ROD DEAN'S 2006 REVIEW
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E & C Hydrocarbon Review - The Global view from Europe. Looking back on 2006 & ahead to 2007.
Saipem is a leading company in the design and execution of large scale offshore projects for the production and transportation of hydrocarbons, and has distinctive construction capabilities for the realization of onshore projects.
Saipem will have a position of primacy at the high end of the market for the provision of Engineering, Procurement, Project Management and Construction services for the Oil & Gas Industry, with a strong bias towards especially challenging activities in deepwater and remote areas; with significant technological competence such as gas monetization and heavy oil exploitation. The new Group will operate globally but with a strong local presence in the most strategic regions of West Africa, Middle East, Central Asia, and South East Asia.
So that’s how they announce these mergers - not a downside in sight! I won’t bore you with the rest but it goes on a bit. But as you know if they did use the following you would be very disappointed - dare I mention synergy? a position of primacy? a superior balance between capital intensive (offshore) and less capital intensive (onshore) activities?
The range and nature of the clients' profile of the new Group is broader and deeper? will be uniquely facilitated by the strong industrial relationships developed on many common endeavours, by a natural affinity and culture deriving from common roots? The capabilities of the two companies are both highly complementary and strongly synergistic: the amplification of the technological content and engineering & project management competence will facilitate new business, while the group-wide exploitation of the ability to operate in the toughest environments will increase efficiency?
I have heard these phrases mentioned, either partially or completely in every merger since the year dot - it’s really back to the simple 1=1+ 2 (or 3) (or1) .Stirring words all the same.
However since then the orders have continued to flow (both on and offshore) - this Italian Titan is now definitely one of the ‘Galacticos’ of the contracting industry.
For Technip it was another successful year with the split of business and margins very similar to the enlarged Saipem. Offshore and Onshore are a very similar size at about E3 bn Revenues a year but again margins are very different - with offshore a mixture of Surf and Conventional at 9% and Onshore labouring at 2%. So plenty of new orders and lots of ongoing work - but the meagre margins may disguise all sorts of difficulties - we shall see (next year?).
There was great excitement for a few days in late November when rumours (or were they just rumours?) of a Saipem bid for Technip. The latter’s stock price rocketed but fell back as quickly after denials by the Technip management. It was very hard to imagine this deal going through when you examine the structure of the French Energy industry - with Total, GdF, EDT and Technip having a dominant position in the domestic area and the flagship for French exports - as a major piece of the jigsaw Technip would not have nestled happily in the Saipem camp! The Wood Group staged a solid recovery with full-year earnings before interest, taxes, depreciation and amortization, or EBITDA, rising 45% to $210 m from $144.1 m in 2005. The company attributed the rise largely to the strong performance of its engineering activities and its well-support business. It said it continues to develop its presence in a number of territories around the world.
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