Eni Strikes Saipem Deals, Selling Shares and Recovering Debt

By Liam Moloney and Eric Sylvers

Eni SpA (E) expects to receive 5.4 billion euros ($5.9 billion) in net proceeds from the sale of a stake in Saipem SpA (SPM.MI) and the repayment of debt held by its oil-services unit which has announced an capital increase to bolster its finances.

The Italian oil group said on Wednesday it has earmarked the proceeds for investment in its own exploration activities.

Eni said it will sell a 12.5% tranche of its 43% stake in Saipem to Fondo Strategico Italiano, an Italian state-run investment fund, for as much as EUR487 million with the final price of the share sale to be determined later. Saipem will also repay Eni EUR6.1 billion in debt.

As part of the agreements, Eni plans to take up its share of a EUR3.5 billion capital increase at Saipem.

The series of operations allow Eni Chief Executive Claudio Descalzi to achieve some of the goals of his strategic plan by recouping the debt held by Saipem while honing the company's focus on its core business of exploring for oil and gas. Eni, like other large oil groups, has seen its financial results battered by the plunge in oil prices since the middle of last year.

The money Eni raises by selling the stake in Saipem and recouping the debt will be used to develop the company's oil and gas reserves, Mr. Descalzi said in a statement.

Eni has outperformed most of its rivals in recent years in finding new resources, including the discovery in August of a massive natural gas field off the coast of Egypt where several competitors had given up looking.

Saipem is trying to shore up its finances through the stock sale, as oil-services companies have also been hit hard by the fall in oil prices as oil and gas producers have slashed capital spending and rushed to cut costs.

The company, which in July said it would lay off almost a fifth of its workforce in the next two years, has lowered its profit forecasts at least three times since 2013 and Tuesday reiterated a forecast that it will lose EUR800 million this year.

"Today's announcement marks a turning point for Saipem: we have a new shareholder structure, a strengthened balance sheet [and] a new strategic plan" Saipem CEO Stefano Cao said in a statement.

Write to Liam Moloney at [e-mail] and Eric Sylvers [e-mail]

Subscribe to WSJ: http://online.wsj.com?mod=djnwires

(END) Dow Jones Newswires

October 28, 2015 03:28 ET (07:28 GMT)

Copyright (c) 2015 Dow Jones & Company, Inc.