Saipem Earnings: Revenue Continues Upward Trajectory As Global Offshore Activity Expands

Saipem’s SPM second-quarter results reflect the significant acceleration in offshore oil and gas activity around the world. We maintain our no moat rating and EUR 2.50 fair value estimate following the results due to our favorable outlook for Saipem’s performance as the offshore industry commences what will likely be a multiyear upcycle. By our estimate, annual top-line growth will average 6% through 2027 with companywide adjusted EBITDA margins averaging 8% over the same period.

In the second quarter, companywide revenue jumped 7% quarter over quarter, driven entirely by Saipem’s offshore operations. Profitability also continues to improve: the offshore drilling segment posted an EBITDA margin exceeding 40% for the first time since early 2020 and we expect it will continue its steady reversion to a precoronavirus average of 45% over the next few quarters. We expect demand for offshore rigs will remain high in future. At least three quarters of Saipem’s marketed fleet is under contract until 2025 and nearly half are committed beyond 2026, with some contracts extending as far as 2033. In the second quarter, vessel utilization for Saipem’s main fleet averaged about 85% this quarter, with any downtime attributable to maintenance or preparation for work.

Elevated offshore activity will drive Saipem’s performance through at least 2027. Its project backlog has definitively shifted over the last year, with higher-margin offshore projects composing nearly 60% of its current backlog portfolio compared with less than 40% in the second quarter of 2022. Saipem’s prospective pipeline of offshore projects over the next six months alone totals more than EUR 50 billion, implying offshore activity will continue to dominate the firm’s operations over the next several years.