annual report 2017 - saipem.com

1 4-04-2018 13:48 Pagina I. annual report 2017. 4-04-2018 13:48 Pagina II. Mission Our mission is to implement challenging, safe and innovative projects, leveraging on the competence of our people and on the solidity, multiculturalism and integrity of our organisational model. With the ability to face and overcome the challenges posed by the evolution of the global scenarios, we must seize the opportunities to create economic and social value for all our stakeholders. Our values Innovation; health, safety and environment; multiculturalism; passion; integrity. Disclaimer The annual report contains forward-looking statements, in particular in the section Outlook'. By their nature, forward-looking statements are subject to risk and uncertainty since they are dependent upon circumstances which should or are considered likely to occur in the future and are outside of the Company's control.

2 These include, but are not limited to: monetary exchange and interest rate fluctuations, commodity price volatility, credit and liquidity risks, HSE risks, the levels of capital expenditure in the oil and gas industry and other sectors, political instability in areas where the Group operates, actions by competitors, success of commercial transactions, risks associated with the execution of projects (including ongoing investment projects), in addition to changes in stakeholders' expectations and other changes affecting business conditions. Actual results could therefore differ materially from the forward-looking statements. The Risk management' paragraph and the Notes to the financial statements contain in-depth analyses of some of the aforementioned risks. Forward-looking statements are to be considered in the context of the date of their release.

3 Saipem SpA is under no obligation to review, update or correct them subsequently, except where this is a mandatory requirement of the applicable legislation. Countries in which Saipem operates EUROPE. Austria, Bulgaria, Croatia, Cyprus, Denmark, France, Greece, Italy, Luxembourg, Netherlands, Norway, Poland, Portugal, Principality of Monaco, Romania, Spain, Sweden, Switzerland, Turkey, United Kingdom AMERICAS. Argentina, Bolivia, Brazil, Canada, Chile, Colombia, Ecuador, Guyana, Mexico, Panama, Peru, Suriname, United States, Venezuela CIS. Azerbaijan, Georgia, Kazakhstan, Russia, Turkmenistan AFRICA. Algeria, Angola, Congo, Egypt, Gabon, Ghana, Ivory Coast, Libya, Morocco, Mozambique, Namibia, Nigeria, Uganda MIDDLE EAST. Iraq, Kuwait, Oman, Qatar, Saudi Arabia, United Arab Emirates FAR EAST AND OCEANIA. Australia, China, India, Indonesia, Malaysia, Singapore, South Korea, Taiwan, Thailand Board of Directors and auditors of Saipem SpA.

4 BOARD OF DIRECTORS1 BOARD OF STATUTORY AUDITORS2. Chairman Chairman Paolo Andrea Colombo Mario Busso Chief Executive Officer (CEO) Statutory Auditors Stefano Cao Giulia De Martino Riccardo Perotta Directors Maria Elena Cappello, Federico Ferro-Luzzi, Alternate Auditors Francesco Antonio Ferrucci, Guido Guzzetti, Francesca Michela Maurelli Flavia Mazzarella, Nicla Picchi, Leone Pattofatto Maria Francesca Talamonti (1) Appointed by the Shareholders' Meeting on April 30, 2015 for a 2015, 2016, 2017 and in any case up to the date of the Shareholders Meeting to approve the financial statements on December 31, 2017. (2) Appointed by the Shareholders' Meeting on April 28, 2017 for a three-year period and in any case up to the date of the Shareholders Meeting to approve the financial statements on December 31, 2019. Independent Auditors EY SpA.

5 23-05-2018 10:23 Pagina 1. annual report . 2017. Letter to the Shareholders 2. Shareholder structure of the Saipem Group 5. Directors' report Saipem SpA share performance 10. Glossary 13. Operating review 17. Market context 17. New contracts and backlog 17. Capital expenditure 18. Offshore Engineering & Construction 20. Onshore Engineering & Construction 25. Offshore Drilling 31. Onshore Drilling 34. Financial and economic results 36. Operating results 36. Financial position 41. Reclassified cash flow statement 44. Key profit and financial indicators 45. Research and development 46. Health, safety and environment 50. Human resources 51. Information system 55. Governance 57. Risk management 58. Additional information 68. Reconciliation of reclassified balance sheet, income statement 71. and cash flow statement to statutory schemes Consolidated Non-Financial Statements 73.

6 Consolidated financial statements Consolidated financial statements 102. Notes to the consolidated financial statements 109. Information relating to the remark expressed by Consob pursuant to Article 154-ter, subsection 7, 190. of Legislative Decree No. 58/1998, and communication by Offices of Consob on April 6, 2018. Management's certification 193. Independent Auditors' report 194. Shareholders' Meeting of May 3, 2018. Notice of the Shareholders' Meeting was published in the daily newspaper Il Sole 24 Ore on March 23, 2018. 1. 23-05-2018 10:23 Pagina 2. SAIPEM annual report 2017 / Letter to the Shareholders Letter to the Shareholders Dear Shareholders, - EBITDA: 862 million;. - adjusted operating result (EBIT): 440. In 2017, the average price of Brent was million;. around $53 per barrel, up more than 17% - operating result (EBIT): 126 million.

7 Compared to about $45 per barrel in 2016, - adjusted net result: 46 million, supported by agreements to reduce - net result: loss of 328 million;. production signed by OPEC countries and - capital expenditure: 262 million;. Russia, increased consumption and - net debt at December 31, 2017: 1,296. geopolitical tensions in the Middle East. million;. This trend, concentrated in the latter part of - new contracts: 7,399 million;. the year, did not have significant effects on - backlog: 12,363 million. the growth of investments of Oil Companies, Specifically, revenues in Offshore Engineering which remained much lower than pre-crisis & Construction for 2017 amounted to 3,692. levels. Specifically, in 2017, the sectors in million, down 21% compared to 2016. which Saipem operates continued to be This was mainly attributable to lower volumes affected by cost reduction programmes, recorded in Kazakhstan and Southern Central organisational rationalisation, restructuring America, which were mostly offset by higher and extraordinary transactions, aimed at volumes registered in North Africa and the pursuing the optimisation of operational Middle East.

8 Adjusted EBITDA for 2017. efficiency and strategic diversification. amounted to 555 million, equal to 15% of In 2017, Saipem radically changed its revenues, compared to 717 million, equal to organisational structure, splitting into five of revenues, in 2016. The substantial divisions characterised by greater operational stability of the margins, despite the high fall in autonomy and streamlined decision-making, revenues, is due to excellent operating and by greater responsibility on operating efficiency and lower fleet idleness. performance and financial results. The Onshore Engineering & Construction The Floaters business line, formerly part of the sector reported revenues of 3,530 million in Offshore Engineering & Construction division, 2017. The 24% increase compared to 2016 is was included in the Onshore Engineering due to higher volumes of activity recorded in & Construction division, and the new XSIGHT the Middle and Far East and in Kazakhstan.

9 Division, dedicated to engineering services The adjusted EBITDA for 2017 is negative for with a high added value, was created. 31 million compared to the 43 million in The challenging market environment was 2016, due to the negative effects mainly tied reflected in the new contracts acquired, which to the result of LPG arbitration in Algeria. amounted to 7,399 million in the year, down Revenues for the Floaters business line compared to 2016. amounted to 674 million, down 34%. Significant acquisitions concerned the compared to the same period in 2016, due Offshore and Onshore Engineering mainly to lower volumes recorded in West & Construction sectors, the result of new major Africa. Adjusted EBITDA for 2017 amounted to projects mainly in the Middle East, the 10 million, equal to of revenues Mediterranean and West Africa.

10 The backlog as compared to the negative result of 90 million at the end of 2017 amounts to 12,363 million. in 2016. The improvement is due to a project Operating performance in 2017 was above in West Africa which in 2016 had forecasted expectations in the Offshore sectors, both increased costs resulting from a particularly Engineering & Construction and Drilling. impactful acceleration programme. The Onshore Engineering & Construction The Offshore Drilling business recorded sector, excluding the effects of arbitration revenues of 2017 for 613 million, a decrease regarding Algerian projects, continued on the of 32% compared to 2016, mainly due to the path to recover margins, while the Onshore lower revenues registered by some drilling Drilling sector continues to suffer from a much vessels. Adjusted EBITDA for 2017 amounted slower recovery than expected in Latin to 321 million, compared to 454 million in America.