the Gulf in 2026 is supported by materials already present in the area that they were purchased in the previous years. So we are not depending on, let's say, largely on items that should be purchased now. What we are going to install in the next six months is definitely already in the area. That's something that has to be taken into account also.

Okay. Thank you very much.

Next question is from Mick Pickup, Barclays. Please go ahead.

Good morning. Thank you for everything today. Can I just follow up from Alessandro? Sorry to be on the same subject. Can you just talk about a few practicalities, so maybe for Paolo, milestones on contracts likely to slip? How does this affect working capital? Are your clients still paying? And secondly, on the pipeline, obviously 34% of your pipeline is in the Middle East, and it's good to see you winning stuff for that Saudi captive work. but what's happening on those conversations and the projects to be awarded later this year and do you at some stage decide to refocus some of your efforts elsewhere?

Mike, thank you. So I will say that our clients are very strong and resilient in the area and definitely we didn't recall any problems in payment, zero. So this is reflected also in the very positive cash flow figures we presented. And the signals that we are collecting is also that the pipeline of expected award is going ahead as per plan. To date we are not recording situation of project awards incurring in delay because of the situation, commercial activity. all the signals we have on commercial activities the commercial activity is going ahead normally apart maybe some meetings being postponed between few days or in certain situation and maybe difficulties in traveling that we experienced during the month of March but that is now that is now over because even commercial flights are fully back operational in the area. So beyond that, we didn't see any change of attitude of the client. And I personally made a trip 10 days ago in the Middle East, visiting our major clients, and I can confirm they are all very strong and resilient.

Thank you, and let's hope it sorts itself out soon.

The next question is from Guillaume Delaby, Bernstein. Mr. Delaby, we cannot hear you. Maybe the line is on mute.

Oops.

Yes, now we can hear you. Please go ahead. Mr. Dolabi, we cannot hear you again. Please check your microphone, please.

Oh, sorry.

Yes, good morning.

In fact, I'm going to pass it over because the questions I had have already been answered, so no reason to keep the mic open. Okay.

The next question is from Mark Wilson Jeffries. Please go ahead.

Thank you. I'd like to ask Paolo actually specifically regarding the onshore ENC, the energy carriers. Only 8% of backlog in the Middle East for energy carriers. He spoke last quarter about finishing the remaining or most of the remaining legacy contracts. Mozambique has restarted. I just wondered about your guidance for slightly improved margins this year and whether there is any inflation cost within that expectation. I'm just wondering where you think energy carriers margin could be going to given new set of projects starting up and finishing the other ones versus that guy you talked about. Thank you.

yeah thanks mark for the question so so the first comment is in the projects in saudi yeah it's true that most of them will be completed uh by this year well all of them actually and um and this is also what drives up the margins uh for the for the business line as as you can remember two of the big projects in the area where um behind the the profit warning um and yes obviously the the the new projects are being acquired with better contractual terms and better conditions we remain convinced that the business line can deliver at least a mid single digit margin provided that the risk profile of the projects is very different from from the old lamps on turnkey type of contractual agreements so we take with contractual terms that provide us protections against certain risks So, to answer your question on price escalation, etc., many items today are protected against those cases. Then a general comment is that large EPCI projects, especially onshore, tend to suffer if there are disruptions in the global value chains, late delivery of critical items, etc. So even though today we don't see any major problems coming from the situation in the Gulf and from the logistics worldwide, this is a comment that we've made a few times. Obviously, we are hoping and we assume that situations will get better soon as deliveries of items on site remain, for any PCI contractor, quite an important precondition to execute the projects. But when it comes to the Middle East, having most of the projects completed or very close to completion, we think that we already have all the materials needed at site.

foresee limited disruptions even if the situation in the middle east remains as it is today okay thank you and if i may have have one follow-up um could i ask of the the three large qatar uh projects the first of those the first gas compression is that platform

now inside the gulf or is that one of the large pieces or transit items you're talking about thank you so then i will give you uh i will give you a an answer my them so in qatar As you know we have basically four main projects. The PCOL project is in the final stage and so we are doing commissioning so activities are being carried out within Qatar. So EPC2 is mainly being under construction out of the country, and this is the same that goes for COM3, while EPC5 is just started basically the engineering and procurement, so it's not affected by the situation on the Gulf. so the the first crossing of the ormuts as i said before with some jackets and decks for a apc2 and com3 they will be uh they will be across as we said a june july time so that's the uh and by that time we are all assuming that that the the normal street will be cleared.

It's very clear. Thank you very much. We'll hand it over.

The next question is Massimo Bonisoli, Equita.

Good morning. Two questions last. One on the pipeline. Your commercial pipeline has increased to 58 billion from 54 billion at the time of 4Q results. Can you elaborate on how the attitude of clients of a few end markets like fertilizer or maybe gas storage, the ones that were mostly affected by the Strait of Hormuz closure, how this attitude has changed over the past month considering the new strategic evidence of these industries? And the second question is on Mozambique. If you can just elaborate on the current status of the project execution and when do you expect full normalization? Thank you.

Okay, so I would say that in the last month, because this is what we are speaking, to be honest, we didn't see any particular change of attitude of our clients toward the commercial pipeline. We expect that the as I said before, that the price of the commodity they will drive maybe potentially a further extra demand. You mentioned specifically fertilizer. Clearly, the current price of urea is likely to drive more demand for fertilizer. We have no doubt, let's say, about that. And as well as I was commenting before, we expect a further, let's say, step up in the demand for the porter activity. This is typical whenever oil price is going above $70 per barrel, then the demand there is getting bigger. But it's also, as we said before, infrastructure are critical. So we do expect also an increased demand for infrastructure. infrastructure that are linked to diversification of the source of supply. A bit like the same that happened in the second half of 2022 as a consequence of the war in Ukraine, it is possible that this situation in the Gulf will also drive demand for new infrastructure devoted to diversification of the supply.

Regarding Mozambique?

Regarding Mozambique, sorry. Regarding Mozambique, we are, let's say, progressing and activity at the site is going ahead. We have around 3,500 people already more normalized. We will become soon 4,000 people. So I would say that the project is going ahead. Activities are ramping up in terms of civil and mechanical works and as I said before, we are ramping up in activities together with the people.

Very clear, many thanks.

The next question is from Kevin Rodger, Kepner Sugar.

Yes, hi, good morning. Thanks for the time I have. Three, if I may. The first one, you commented in the remark that you have seen some lower dairy rates in drilling activities. So I was wondering if you can comment a bit on that, the lower dairy rates in the drilling environment. The second one is on Courcelles. So just to be sure that everything has been on track in Q1 because you have drilled only six sockets. So just to be sure that you just, let's say, a kind of seasonality effect with Q1 activity in winter being very slow and that nothing materialized. And the third one, sorry to chase you on that again, but this quarter we have a move in the provision again and quite... a big reversal this quarter of 113 million so any color on this reversal in provision please

So I will start to give you an answer on Courcelles. Yes, there is clearly an improvement of performance on the last sockets being drilled, especially in the time required to move from one location to another location. and this goes straight in line with the improvement of the weather condition in the area that is typically of the spring and summer season. So we should expect in the coming months this improved condition that are leading to less time required to move from one location to another location. In terms of drilling time, we now reach the steady performance, it takes no more than three days to actually drill each location. And regarding the provisions, Paolo?

On the provisions, what happened is the following. We didn't account for any new provisions while we used actually part of the provisions, roughly 130 million to execute mostly CURSELL. So the number you see is the decrease in the funds because of the use on CURSELL without any new provisions being accounted for in Q1. And then, I mean, just to make it clear, the six sockets that we drilled, it's an update since the last update we gave you with the full year results. So it's It's not six sockets from January the first, it's actually six sockets from the last presentation we gave you.

Otherwise it would have been quite problematic. Sorry Paolo, let me elaborate. This is really from end of February to, let's say, last weekend. So we are speaking in one month and a half. Regarding the daily rates of the drilling rig, yes, they are slightly reduced, but then when you get this kind of short-term activity, basically to make sure your schedule is fully booked, normally In this case, drilling units are offered with a reduced, let's say, rate to the client that is partially compensated to the fact that being all this activity very close to the previous operational areas, normally they are associated with no mob-to-mob cost. So there is a part of compensation for that.

Okay. No, that's very clear. Thanks a lot for that.

Thanks. The next question is from Sebastian Erskine, Rolf Child, and Co-Redburn.

Yeah, hi. Good morning, gentlemen. Hopefully, you can hear me. I just want to return to the asset-based services performance, the margin in particular far in excess of my expectations. I think also consensus is 16.5%. But can you kind of give us any indication of where we might expect this to sort of plateau? And I'm thinking because, of course, SiteBend versus other pure play E&C providers has a very successful shallow water conventional business that might put a ceiling on those margins. So perhaps you could venture a little bit and give us a sense of where you're expecting a natural ceiling.

Well, I guess that the reasonable assumption is to have high double-digit margins for the asset-based services as a whole and as a result of the mix between deep water and shallow water activity or conventional activity. Obviously, the number can change a bit over time from one quarter to the other based on the mix of the projects that are being executed in the three months. Because obviously, when we execute more surf, deep water activity, you get typically higher margins. When the weight of the conventional activity is higher, it's the other way around. But all in all, I think that somewhere between high double digit is a fair assumption as a medium term expectation for the business line. We still see an opportunity to increase the margin further compared to Q1 2026, Q4 2025. But we hardly see the margins going higher than the high double digit in the medium term.

I really appreciate that, Kala. And just a sort of slightly boring accounting question on the DNA. So if I look at, you know, if I take FY2025, you sort of initially had guided, I think, sort of 800 million euros. It came in at a billion. I think you guided at full year 25 for FY26 at one billion. You're raising it slightly. Is the stickiness or the kind of stubbornness in how high DNA has been, is it accounted for both the accounting treatment change and then also the lease impact? Or is there any color you can give on why DNA has proved kind of slightly stubbornly high versus perhaps our expectations in the initial guidance?

Well, I guess the reason is that, I mean, as we have a lot of work being executed, especially the installation phase, we front-loaded the least vessel fleet in 2025, and so now you see the full... impact of the new vessels entering the fleet and especially in quarters like Q1 when the overall volumes are a bit lower, the relative weight of the lease vessels is obviously higher because the lease payments don't change over time based on the volumes because they remain relatively constant over time. explains a big part of the increase in the leases then as we said a few times over 20 well we reach the peak already in terms of lease liabilities they will start decreasing this year with with a big decrease in the lease payments starting from 2027 as certain projects come to completion and we will release the lease lease vessels that's the first step effect the second relates to I mean, many of the vessels working on Courcelles are leased, and having been a project behind the profit warning, it doesn't bring any margins, but then you add up the lease, the DNA connected to the lease payments back to the margins, and so they increase a bit depreciation compared to the plain EBIT that doesn't get any benefit from projects like Courcelles. Those are the two big elements behind the lease and connected DNA numbers.

Very clear. Thank you very much Paolo and I'll turn it back now. Congrats on the results. Thank you.

The next question is from Richard Dawson Berenberg.

Hi, good morning and thank you for taking my questions. And the first one is just a follow up on Sebastian's question and looking at asset based services. Is the mix in Q1 considered favourable or is that sort of a more normalised mix when you look at the deep water versus more shallow water? And appreciate that some of the margin strength in Q1 was given very high vessel utilisation in ABS. Is there any sort of utilisation reductions we need to think about across the rest of the year? So any maintenance of key vessels? Thank you.

So the mix in Q1 has been a bit favorable in terms of relative weight of the deepwater activity compared to the conventional. I think it was roughly 50-50, which is a bit better than the historical average. So there's been a bit of benefit from the mix. And also certain projects got to the final stage and therefore releasing contingencies and margins. But as I said, I think that going forward, it is very fair to expect a performance that will remain in the high double digits for the asset-based services as a whole, regardless of the mix. So you can expect high teams going forward.

On the best of utilization...

On vessel utilization, 2026 will benefit from higher utilization compared to 2025, especially for certain vessels that have been a bit less utilized in 2025. They have good expectations of utilization this year, so it's a trend that we expect to continue for the next nine months.

That's great. And maybe just a quick follow-up on CapEx, given it did about 40 million in CapEx versus guidance of over 400. So do you expect a ramp-up from Q2, or is that more back-end weighted? Thank you.

Well, I guess that we confirmed the expectation to have a capex in the 450 million range, which is what we share with the guidance. And they've been a bit below the, let's say, plain division by four in Q1. So you can expect them to increase a bit from Q2 to Q3. onwards, especially in the drilling offshore where there are going to be a number of vessels undergoing cyclical maintenance in the next few months.

Let me add on CAPEX. Really, the reference point is the yearly estimation from quarter to quarter. the CAPEX expenditure are really affected from the timing where the vessel can actually enter into the maintenance yard that are affected by the previous projects. there is a high degree of variability. That's what we expect from a quarter to another quarter, but this will be within the projected capex of the year.

That's very clear. Thank you very much.

The next question is from Guilherme Levy, Morgan Stanley.

Hi, good morning. Thank you for taking my questions. Firstly, you touched on the reconstruction of the Middle East of the damaged infrastructure. So I was just wondering, given that a lot of that infrastructure is on the sort of projects that you have walked away recently, like stuff on shore, refining, gas infrastructure, How should we think about the margin profile in case you are called by the client to help fix that sort of infrastructure? And how should we think about that also in context of the certain degree of urgency from the client? And then secondly, it's been a while since we last spoke about Thai oil. Are there any updates on your arbitration? I think that last year, if I have that correctly, the expectation was for the whole process to take like one, two years before conclusion, meaning that we could still have a year from now. Would you still agree with that timeframe? Thank you.

Okay, so let's start from the activity may potentially expected in the Middle East for restoring damaged facilities and expected margin associated to that activity. I believe that we would be fair our clients have been hit and I would say that the expected margins are the normal margins. I believe that none of us wants to exploit a situation in which our clients were hit and we have a long-term relationship with them and it's a relationship based on fairness. So this would be fair on both sides. So that's something that I would like to stress. On the Thai oil arbitration, just to update, preliminary activity is progressing as expected, and we do expect the arbitral tribunal to issue a calendar a calendar for the arbitration in July. So at that time, we will have a precise time schedule for the arbitration.

Thank you. Can I just ask a very quick follow up on accounting? How frequently do you have to assess the profitability of your whole backlog? Meaning, how frequently do you have to go project by project and look There is additional inflation here and there. These logistic constraints are going to take a toll here and there. I think that's done quarterly, but I just wanted to make sure.

Well, we review the performance of the important projects, the most relevant ones on a monthly basis. And then there is a big review project by project on a quarterly basis where we go through the all the assumptions behind the project status review which is the balance sheet of each project and we go line by line and it's done on a quarterly basis but then on the critical projects it's done even on a monthly basis. It applies to almost any project, so either large or with decreasing margins, etc. It's not only the legacy portfolio.

Perfect. Thank you so much.

The next question is from Ana Kishmaria, UBS.

Good day. Thank you for taking my questions. I have two. One regarding the provisions and the reversal of the provisions. Do you expect with the Corsair ongoing now at a faster pace to have more reversals? by how much you expect maybe it could impact or support the performance of the segment at this year. And my second question will be around working capital. So when we discussed your guidance for 2026, the comment was that the bridge between EBITDA and British law accounts for some of the working capital drag. Do you still expect this for the year? First quarter provided for a large relief. Thank you.

Okay, so on the first question was on the provisions. Well, we don't typically disclose provisions for project by project, but what we can expect in 2026 as a whole for the portfolio is a decrease in the overall funds. a bit of a reversal of the provisions going forward. So we will utilize the provisions as the projects get executed. On the working capital, well, we expect a bit of a negative contribution from the working capital from Q2 onwards, even though Q1 has been especially positive when it comes to working capital. In fact, excluding the use of the provisions for the funds, the rest of the working capital decreased significantly. quite remarkably, which we see as a very strong signal of the fact that we've been able to invoice and getting paid everywhere well in time.