Saipem Spa

Good morning, this is the Coruscall Conference operator. Welcome and thank you for joining the SIPEM first half 2026 results. As a reminder, all participants are in listen-only mode and after the presentation there will be an opportunity At this time I would like to turn the conference over to Mr. Alessandro Puliti, CEO of Saipem. Please go ahead, sir.

Thank you and good morning. Thank you for joining the presentation of Saipem first half 2026 results. I'm here in Milan today with our CFO Paolo Calcagnini and with the other members of the 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 on 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 second quarter. Saipem reported revenue of 3.8 billion euro in Q2, representing a growth of 8% quarter on quarter and 3% year on year. Despite the conflict in the Gulf, we made strong progress on all our projects, recording 1.2 billion euro revenue in the Middle East. We list project execution was robust, we suffered extra cost of 70 million euro because of the conflict. This impacted our profitability, especially in the asset-based services. Adjusted EBITDA in the second quarter stood at 402 million euro, representing a margin of 10.5%. Without these extra costs, we would have posted the second highest EBITDA since 2022. We are currently discussing with our clients about these extra costs and we think we will be able to recover a good portion of them. Notwithstanding the disruption brought by the conflict, our cash flow conversion keeps on improving. In the second quarter, we generated 189 million euro of free cash flow, bringing the overall cash generation in the first Our commercial activity has recently accelerated, leading to an order intake of 4.1 billion euros in Q2, corresponding to a book-to-bill of 1.1 times. We expect our order intake to accelerate even further in the second half. as already demonstrated by the 2.3 billion euro awards already announced in the month of July. Our revenue booking in the second quarter is consistent with the growth profile of the last four years and it represents the highest level recorded in Q2 ever. Coming to EBITDA, in Q2, we booked 402 million euro, reflecting the extra cost generated by the conflict. Also, as already mentioned, even considering this extra cost, our operating cash flow remains very robust in Q2 at 449 million euro, representing the second highest level of quarterly cash flow ever. The strong cash flow generation is a further demonstration of the continuous improvement achieved by Saipem in terms of conversion of EBITDA into cash. Let's now move to the order intake in Q2 and our... ...their intake of 5.7 billion euro for the first half of the year. Considering the 2.3 billion euros of award already signed in the month of July, We already reached a cumulative order intake of around 8 billion euro higher than when we achieved in the first nine months of 2025. We can confidently say that for 2026 we are on track to exceed the order intake achieved in 2025 also in the light of the various commercial discussions we are having with clients. Just to give you a bit more color, commercial discussions are relatively broad-based and revolve around projects in Latin America, Africa, Middle East and Far East. Let's now look at the recent order intake in the offshore ENC. The most recent award was signed with ENI in the Ivory Coast for the third development phase of Balene, located in water depths up to 1,300 meters. In addition, Azul Energy has awarded us the Greater Page development in Angola, which represents one of the most significant ultra-deepwater projects in sub-Saharan Africa, at a depth up to 2,000 meters.

The Bay Lane and the Page projects will

have densified the planned utilization of our fleet. Despite the ongoing conflict, our clients in the Middle East remain positive and eager to push forward their investment plans, as demonstrated by the two CRPOs awarded to us by Aranco, which we already discussed during the Q1 call. Lastly, we continue to build on our relationship and track record with Exxon in Guyana and we expect that the limited notice to proceed from Long Tail will turn into a full EPC contract later in the year. Let's now move to the recent awards in Onshore Engineering and Construction. The order intake of the last four months is fully in line with our new strategy for energy carriers, both in terms of project type as well as in terms of the risking. In terms of project types, biorefinery in Italy remains one of the most important areas in our energy transition portfolio. We are progressively increasing our exposure to FPSO fast track projects with appropriate contracting models and in particular in Indonesia when we can rely on our Karimun yard. We have increased our backlog in the operating and maintenance segment through a multi-year extension from a key client. We won a new gas treatment plant project for Aranco under the national APC champion program in partnership with one of the most important and reliable local construction companies. We also started the internationalization of our but they all share a common approach based on a mix of the following tools. First, early engagement through pre-feed and feed activities. Second, hybrid contracts with significant portion based on remeasurable provisional and cost plus fee mechanism. Third, tier one construction and fabrication partners responsible for their own portion. Fourth, maximization of utilization of Saipem's yard for fabrication and integration of modules. Fifth, clients supply critical items. All in all, approximately half of the aggregate scope of work of this project is de-risked through a mix of contractual scheme and other levers. Let's now look at the disposal of our shallow water drilling business. In late June, we have entered into a binding agreement with ADES for the divestments of Saudi Arabian Saipem Limited, the company which runs our shallow water drilling activities. The associated fleet is made by five units. Three own J-Caps, the Peronegro 7, 8 and 10, and two lease J-Caps, the Peronegro 11 and 13. The transaction value amounts to 285 million of US dollars and completion is expected in the third quarter of 2026. The disposal is part of our strategy to focus on deep water and harsh environment offshore drilling operation. and is also a natural continuation of the path which we started with the sale of the onshore drilling business in 2022. Let me now turn into the recent commercial activity in the deep water drilling segment. Last week, We have been awarded an important new contract worth $260 million for the Santorini drilling ship, which will be deployed in Ivory Coast for a long-term campaign with ENI. Operation will start between the end of 2026 and the beginning of 2027. The contract includes a firm commitment of approximately 18 months with additional option periods. This award further increases the level of utilization of our deepwater fleet and improve our revenue visibility for 2027, 2028 and possibly beyond. To serve this contract, we are bringing forward the SPS of the drill ship to the second half of this year, that was originally planned in the first half of 2027. Based on the visibility we have at the moment, we are confident that our deepwater drilling fleet will be fully booked in 2027. and that the year 2027 will be virtually free of SPS maintenance activity for any deported vessel drilling. Let me now give you an update on our operation in the Middle East. In the first half of the year, we recorded a good progress on the execution of our project in the region, notwithstanding some disruption in offshore operations. Vessel utilization has been proactively managed to minimize the impact of temporary suspension and late arrival of certain critical derivers through hormones. At the beginning of July, we completed three inbound crossings through Ormuz for critical deliveries related to the projects in Qatar.

All in all, we managed Thank you very much.

The standby cost of certain vessel and project teams as well as the impact of temporary repatriation of expat family members. We expect to recover a portion of this cost subject to the outcome of the commercial discussion ongoing with the clients. For the second half of the year, we forecast a similar situation to the one experienced in the first half. with good progress on the delivery of the projects but with some extra cost of similar magnitude. Let me now give you a brief update on Courcelles. The execution is progressing steadily and the drilling activity is proceeding at a very good pace. To date, we have successfully drilled 36 sockets and installed 23 monopiles. This means that since our update in late April, we have added 12 new sockets and 8 new monopiles. We confirm that completion is expected in 1st June 2027. Let me now give you an update on our commercial pipeline. As you can see from the numbers, the opportunities set in front of us remain robust and continues to grow. In terms of mix, we see attractive prospect in offshore engineering and construction, both conventional and surf. At the same time, in the onshore engineering and construction space, we are seeing opportunities in upstream, LNG, FPSO, fertilizer, biorefineries and sustainable infrastructures. Geographically, our pipeline is concentrated in the Middle East as well as in Africa, while we also see attractive potential growth in Latin America and in the Far East. Let me now hand over to Paolo to cover the financial results in more detail.

Thank you, Sandro. Good morning, everyone. I'll begin with slide 15. which provides an overview of Saipem's main results for the first half of 2026. Revenue grew by 1.9% year-on-year to 7.3 billion euros, while adjusted EBDA grew by 9.4% to reach 836 million euros. The adjusted EBDA margin continued to improve year-on-year, rising to 11.4% compared to 10.6% in the first half of the last year. As mentioned by Sandro, our performance in the first part of the year was affected by extra cost of 70 million euro due to the conflict in the Middle East. Without this cost, our adjusted BDA margin for the six months would have been equal to 12.3%. Net results stood at 131 million euro on an adjusted basis, whilst operating cash flow stood at 841 million euro in line with last year. The difference between adjusted and reported results reflects a provision booked in Q2 for €35 million in relation to the implementation of an early retirement scheme for Saipem employees in Italy. Approximately two-thirds of such costs are associated to the energy carriers division. These costs are expected to continue in the second half of the year for approximately €69 million for a total of €104 million. This initiative will bring substantial savings from 2027 and will help rejuvenating the overall population of Saipem in Italy. Let me now turn to the performance of the three business lines. And I'll start from asset-based services on page 16. Revenue in the first half of 2026 stood at 4.3 billion euro, representing a 5.3% increase year on year. Such performance was mainly driven by strong progress of our projects in Latin America, the Far East and North Africa, partially offset by the completion of SACAREA II in Turkey and BUZIO7 in Brazil. The mix between conventional and deep water activity has remained broadly stable year on year. Adjusted VDAs to that 674 million euro in the first half, an increase of 25% year-on-year with a margin expansion of 2.5 percentage points versus the same period in 2025. Factoring the disruption brought by the conflict, which has generated extra costs for 70 million euro for the group. of which 80% associated to the offshore ENC projects in the Middle East. Without this cost, our adjusted EBITDA margin would have been 17%. The growth in adjusted EBITDA more than offset the increase in the least component of DNA, driving adjusted EBIT margin up by 60 basis points year-on-year from 5.4% to 6%. Excluding the costs associated with the conflict, the EBIT margin would have increased to 7.3%. Anticipating that project execution in the Middle East remains resilient and broadly in line with the first half of the year, we expect revenue in the second half of the year EBDA and debit margins. Let me now move to drilling offshore on page 17. The year-on-year decline in both revenue and EBDA mainly reflects the reduction in the size of the fleet following the exit of the Pioneer and the Pernonegro 12 jackups in the second half of 2025. Second, the lower activity by the Scarabeo 9, the Cypern 10,000, the Pernonegro Lower day rates for the Saipem 10,000, the Santorini, the Scarabeo 9 and the Peronegro 7. Last, the additional costs related to the termination of the operations of the DVD and the related handover of the dealership to the owner. This was partially compensated by the higher day rate of the Scarabeo 8 and the higher utilization of the Peronegro 10 and the Saipem 12,000. Assuming the completion of the disposal of the shallow water drilling business at the end of September and taking into account the planned maintenance capex for the Santorini, which was brought forward from 2027 to 2026, we expect a double-digit decline in revenue in H2 2026, low teens EBITDA margin for the second half of 2026, and a break-even EBIT for the entire 2026. For 2027, we don't expect any major maintenance activity for our dealing fleet. Let's now conclude the review with energy carriers on page 18. Revenue remained broadly stable year on year. This was the result of an increased contribution by projects in Italy and in the Far East, offset by lower contribution of projects in the Middle East and in Africa. The latter despite an increase in the revenue due to the restart of the Mozambique LNG project for Total. Adjusted EBITDA margin rose by 60 basis points year on year, mainly because legacy project volumes continued to decrease. As in asset-based services, the energy carriers business line absorbed 20% of the €70 million of extra costs related to the conflict in the first half of the year. Assuming no major disruptions in the Middle East, we expect high teens growth in revenue in H2 versus H1 and a broadly stable EBITDA margin. Let's now take a look at the figures below EBITDA as shown on page 19. DNA increased by 20-20% year-on-year. As discussed several times already, this reflects the growth of the fleet on a charted basis as well as the change in accounting treatment for the DVD vessel. In particular, DNA related to lysis increased by 50% year-on-year from around 240 million euro to around 360 million euro. The overall level of DNA expected for full year 2026 is confirmed at around 1.1 billion euro. Financial expenses stood at 66 million euro in H1. A decline of 28 million euro year on year, reflecting mainly a lower edging cost on the back of the reduction in the interest rate differential between the euro and the US dollar, as well as lower volumes of traded derivatives. And then a decline in the net financing cost, ex IFRS 16, as a result of the decline in the gross debt and growth in the cash position, we generate a positive yield. Partially, 15% to 20% lower than in 2025. Income taxes rose year on year by 20%, implying an effective tax rate of 47.5% on a reported basis for H1 2026, compared to 34% a year ago. This is mainly due to two factors, a tax settlement in West Africa and the different profit mix between the various companies of the group. These two effects are expected to impact H2, and as such, the tax rate is expected to remain stable on a reported basis in the second half of 2026 compared to the first half of 2026. Let's now focus on the cash flow and net financial position on page 20. In H1 2026, considering the 330 million euro dividend paid in May, the pre-IFRS 60 net cash position improved by 79 million euro and stood at 1.1 billion euro at the end of June. This is primarily due to the cash generation totaling 388 million euro, which was supported by the strong performance of the business, as well as a release of cash flow from working capital as some key projects were completed. More broadly, the improved cash conversion we have experienced in the last four years is mainly due to the improved quality of the projects and the related contractual terms, as well as the optimization of the working capital management. Lease liabilities declined by €84 million in the first half and are expected to continue to decline in the next two quarters. As we release some chartered vessels back to the owners, we expect the completion of some specific projects. In fact, We expect lease liabilities to decline to approximately 900 million euro at the end of 2026. Lease repayments in H1 2026 amounted to 305 million euro and we expect lease repayments to be around 650 to 700 million euro for the full year 2026. Now to wrap up, let's quickly look at the SIPM debt and liquidity position at the end of June. Our liquidity position is very solid and stands at 3.5 billion euro. This is made of 1.3 billion euro for available cash, 1.6 billion euro of cash in JVs, and 600 million euro related to the undrawn RCF. As anticipated last year, we are looking to reduce gross debt by repaying all maturities that fall in 2026. So far this year we have in fact already repaid using available cash 30 million euro related to an ACA facility in April and 241 million euro worth of EMTN bonds at maturity in mid-July. We also have a clear target to achieve an investment grade credit rating in a medium term, a target which is well supported by the conversation we're having with the rating agencies. I'll now hand it back to Sandro for his closing remarks.

Thank you, Paolo. Let's now go through our updated guidance for 2026. We are now five months into the conflict and acknowledging the situation in Ormuz is still unclear. We think it is prudent to update our guidance for 2026 in particular. In terms of revenue, we confirm the guidance issue in February also considering the resilient project delivery in H1. In terms of EBITDA, we are considering the extra cost booked in H1, our estimate for possible extra cost in H2, as well as the impact of the deconsolidation of the shallow water drilling business. We are therefore adjusting our EBITDA guidance from 1.9 billion euro to 1.75 billion euro. We confirm our operating cash flow guidance thanks to the structural improvement in cash flow conversion. Our free cash flow guidance is also unchanged. For the sake of clarity, this number does not include the extraordinary proceeds we expect to receive from the disposal of the shallow water drilling business. Let's now wrap up with some closing remarks before we turn to the Q&A session. Thank you very much. The disposal of the shallow water drilling business will allow us to fully focus on the deep water activities. We have achieved the full utilization of the construction fleet for the next two years. The prospect of our industry remains strong and a further reinforced by increased need of energy security and diversification. Thank you for your attention. and we are now happy to take your questions.

Thank you. This is the Coruscall Conference operator. We will now begin the question and answer session. Anyone who wishes to ask a question may press star N1 on their touchtone telephone. To remove yourself from the question queue, please press star N2. The first question is from Alessandro Puliti, Mediobanca.

Good morning. Thank you for taking my two questions. The first one is on the guidance. I think it's quite reassuring to see that you haven't changed the revenue guidance, meaning that I guess the progression of milestone is still as expected. There's no meaningful change there. but EBITDA is coming down. If I look at the second half that implies maybe extra cost of 80 million compared to the 70 in Q2. So I was wondering can you give us a bit more color around what are the assumptions for the new guidance for revenue and especially EBITDA in terms of Thank you very much. The merger with Subsea 7, I'm not sure how much you can say, but I was wondering, are you surprised that this is entering a phase 2 now in Europe?

Thank you.

Okay, so in terms of guidance and the cost that we've been... that possibly we incur in H2. You were mentioning 80 million. If we look at the figures, this is not entirely due to the extra cost possibly that we and many others who were possibly faced in the conflict but also includes the missing EBITDA coming from the disposal of the shallow water drilling fleet. So the 80 million is the sum of the two. is pretty simply a linear that we possibly incur in the same level in H2 of extra cost we incurred in H1. So this is the basis for, let's say, our updated guidance. Regarding the merger situation in terms of antitrust authorities all around the world is that we have two clear 16 antitrust authorities around the world. We already received positive clearance from eight antitrust authorities. We are entering in phase two in many situations, so not only in Europe, but also in Australia, as it is well known. And this is perfectly understandable considering the size of the merger and the business. And I would say that this has to be considered normal in these circumstances.

and with regards to the to the reimbursement of cost um but also on the second half i guess it's you have six months of potential disruptions uh uh whereas i think in uh in q2 probably had four months of uh so the 70 million is probably based on four months so i was wondering uh In terms of assumptions, do you expect more inbounds over the next few weeks and months? Some sort of normalizations in the Gulf?

Okay, so let's come to the first. Possibility of recovering extra costs from the client is clearly... are present. We are currently discussing with them. Some of them, they clearly, they already gave us positive indication. But, you know, those are variation orders and they require a bit of a lengthy process. So we may expect to factor in in in 2027 rather than 2026. This is something that we have to acknowledge. Again, on the forecast for the next, let's say, the H2, I consider the same. It's not a matter of being four months or six months. It's a matter of having to acknowledge that some extra costs will last for for a while, like the extra premium for the vessel, extra cost for local tugboats or local supporting vessels. So this is, let's say, the bulk of the extra cost we envisage.

Okay, just a final one. I think in Q2 you had 30% of the revenues coming from the region. I believe, is that a good estimate also for maybe 2027?

No, I'll leave it to Paolo on this.

The number for 2027 is very close to 2026. So the region keeps accounting for a significant portion of our backlog.

Thank you very much.

Next question is from Mark Wilson Jeffries.

Hello and thank you for taking my question. Obviously I've got to ask regarding the Middle East more on the cost there but in particular Alessandro could you speak to the transits you clearly managed to manage some of those transits you spoke last quarter about between May and July and you said you've managed to get some so where do we stand in terms of materially important transits for the rest of the year and how that relates to those costs Second question for you Paolo on working capital you mentioned you had some projects that had completed and we did see a positive inflow from working capital so are there any more of those to expect in the second half and indeed into 27 I imagine legacy projects might be part of that thank you

Okay, so in terms of transits, we managed by the beginning of July to have three very important transits. So we had three inbound important deliveries for projects in Qatar that are allowing to make actual progress in those transits. in those projects, specifically in the so-called Comp 2 project where we managed to pass with the large living quarters that has been set on a jacket that was already in place. So there was very important crossing. We managed also to have an outbound crossing for deliveries from the Middle East to the Far East, other critical areas. So that was, let's say, a good achievement also recognized by clients. Basically, like many other operators, with a good work of readiness, we managed to cross in the window one week where many many other operators managed to have their crossing on Ormots. Prior situation became again, let's say, complicated. For the future, in the year, there are planned in the second half 10 inbound. Some of them are again for the COM2 project in Qatar. so that are the deck for the compression for a PC2 jacket and a jacket for a PC2 and jackets for a PC3 so this is This is why we envisage a situation in the second half that could be similar to the situation of the first half. So with some window in which we can, let's say, cross the crosshormones safely. but we may be associated with some waiting time to wait the right time to cross. Clearly any waiting time is also generating extra rental cost for the vessel and then the situation is also very much influencing the insurance premium. So that's the reason why we are seeing a second half possibly similar to the first half. Is this a prudent view? Yes, I believe it is a prudent view. But I believe that all in the circumstances we must be prudent. Regarding the rest, I will leave the floor to Paolo.

On the cash generation and working capital. So, Marc, I think that there is a trend that we have seen starting from 2023, which is a structurally higher cash conversion compared to the past. And the reason being that there is a better mix of contracts and contractual terms. There is also much more focus on working capital in general and the efforts are paying off because we gained quite a few percentage points of cash conversion in 2025 already, but then the trend continued in 2026. Now, yeah, there have been a few projects that contributed to the decrease in the working capital. But more in general, I can share with you a couple of additional insights. The first one is that when you look into the commercial liabilities, so payables to suppliers, they didn't increase in H1 2026. And also the advances from clients decreased. That gives you an indication of the quality of the performance and the reason why I called it a structural trend rather than a short-term movement in the working capital. Also because if it's not the liabilities, it should be the current assets contributing to the cash, which is good news because it tells you It tells you a lot about the contractual terms of the new contracts. And as the new contracts kick in, you get the benefits when it comes to the overall working capital. And if you look at the wider picture in the last year, so from June 2025, the working capital decreased roughly 300 million euros or 250, give or take. And that is mostly because of the trends I just shared. I think it's a structural thing and we're enjoying the benefits of the work.

Thank you very much. I could follow up, but I'm sure there's other questions, so I will hand it back. Thank you.

Next question is from Mick Pickup, Barclays.

Good morning, gents. Two questions if I may. Firstly, just on the drilling side, it's been a while since we've missed on drilling estimates and it's obviously because of maintenance. Can you just run through what you said about the maintenance and what we're missing into the second half? I know you said 2027 is quite a clear year, but can we just get the back half of 26 sorted out, please?

Okay, so the main event for 2027 is that we went through SPS for Saipem 10,000 that will end at the end of July in a few weeks and then beginning of August the rig will start working back in the Mediterranean the new event is that since we signed this contract for ivory cost for the Santorini we starting from beginning of 2027 and since the client wanted a clean start we anticipated and so we brought forward the SPS that was expected at the beginning of 2027 into 2026. We are now accounting 60 days of SPS end of the second half of this year. During this year we did also maintenance for Scarabeo 9 so situation is such that next year we will not have any planned SPS for the drilling fleet deepwater that's the situation okay thank you and then on that redundancy cost that popped up in the quarter obviously 35 million this quarter I think you said it's 100 million for the year can you just talk about when the cash goes out for that I will leave the floor to Paolo.

So the cash will be paid when the colleagues will leave the company. So it's going to be partly in 2026 and then 2027 and onwards. We think that this year is going to be roughly 30 million euro, the cash out from the redundancy plan. I think we should focus on the benefits in the medium term because from 2027 we'll experience significant benefits in terms of labor costs and most importantly we'll significantly reduce the average age of the working population in Italy. There's only this accounting treatment because you have to account for all the costs in advance as always and then you will see the benefit as the colleagues will leave Saipem end of this year in 2027.

And what is the rationale for getting rid of your most experienced people?

Well actually I mean it's not that we are leaving the company because the way it works is that the colleagues can express their willingness to leave the company and the company can accept or not so it's a case by case it's a case by case discussion and the most valuable people I don't think they're leaving the company because of the early retirement plan This said, it's in their rights if they don't want to work anymore to enjoy their retirement, right? So it's a business, almost a business as usual kind of decision. The fact is that in Italy there is this law that allows people to retire as earlier as five years compared to the original retirement age. And some colleagues decide to enjoy their lives off the side side.

Thank you.

I wish I was in that age. Me too. Not yet.

Next question is from Massimo Bonisoli, Equita.

Good morning. Two questions. One, if you could explain the rationale for recognizing the Middle East-related extra cost upfront in Q2 and then in second half, rather than waiting for the conclusion of the commercial discussions with the clients on potential recovery or pass-through. I understand it is prudent by doing so. How did it work in the past? And the second question, could you share some indication of recent trends in offshore drilling dairies? Are you seeing any signs of improvement or should we still expect a more mixed environment in the short term? Thank you.

Okay. Regarding the first one, and let's say the decision to consider possibly in second half the same cost we incurred in the first half. The fact that this cost may recover by the client is clearly a fact. But this process will require a while. Certain clients, they gave us already positive, let's say, indication that they are willing to do so. But based on past experience, like if you want to recall the time of the COVID and the extra cost we incurred at that time, There was a compensation, a partial compensation, but it came, let's say, it's a process that may take six months, seven months. So, as I said before in the call, most likely this restoration of this cost will actually occur in 2027 rather than in 2026. So, the The way it works is that now I have to, in a way or another, make clear that there are these possible extra costs in the second half of the year. So possibility to recover is real, but there will be a mismatch of time compared to our reporting exercise. as it happened for the COVID. Regarding the daily rates in drilling, I would say that we are still in a mixed environment. There are signs, good signs, but also it's also true that some clients are postponing right their the startup of their drilling activities. Therefore, it made possible that in 2027 we will see a more clear direction in the daily rates. Today, the environment is pretty steady, I would say.

Very clear, thank you.

Next question is from Sebastian Erskine, Rothschild & Co, Redburn.

Yes, good morning gentlemen, thanks for taking my questions. The first one just on the Middle East, I guess beyond The one-off cost. Is the risk that these structurally higher tugboat costs, logistics costs, insurance costs kind of drive structurally lower through cycle profitability of engineering and construction work in the Gulf? Or is that the wrong way to think about it? I guess the commercial activity is very strong, but I'm just thinking about actually over the medium and long term what the profitability of that work might look like.

The question is also the question that we are asking ourselves in these days. I would say that as soon as the situation of the hormones gets clear and we return To the previous, let's say, to the situation that was back in February, there is no reason why the cost, they should not return at that level. And I would say, so that's our view. As soon as we are back to normal crossing, for example, insurance premium, they should go back to what they were before the beginning of the conflict. Just to give you an example. So I would rather say that this is a localized effect Thank you very much. Inflation of cost, but not because of the world, but because of a surge of activity. But you know, if there is a surge of activity, then the extra cost is compensated within the new contracts. So I would say that all in all, we do not see a deterioration of marginality in the long term in the Middle East.

That's very helpful. Thank you. And then just a question on energy carriers. The margin does remain quite weak at sort of 2%. EBITDA, obviously Mozambique LNG is kind of restarted. But maybe you could give kind of a sense of the timing of the recovery and profitability. I think, Paolo, at some point you were talking about potentially getting back to sort of mid-single digit EBITDA margins. What's the potential kind of timing on that recovery in energy carriers?

So we do expect clearly a 2027 change to be different and to be definitely better. Many of the projects that are keeping the marginality of the anchor pretty low and constant are coming to an end during this year. So there should be no reason why in 2027 we should not see any improvement of the marginality.

Perfect. Thank you very much. I'll turn it back now. Thank you.

Next question is from Guillaume Delapie, Bernstein.

Yes, good morning. Two questions, if I may. The first one is once again on the Middle East. Can you give us maybe a little bit of color about your logistics, how your logistics is currently working? What is, I would say, typically the proportion of which goes from through Saudi Arabia to the Red Sea, the proportion which goes, I would say, through the Omanian coast and maybe as well the proportion from the Strait of Hormuz or are there also some other logistical routes? So this would be my first question. My second question is regarding, I would say, the offshore infrastructure Thank you very much.

Okay, so I will give you an answer to the logistics. So, you know, we operate in three main countries in the Middle East, Saudi Arabia, Qatar, and the Emirates. So clearly, nowadays, some of the deliveries that we were used to get for Saudi Arabia through Ormuz in the Gulf, now they are coming from the ports of the Red Sea and then being transported by lorry into the east coast of Saudi Arabia. Similar things happen in the Emirates. were deliveries that were expected directly. For example, in Abu Dhabi, now they are landing in the coast of the Emirates on the Oman Gulf. So, while for Qatar, as I was saying before, delivery of large items like the jackets and the decks, they are built in the Far East, to be installed in Qatari waters, they still need to pass through Ormuz. And as I mentioned before, three of them passed within the first week of July and others they have to pass through in the next months. This is how the logistics works in these days. Offshore markets succeed. Now, it's true that there are many opportunities. Some of those you have seen by our recent acquisition being captured. There are further in our pipelines, especially I would say in the Sub-Saharan Africa. but initiatives are also in the Far East as well. There are many developments associated in all deep water, for example, in Indonesia. So clearly we see activity coming up. Now you... The ability of turning this activity into higher margins has always to be confronted with the ability of our clients and their bargaining powers that remains very strong. So their decision of investments are very much linked to get the right price for the development. So in many situations, when you run a tender and you win a tender, in practice, you do not win a tender. You win the right to negotiate with the client and the client will like to further squeeze your margin prior coming to the assignment of the contract. So margins in the deep water activities are nice but I would not rely on the fact that they become nicer because of the increase of the demand.

Thank you very much Alessandro, I turn it over.

Next question is from Guilherme Levy Morgan Stanley.

Hi, good morning. Thank you for taking my questions. I have two, please. Firstly, just going back to the provisions related to early retirement, is there a scope to do that in other countries as well? And was that somehow embedded in the one-off cost that was guided at the time of the merger of 7 of 270 million to implement various types of synergies? And then secondly, thinking about your pipeline of new opportunities, there was a jump in Middle Eastern shore E&C work, particularly between the first quarter and the second quarter of around 3 billion euros of new projects that you could bid for. Can you talk a bit about the profile of those new prospects? Is that related directly to reconstruction work or is that mostly greenfield projects outright? Thank you.

Okay, I'll pick the first one on the early retirement. Well, every country is different from the other. So the way it works in Italy is different from any other jurisdiction. So you should go country by country. Every country has its own schemes, if any. So it applies only to the colleagues employed by Italian companies. and no they were not included in to the cost of the synergies if that is the question because we would have done it anyway even without the merger and as I said it many of the colleagues a big part of the colleagues will leave the company from the energy carriers rather than the offshore and but obviously the cash cost is included and was included in the cash guidance for 2026. So the guidance is already net of those costs. And then the other question was on the commercial opportunities, I guess.

Yes, on commercial opportunities, we still, as you rightly mentioned, we still see many opportunities in the... In the Middle East, I would say that both offshore and onshore is not only onshore activities. The national oil companies in the Middle East, they're very resilient and stronger. So they even... All in the current circumstances, they are keeping looking at their future for developmental research and optimized production of oil and gas. So therefore, they are looking to new project. The Utmania project is one of the key of those projects that is to improve ability to produce gas in Saudi Arabia. and on our side it represents a big change compared to the to the projects we acquired back in 2018-2009 in Saudi Arabia just to make the name very Omarjan those projects that were acquired by Saipem hundred percent taking the full risk The new Utmania project is acquired under the new scheme of the national champion. So we are 50-50 with, I would say, a main and very reputable local contractor, which will share the risk of the project. The national champion project is a program launched by Saudi Aramco to really get growing the local capacity of building APC contracts. So Saudi decided, Saudi Aramco decided to give to those new association of an international contractor and a local contractor seed projects to let this activity start up. Under this setup, I would say that our risk profile is fundamentally reduced compared to the previous project acquired in Saudi Arabia and fully satisfied our current risk appetite for projects on land and generally speaking in the anchor division of Saipem. So this is the rationale for acquiring. So we have been and we will be very selective when acquiring land. and only if the new risk appetite is satisfied, we will get it. Utmania was fully satisfying this condition.

Very clear. Thank you so much.

Next question is from Kevin Roger, Kepler Shubr.

Yeah, thanks. Frankly, everything has been asked, but just to be sure that I well understand the 26 updated guidance. So the 1.75 billion that you are guiding includes the 70 million additional costs that you have booked already now in Q2. but also the 70 million potential additional costs that you're going to see in H2. Just to be sure that I understand well the 26 EBDA guidance with those Q2 and H2 costs.

That's correct, Kevin.

Okay, so you took a very conservative, in a way, approach. And just to be sure, let's say, I don't know if you want to provide a number also, but the adjustment in the guidance also relates to the shallow water disposal. Is there any sense to assume what was the, let's say, expected contribution of the shallow water for, let's say, H2 ABDA at the group level?

Kevin, this is a number we can't share because of confidentiality with the buyer. We shared the revenues for 2025 for the shallow water fleet. I remember a number close to 170 million euros as revenues. Make your assumption on the margins and you can guess what is missing in Q4.

Okay, perfect.

Thanks a lot. Thank you.

Next question is from Victoria McHullock, RBC.

Thanks very much for taking questions and thanks for detailing the risks, the de-risking of these new awards. I wonder if you could talk to a bit about how much the increase in the tender pipeline not necessarily year on year but maybe over the previous couple of years has been due to you being open to these new types of projects within sort of the bidding framework and also in connection to that how that has changed geographically the split of the tender pipeline and then secondly given the recent escalation this month in the conflict and the volume of cargos to pass through the street in the coming month What kind of assumptions have you made in terms of potential delays within your guidance that you've retained today? Is there an element of that in the numbers that we see today?

Thanks very much Let's start from the second one Basically, as I said before, in the second half we expect 10 inbound crossings in the Ormuz to feed our project activities, mainly to feed our offshore project activities, and I would say mainly in Qatar, because Construction activity in Saudi and in the Emirates is done locally. So why we are possibly, we see this possible extra cost also in phase two, because we do expect a similar situation that in phase one. So a situation in which you may achieve the crossing, but this crossing will imply waiting time Alessandro Puliti we had the jacket for the Ruia project in Qatar loaded out in Oman and basically this jacket waited almost one month if not more the right window to cross safely so but clearly while you are waiting you generate extra cost because you still have to pay your barges longer, your tags are booked for longer times because some of this heavy equipment like jackets and deck are loaded Thank you very much. have to wait in the entrance in Ormuz the right time to cross, then you generate extra cost. So this is the reason why we say that in the second half we possibly have extra cost similar to the one we incurred in the first half. in the first half. You may argue that you did three crossings and then you have to do ten crossings so there is no proportion between the two extra costs but the fact that is also true that we made some experiences so we need which is the degree of preparation what to do and how to handle the situation in a such a way that when the windows are right we're ready to cross basically in the first during the first half we spend lots of time to understand how to make a safe All this is experience done, so that's the reason why all in all we think that we possibly have in the second half a very similar amount of extra cost than the first half.

But then there was another question that I may have lost.

Okay, regarding the commercial pipeline. Now, the commercial pipeline is increasing because we see We see in front of us much more opportunities than we were experiencing one year ago. There are plenty of calls for tenders, both onshore and offshore. But I would say we will try to keep fit. So our appetite for new projects will be only if the new projects are within our new company risk appetite. The fact that there is a bit that is a wider commercial pipeline ahead of us has to be interpreted in a way that this will allow us to be a bit more choosy than we were in the past.

Thanks very much for that. If I could just ask a follow-up on the first part, and this might be a stupid question. Is there no impact on the revenue recognition on the delays that you experienced in Qatar and the expectations you have for the second half of the year?

Yes, because at the end those projects are very complex projects. is not immediately... A late delivery is not... Why a late delivery does not impact immediately the revenues? This is the... I repeat your question and try to understand whether... If this is the question, those are such complex projects where in the short term a late delivery of certain equipment in the overall project schedule is compensated by bringing forward other activities that you can carry out while waiting that kind of achievements. All those achievements, they are not on the critical part of the projects, but within the project schedule, in the short term we normally do as we normally do we continuously update the schedule in order to make to make progress although although there is no some part of equipment for in a way or another is late this is part of normal project Management and optimization. There are many reasons why certain deliveries are late in a project. The most common situation is because the supplier is late on the delivery. In this case, there are no late deliveries because of suppliers, but there are late deliveries because of the difficulties of crossing Ormuzza. but the practical results is the same. While waiting the jacket, we lay, for example, we use the vessel to lay lines that are already in the country. So our installation fleet is not idle. It's simply bringing forward activities that were expected, for example, to be done later that are anticipated. So that's the reason why Revenues are constant while costs are possibly higher.

Thanks for the call, much appreciated.

Since we are already over our one hour slot, we will accept only one question for analysts and close the call at 12 CST time. Next question is from Alejandra Magana, JP Morgan.

Hi, good morning. Thanks for taking my question. I know you said overall you don't see a deterioration of profitability longer term, but could you help us understand what proportion of the 70 million euros of costs incurred in the first half could remain relatively sticky in the near term after disruptions ease versus those that should unwind relatively quickly, such as waiting costs?

But if, as I said before, if situation get back to normal, we do expect that extra premium will be back to normal. Rental of certain tanks, supporting vessel. that now are increased because you have to use only equipment and tax and barges that are within the Gulf. So you cannot bring competition from outside the Gulf. So that's the reason why pricing are rising. As soon as, let's say, Ormuz reopens in full, then all these costs increase. are supposed to disappear. As I said before, there could be instead let's say an increased logistic cost because there may be a surge of new projects in the area. The projects that are currently ongoing plus projects that are coming from restatement of facilities being damaged by the war. So in this case, then you can have some costs, but costs that are associated to an increase of demand. So in that case, normally there is no effect on margins. That's why I don't see a and permanent deterioration of margins in the area in the medium-long term.

Thank you. And my follow-up is how did the 70 million euros of costs evolve through the period and how is the run rate so far in July versus the first half run rate?

Now you're asking me very detailed. What we can say is that what I can repeat clearly is that we accumulated 70 million in the first half, so as of the end of June, and we think that we possibly have the same amount of extra expenditure in the second half. Clearly, you understand that that situation can get better very soon or can get more complicated very soon. It's completely out of our hands and even for a casting as you can imagine is not that easy. So I believe that the most linear choice we had and prudent was to say okay in the second half possibly we consider same amount of extra cost we got in the first half. The sum of those that are related, as I said before, extra cost of premium, extra cost of tax, extra cost of purchases, extra cost due to deliveries with lorries, trucks from... the Red Sea and the Gulf of Oman to the east coast of Saudi Arabia and the north coast of the Emirates. That's the situation. If you are asking me whether I'm expecting extra cost linked to relocation of expats families like we did the beginning of March. Okay, I would say that that's a cost that I believe will not enter into the second half or more, I hope, will not enter into the second half as well.

Thank you. Next question is from Christopher Coupland, Bank of America.

Thank you very much. I'll try and give you some time back. And just to confirm, very quick one, the 70 million, has that flown through to cash? That's it. Thank you very much.

Yes, that's correct. It's money already spent.

Excellent. Thank you.

Next question is from Richard Dawson.

Hi, good morning. Thank you for squeezing me in. Just one question. Of these costs, in a best-case scenario, how much of these could be reimbursed if your client negotiations go well, and how much will have to be absorbed regardless of those discussions? Thank you.

Okay, so the extra cost... now it is difficult to say the exact percentage in which we we can recover certainly i will tell you what we will not recover for sure are the margins normally when we bring when we bring a cost to the to the clients then on top we have margins of those costs in this case clearly there will be no margin associated to this cost so that's we can say it for sure but I believe we can recover a good part of those costs because they are all very well documented but it requires then clearly clients to go through their own That's clear, thank you.

Gentlemen, the floor is back to you for any closing remarks.

Okay, we don't have closing remarks, so I believe that we can thank you all and close the SIPEM Second Q 2006 results call.

Ladies and gentlemen, thank you for joining. The conference is now over. You may disconnect your telephones.