Saipem CEO Says Market Misinterpreted Outlook for 2014 - Report

MILAN--The market misinterpreted the 2014 outlook Saipem SpA (SPM.MI) provided in a profit warning earlier this week, Chief Executive Umberto Vergine told the Italian daily Il Corriere della Sera.

"The market didn't expect" Saipem to cut guidance, Mr. Vergine said in an interview published Saturday. The profit warning prompted a 34% price drop Wednesday in the Italian oil-field-services provider's shares.

Some new contracts that had been expected to close at the end of 2012 have been delayed and will be closed in coming months, Mr. Vergine told Il Corriere della Sera. "Basically, this year we'll work on contracts with lower margins, which we acquired during the crisis," he said.

"There has been a delay. Normally oil companies provide indications on their plans in the last quarter of the year, but this time they delayed this because of strategy reasons," he said.

Mr. Vergine said Saipem is in talks for important deals but also has invested heavily to make these deals possible. "Let's look at Brazil. A closed market where the discovery of big offshore oil fields has created huge perspectives. To enter that market we first closed small deals and now we're negotiating on a completely different basis. There are also projects such as Southstream, Nordstream and those in the Persian gulf, which are a lot," Mr. Vergine said.

Hours before Saipem issued its profit warning on Tuesday, Bank of America Merrill Lynch placed 10 million shares in the market on behalf of an unidentified investor. Mr. Vergine said in the interview that he didn't know about Bank of America's placement and that he learned about it from the press only while it was happening.

Italy's stock-market regulator Consob said that it would conduct a review of the placement.

Bank of America had no comment on the sale or Consob's review.

Saipem's cuts to guidance came as Mr. Vergine announced an "operational review of the entire business." Saipem's new guidance points to net profit this year of 450 million euros ($613.9 million), half the expected result for 2012 and less than half of the consensus forecast among analysts.

Mr. Vergine was appointed CEO of Saipem in December. He was previously chief operating officer of the oil-and-gas division of Eni SpA (ENI.MI, E), the Italian oil company that owns 43% of Saipem. Eni had no comment on the investigation.

Publication website: www.corriere.it

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