MILAN: Italian oil contractor Saipem slashed its guidance for the year on Tuesday as it booked writedowns of 929 million euros ($1 billion) and introduced a restructuring plan that foresees 8,800 job cuts.
Saipem, which is 43 percent owned by oil major Eni, said in a statement it expected to post a net loss this year of around 800 million euros and an operating loss (EBIT) of around 450 million euros.
Previous guidance had pegged net profit for the year at between 200 and 300 million euros and operating profits of 500 to 700 million euros.
"Rather than kitchen sinking, this is just sinking," said Andrea Scauri, energy analyst at Mediobanca Securities.
Eni brought in Stefano Cao as chief executive at Saipem earlier this year to turn round a company which has seen around 12 billion euros wiped from its balance sheet in the last 30 months after a corruption probe in Algeria, two profit warnings and a glum business outlook.
Low oil and gas prices have prompted major oil companies and governments to cut energy investments and shelve projects, starving oil service companies of business and forcing streamlining.
Saipem, which employs around 50,000 people, said it would cut 8,800 jobs in the period 2015-2017 as part of a turnaround plan that sees savings in the two years of 1.3 billion euros.
Last week sources told Reuters Saipem was working with Bain & Company to draw up a restructuring plan to help it cut costs and counter falling oil prices.
"The further steep fall in the oil price has resulted in a major disruption, which is not likely to be reversed in the short-to-medium term," Cao said.
Saipem said its turnaround plan would include the "rationalisation of construction yards and disposal of vessels".
In the first half, the company said it posted an operating loss of 790 million euros which reflected the termination by Russia's Gazprom of the South Stream pipeline contract as well as writedowns in the second quarter.
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