Saipem will ask investors for up to 3.5 billion euros ($3.86 billion) of fresh capital to weather the oil service recession. As Ciara Lee reports the CEO of the Italian oil contractor is confident he can plot a path to recovery as main investor Eni SpA takes a step back.
With oil prices still in the doldrums, companies are taking action. Italian oil contractor Saipem is the latest - it's asking its investors to pump in fresh capital. It comes as its main investor, Eni, sells off a chunk of its 43 percent stake in the company. Saipem will hold a 3.5 billion euro rights issue next year as part of a four year turnaround plan after two profit warnings in just over 30 months. Chief Executive Stafano Cao says the 3.2 billion euros of gross debt remaining will be refinanced by new credit lines. (SOUNDBITE) (English) SAIPEM CHIEF EXECTUTIVE, STEFANO CAO, SAYING: "We are ready to go it alone. I think there's always a good time in the history of a company for step change. This is certainly a major change. I think we need to take the challenge and move on." Siapem needs the cash injection because its orders have been battered by low oil prices. Seven Investment Management's Justin Urquhart Stewart says the oil giants are feeling that pain too. (SOUNDBITE) SEVEN INVESTMENT MANAGEMENT, HEAD OF CORPORATE DEVELOPMENT, JUSTIN URQUHART STEWART, SAYING: "What they now have to do is go back redesign their businesses, what is their core business, probably doing far less actually than the original development and exploration and leaving that to specialist companies. And actually just operating with what they've already got but but taking more cost out. And that's going to be human cost and that's going to be operational cost coming right the way through." Saipem remains embroiled in a corruption case in Algeria and is forecasting a net loss of 800 million euros this year. But it is confident the market will recover by 2017. And investors seem happy - Saipem shares rose 10 percent after the announcement.