MILAN (Reuters) -Italian energy services group Saipem has agreed to sell its onshore drilling business to Britain’s KCA Deutag (KCAD) for $550 million, as it strives to bolster its finances and focus on offshore drilling. Asset sales and a 2 billion euros ($2 billion) new share issue are part of Saipem’s efforts to fund a […]
MILAN (Reuters) -Italian energy services group Saipem has agreed to sell its onshore drilling business to Britain’s KCA Deutag (KCAD) for $550 million, as it strives to bolster its finances and focus on offshore drilling.
Asset sales and a 2 billion euros ($2 billion) new share issue are part of Saipem’s efforts to fund a turnaround plan after it downgraded earnings by 1 billion euros in January.
The surprise profit warning, linked to a sharp margin deterioration on some contracts, came just three months after Saipem had presented a new business plan.
As part of the deal with KCAD, Saipem will also get a 10% stake in the Aberdeen-based drilling company, which operates roughly 110 rigs in 20 countries with a staff of 8,300.
“The transaction for Saipem is a further step towards a more focused and resilient business model … concentrating efforts in the drilling offshore,” Saipem said.
Saipem’s onshore drilling business comprises 83 proprietary land rigs in 13 countries across the Middle East and the Americas, employing 4,000 people.
The business being sold generated 347 million euros in revenues in 2021 and is estimated to account for about a fifth of Saipem’s adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) in 2022.
“The cash proceeds from the transaction will improve Saipem’s liquidity, lowering its net debt and supporting the delivery of its 2022-25 business plan,” it added.
Shares in Saipem fell 2.4% by 1008 GMT, against a flat Milan’s blue-chip index.
KCAD said it expected the acquired business to deliver an estimated pro-forma run rate EBITDA of about $150 million when considering ongoing and customer-notified rig reactivations.
Following the deal, KCAD will generate more than 50% of its EBITDA from the Middle East with more than 11,000 employees globally. Total backlog will rise by $1.6 billion to $7.2 billion.
Barclays was financial adviser to KCAD and Houlihan Lokey acted as debt adviser. Lazard and JPMorgan advised Saipem.
($1 = 0.9323 euros)
(Reporting by Valentina Za and Maria Pia Quaglia; Editing by Edmund Blair)
