001 058SaipemSem15Ing SA 100 Saipem Sem15Ing

User Manual: SA-100

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Interim Consolidated Report as of June 30, 2015

001-058SaipemSem15Ing.qxd 6-08-2015 11:41 Pagina I

Mission

Pursuing the satisfaction of our clients in the energy industry, we tackle each challenge with safe, reliable and innovative solutions.

We entrust our competent and multi-local teams to provide sustainable development for our Company and for the communities where

we operate.

Our core values

Commitment to health and safety, openness, flexibility, integration, innovation, quality, competitiveness, teamwork, humility,

internationalisation, responsibility and integrity.

Disclaimer

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. 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 financial reports 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. Saipem SpA is under no obligation to review,

update or correct them subsequently, except where this is a mandatory requirement of the applicable legislation.

The forward-looking statements given herein are not intended to constitute an invitation to invest or to provide legal, accounting, tax

or investment advice and should not be relied upon in that regard.

BOARD OF DIRECTORS1

Chairman

Paolo Andrea Colombo

Chief Executive Officer (CEO)

Stefano Cao

Directors

Maria Elena Cappello, Federico Ferro-Luzzi, Francesco Antonio Ferrucci,

Guido Guzzetti, Flavia Mazzarella, Nicla Picchi, Stefano Siragusa

BOARD OF STATUTORY AUDITORS2

Chairman

Mario Busso

Statutory Auditors

Anna Gervasoni

Massimo Invernizzi

Alternate Auditors

Paolo Sfameni

Giulia De Martino3

Countries in which Saipem operates

EUROPE

Austria, Belgium, Bulgaria, Croatia, Cyprus, Denmark, France, Italy, Luxembourg, Malta, Netherlands, Norway, Poland, Portugal, Romania, Spain, Sweden,

Switzerland, Turkey, United Kingdom

AMERICAS

Bolivia, Brazil, Canada, Chile, Colombia, Dominican Republic, Ecuador, Mexico, Peru, Suriname, Trinidad and Tobago, United States, Venezuela

CIS

Azerbaijan, Georgia, Kazakhstan, Russia, Turkmenistan, Ukraine

AFRICA

Algeria, Angola, Congo, Egypt, Gabon, Ghana, Libya, Mauritania, Morocco, Mozambique, Nigeria, South Africa, Uganda

MIDDLE EAST

Iraq, Kuwait, Oman, Qatar, Saudi Arabia, United Arab Emirates

FAR EAST AND OCEANIA

Australia, China, India, Indonesia, Japan, Malaysia, Pakistan, Papua New Guinea, Singapore, South Korea, Thailand, Vietnam

Board of Directors and auditors of Saipem SpA

Independent Auditors

Reconta Ernst & Young SpA

Saipem is a subsidiary of Eni SpA

(1) Appointed by the Shareholders on April 30, 2015.

(2) Appointed by the Shareholders on May 6, 2014.

(3) Appointed by the Shareholders on April 30, 2015 to replace Elisabetta Maria Corvi, who resigned on January 14, 2015.

001-058SaipemSem15Ing.qxd 6-08-2015 11:41 Pagina II

2Interim results

3Saipem Group structure

Operating and Financial

Review

Condensed consolidated

interim financial statements

8 Saipem SpA share performance

10 Glossary

13 Operating review

13 Market conditions

13 New contracts and backlog

15 Capital expenditure

16 Offshore Engineering & Construction

21 Onshore Engineering & Construction

25 Offshore Drilling

27 Onshore Drilling

29 Financial and economic results

29 Results of operations

33 Balance sheet and financial position

35 Reclassified cash flow statement

36 Key profit and financial indicators

37 Sustainability

38 Research and development

40 Quality, Safety and Environment

42 Human resources and health

45 Information technology

47 Risk management

54 Additional information

57 Reconciliation of reclassified balance sheet, income statement

and cash flow statement to statutory schemes

60 Financial statements

66 Notes to the condensed consolidated interim financial statements

110 Management certification

111 Independent Auditors’ Review report

Approved by the Board of Directors on July 28, 2015

001-058SaipemSem15Ing.qxd 6-08-2015 18:38 Pagina 1

The principal cause of the rapid deterioration seen during the first half of 2015 in the market environment in which Saipem

operates was the low price of oil, whose downward trajectory commenced towards the end of the previous year. This highly

deteriorated environment led in turn to the following:

- delays and cancellations of orders already underway, as well as the adoption by clients of an increasingly inflexible attitude

during negotiations for change orders and claims, related to projects underway;

- an increased credit risk in certain geographical areas;

- the need to rethink Saipem’s operating strategy. Accordingly, a turnaround plan called ‘Fit for the future’ has been launched,

which involves the rationalisation of fabrication yards and vessels that are no longer viable in the new market environment;

- the need to review the Company’s negotiating strategy with a view to reaching settlements with clients, aiming to keep

potential disputes to a minimum and seeking to secure an immediate financial benefit.

The result for the first half of 2015, as impacted by the cancellation of the South Stream contract and the write-downs described

above, were as follows:

- Adjusted EBIT1: -€579 million;

-EBIT: -€790 million, including €211 million in write-downs of non-current assets;

- Adjusted net result: -€709 million;

- Net result: -€920 million;

- Capital expenditure: €268 million (€329 million in the first half of 2014);

- Net debt at June 30, 2015: €5,531 million (€4,424 million at December 31, 2014), including the negative cash impact of

€502 million relating to foreign exchange hedging derivatives maturing during the period;

- New contracts: €3,500 million (€13,132 million in the first half of 2014);

-Backlog: €19,018 million2at June 30, 2015 (€22,147 million at December 31, 2014).

Interim results

Saipem Interim Consolidated Report as of June 30, 2015 / Interim results

(1) Adjusted EBIT and the adjusted net result do not include a €211 million decrease in net capital employed resulting from the write-down of non-current assets.

(2) Cancelled from backlog €1,232 million relating to the South Stream contract and €24 million relating to a contract for the semi-submersible rig Scarabeo 5.

001-058SaipemSem15Ing.qxd 6-08-2015 16:51 Pagina 2

Saipem Group structure

(subsidiaries)

Saipem Interim Consolidated Report as of June 30, 2015 / Saipem Group structure

001-058SaipemSem15Ing.qxd 6-08-2015 11:41 Pagina 3

100.00% ,

95.00%

Saipem

SpA

Saipem

International

Sigurd Rück AG

Saipem

Asia Sdn Bhd

Global

Petroprojects

Services AG

PT Saipem

Indonesia

Saipem (Portugal)

Comércio Maritimo

Sociedade Unipessoal Lda

Saipem do Brasil

Serviçõs de

Petroleo Ltda

Saudi Arabian

Saipem Ltd

Saipem

Ukraine Llc

Saipem

Contracting

(Nigeria) Ltd

Saipem Ingenieria

Y Construcciones

SLU

Saipem

(Nigeria) Ltd

Saipem

(Malaysia)

Sdn Bhd

ER SAI Caspian

Contractor Llc

Saipem

Canada Inc

North Caspian

Service Co

ERS Equipment

Rental & Services

Saipem Drilling

Norway AS

100.00%

60.00%

100.00%

68.55%

99.00%

100.00% 50.00%

100.00%

Moss

Maritime Inc

100.00%

5.00%

100.00%

60.00%

97.94%

89.41%

41.94%

100.00%

Moss

Maritime AS

Petrex SA

Andromeda

Consultoria Tecnica e

Representações Ltda

100.00%

99.00%

Snamprogetti

Netherlands BV

100.00%

Snamprogetti

Ltd

Snamprogetti

Romania Srl

Snamprogetti

Lummus

Gas Ltd

99.00%

1.00%

100.00%

99.00%

1.00%

Sonsub

International

Pty Ltd

Saipem

Norge AS

100.00%

99.92%

Saipem Misr for

Petroleum

Services (S.A.E.)

0.04%

Saipem

Australia Pty Ltd

Snamprogetti

Saudi Arabia

Co Ltd Llc

Saipem

America Inc

100.00%

1.00%

Saipem Drilling

Co Private Ltd

49.73%

100.00%

Saipem Ltd

Saipem

(Beijing) Technical

Services Co Ltd

100.00%

50.27%

31.45%

100.00%

Saipem Libya

Llc

SA.LI.CO. Llc

60.00% 40.00%

Sajer Iraq Llc

100.00%

Saipem

Contracting

Netherlands BV

Saipem

Offshore

Norway AS

100.00%

Professional

Training Center Llc

50.00%

70.00%

Snamprogetti

Engineering

& Contracting Co Ltd

60.00%

Smacemex

Scarl

001-058SaipemSem15Ing.qxd 6-08-2015 11:41 Pagina 4

The chart only shows subsidiaries

Servizi Energia

Italia SpA

Snamprogetti

Chiyoda sas

di Saipem SpA

Saipem

Luxembourg SA Sofresid SA

Boscongo SA

Sofresid

Engineering SA

Saipem

India Projects

Private Ltd

Saimexicana

SA de Cv

100.00%99.90%

Saipem SA

100.00%

Saipem

Services México

SA de Cv

100.00%

Saigut SA de Cv

100.00%

Saipem

Contracting

Algérie SpA

100.00%

Saipem Maritime

Asset Management

Luxembourg Sàrl

100.00%

Saipem

Singapore Pte Ltd

100.00%

99.99%

Snamprogetti

Engineering BV

100.00%

Denuke Scarl

55.00%

SAIMEP

Limitada

100.00%

001-058SaipemSem15Ing.qxd 6-08-2015 11:41 Pagina 5

001-058SaipemSem15Ing.qxd 6-08-2015 11:41 Pagina 6

Operating and Financial Review saipem

001-058SaipemSem15Ing.qxd 6-08-2015 11:41 Pagina 7

During the first half of 2015, the value of Saipem ordinary shares

on the Milan Stock Exchange registered an increase of 8.7%,

reaching a price of €9.52 at June 30, 2015, versus €8.76 at the

beginning of January.

In the same period, the FTSE MIB index, which records the

performance of the 40 most liquid and capitalised Italian stocks,

reported a gain of 17.4%.

The first few days of the year saw the Saipem share continue the

downward trajectory that began midway through 2014. This was

mainly due to the sharp fall in oil prices, as well as to the

suspension of the South Stream contract in December 2014.

The share price hit its period low of €7.29 on January 20. However,

already by the end of January 2015, the price had begun to reverse

the downward trend, registering a gradual upturn that was

supported by the financial community’s positive reaction to the

presentation of Saipem’s annual results for 2014 in mid-February.

From April 2015, the oil price recovery helped consolidate the

upturn in the share price, fostering a climate of renewed

confidence with regard to the Company’s future prospects.

An added boost was provided by the appointment of a new Board

of Directors at the helm of the Company, with a three-year

mandate. On April 16, the share price reached €12.29.

The end of the suspension of the South Stream contract

announced at the end of May, coupled with reports from financial

analysts that were optimistic with regard to the outlook for the

Company and the sector in general helped push the Saipem share

towards its period high of €12.76 on May 13.

Subsequently, in the wake of an announcement made by a

competitor on the evening of July 6 after trading had closed of a

significant deterioration in its results, the oil services sector

registered a sharp fall in prices, causing the Saipem share to lose

6.7% on the previous day’s price and close the day at €8.41.

Saipem’s market capitalisation at period end was approximately

€4.2 billion. In terms of share liquidity, shares traded during the

period totalled 1,074 million, versus the 391 million registered in

the same period of 2014. The average number of shares traded

daily during the period totalled approximately 8.6 million

(3.1 million in the first half of 2014), while the value of shares

traded amounted to €10.6 billion, compared with €7 billion in the

first half of 2014.

The period saw a high level of share price volatility, due in part to

the growing presence of investors employing a speculative

approach, based on a short-term investment horizon.

On April 30, the Saipem Board of Directors approved the payment

of a preferential dividend of €0.05 per share on savings shares

only, in accordance with the limit of 5% of the nominal value of the

share, pursuant to Article 6 of the Articles of Association.

The price of savings shares, which are convertible at par with

ordinary shares, and are of limited number (109,326 at June 30,

2015), decreased by 15% over the period, closing at €15.30 on

June 30, 2015.

Saipem SpA share performance

Saipem Interim Consolidated Report as of June 30, 2015 / Saipem SpA share performance

001-058SaipemSem15Ing.qxd 6-08-2015 11:41 Pagina 8

Share prices on the Milan Stock Exchange (€)2011 2012 2013 2014 First half

2015

Ordinary shares:

- maximum 38.60 39.78 32.18 20.89 12.76

- minimum 23.77 29.07 12.60 8.31 7.29

- average 33.89 35.52 19.31 16.59 9.98

- period end 32.73 29.41 15.54 8.77 9.52

Savings shares:

- maximum 39.25 39.40 35.00 20.99 18.05

- minimum 30.00 30.00 16.00 16.22 15.30

- average 34.89 34.72 24.50 18.58 17.58

- period end 30.00 35.00 17.10 18.05 15.30

1234567891011121234567891011121234567891011121234567891011121234567891011121234567

2010 2011 2013 20152012 2014

Price in euro of Saipem shares FTSE MIB

Value

Saipem and FTSE MIB - Average monthly prices January 2010-July 2015

Saipem FTSE MIB

12,000

21,000

16,500

25,500

30,000

48,000

39,000

43,500

34,500

39.00

7,00

11.00

15.00

35.00

31.00

27.00

23.00

19.00

Saipem Interim Consolidated Report as of June 30, 2015 / Saipem SpA share performance

001-058SaipemSem15Ing.qxd 6-08-2015 11:41 Pagina 9

Financial terms

-Adjusted operating result/net result operating result/net

result adjusted to exclude special items.

-EBIT Earnings Before Interest and Tax (operating result).

-EBITDA Earnings Before Interest, Taxes, Depreciation and

Amortisation.

-IFRS International Financial Reporting Standards. Accounting

standards issued by the IASB (International Accounting

Standards Board) and adopted by the European Commission,

which comprise International Financial Reporting Standards

(IFRS), International Accounting Standards (IAS), and the

interpretations issued by the International Financial Reporting

Interpretation Committee (IFRIC) and the Standing

Interpretations Committee (SIC) adopted by the IASB.

The name International Financial Reporting Standards (IFRS)

has been adopted by the IASB for standards issued after May

2003. Standards issued before May 2003 have maintained

the denomination IAS.

-Leverage a measure of a company’s level of indebtedness,

calculated as the ratio between net borrowings and

shareholders’ equity including non-controlling interests.

-OECD Organisation for Economic Cooperation and

Development.

-ROACE Return On Average Capital Employed, calculated as the

ratio between the net result before non-controlling interests,

plus net finance charges on net borrowings less the related

tax effect and net average capital employed.

-Special items items of income arising from events or

transactions that are non-recurring or that are not considered

to be representative of the ordinary course of business.

Operational terms

-Buckle detection system that utilises electromagnetic waves

during pipelaying to signal collapse of or deformations to

pipeline laid.

-Carbon Capture and Storage technology which enables the

carbon present in gaseous effluents from hydrocarbon

combustion and treatment plants to be captured and stored

over long periods of time in underground geological

formations, thus reducing or eliminating carbon dioxide

emissions into the atmosphere.

-Central Processing Facility production unit performing the

first transformation of crude oil or natural gas.

-Commissioning series of processes and procedures

undertaken in order to start operations of a gas pipeline,

associated plants or equipment.

-Concrete coating reinforced concrete coating for subsea

pipelines in order to ballast and protect them from damage

and corrosion.

-Conventional waters water depths of up to 500 metres.

-Cracking chemical-physical process, typically employed in

dedicated refinery plants, whose objective is to break down

the heavy hydrocarbon molecules obtained from primary

distillation into lighter fractions.

-Deck area of a vessel or platform where process plants,

equipment, accommodation modules and drilling units are

located.

-Decommissioning process undertaken in order to end

operations of a gas pipeline, associated plant or equipment.

Decommissioning may occur at the end of the life of the plant,

following an accident, for technical or financial reasons,

and/or on environmental or safety grounds.

-Deep waters water depths of over 500 metres.

-Downstream all operations that follow exploration and

production operations in the oil sector.

-Drillship vessel capable of self-propulsion, designed to carry

out drilling operations in deep waters.

-Dry-tree wellhead located above the water on a floating

production platform.

-Dynamically Positioned Heavy Lifting Vessel vessel

equipped with a heavy-lift crane, capable of holding a precise

position through the use of thrusters, thereby counteracting

the force of the wind, sea, current, etc.

-EPC (Engineering, Procurement, Construction) type of

contract typical of the Onshore construction sector,

comprising the provision of engineering services,

procurement of materials and construction. The term ‘turnkey’

is used to indicate that the system is delivered to the client

ready for operations, i.e. already commissioned.

-EPCI (Engineering, Procurement, Construction, Installation)

type of contract typical of the Offshore construction sector,

which relates to the realisation of a complex project where the

global or main contractor (usually a construction company or

a consortium) provides the engineering services,

procurement of materials, construction of the system and its

infrastructure, transport to site, installation and

commissioning/preparatory activities for the start-up of

operations.

-Fabrication yard yard at which offshore structures are

fabricated.

-Facilities auxiliary services, structures and installations

required to support the main systems.

-FDS (Field Development Ship) dynamically-positioned

multi-purpose crane and pipelay vessel.

-FEED (Front-End Engineering and Design) basic engineering

and preliminary activities carried out before beginning a

complex project to evaluate its technical aspects and enable

an initial estimate of the investment required.

-Flare tall metal structure used to burn off gas produced by

oil/gas separation in oil fields when it is not possible to utilise

it on site or ship it elsewhere.

Glossary

Saipem Interim Consolidated Report as of June 30, 2015 / Glossary

001-058SaipemSem15Ing.qxd 6-08-2015 11:41 Pagina 10

-FLNG Floating Liquefied Natural Gas unit used for the

treatment, liquefaction and storage of gas which is

subsequently transferred onto vessels for transportation to

end-use markets.

-Floatover type of module installation on offshore platforms

that does not require lifting operations. A specialised vessel

transporting the module uses a ballast system to position

itself directly above the location where the module is to be

installed. Once this has been completed, the vessel backs off

and the module is secured to the support structure.

-Flowline pipeline used to connect individual wells to a

manifold or to gathering and processing facilities.

-FPSO vessel Floating Production, Storage and Offloading

system comprising a large tanker equipped with a

high-capacity production facility. This system, moored at the

bow to maintain a geo-stationary position, is effectively a

temporarily fixed platform that uses risers to connect the

subsea wellheads to the on-board processing, storage and

offloading systems.

-FSRU (Floating Storage Regasification Unit) a floating terminal

in which liquefied natural gas is stored and then regasified

before being transported by pipeline.

-Gas export line pipeline for carrying gas from the subsea

reservoirs to the mainland.

-Hydrocracker installation in which large hydrocarbon

molecules are broken down into smaller ones.

-Hydrotesting operation involving high pressure water being

pumped into a pipeline to ensure that it is devoid of defects.

-Hydrotreating refining process aimed at improving the

characteristics of oil fractions.

-International Oil Companies privately-owned, typically

publicly traded, oil companies engaged in various fields of the

upstream and/or downstream oil industry.

-Jacket platform underside structure fixed to the seabed using

piles.

-Jack-up mobile self-lifting unit comprising a hull and

retractable legs used for offshore drilling operations.

-J-laying method of pipelaying that utilises an almost vertical

launch ramp, making the pipe configuration resemble the

letter ‘J’. This configuration is suited to deep water pipe laying.

-Leased FPSO FPSO vessel for which a lease contract is in

place between a client/lessee (i.e. an oil company) and a

contractor/lessor, whereby the lessee makes lease payments

to the lessor for use of the vessel for a specific period of time.

At the end of the lease term, the lessee has the option to

purchase the FPSO.

-LNG Liquefied Natural Gas, obtained by cooling natural gas to

minus 160° C at normal pressure. The gas is liquefied to

facilitate its transportation from the place of extraction to that

of processing and/or utilisation. A tonne of LNG is equivalent

to 1,500 cubic metres of gas.

-Local Content policy whereby a company develops local

capabilities, transfers its technical and managerial know-how

and enhances the local labour market and businesses

through its own business activities.

-LPG (Liquefied Petroleum Gas) produced in refineries through

the fractionation of crude oil and subsequent processes, liquid

petroleum gas exists in a gaseous state at ambient

temperatures and atmospheric pressure, but changes to a

liquid state under moderate pressure at ambient

temperatures, thus enabling large quantities to be stored in

easy-to-handle metal pressure vessels.

-LTI (Lost Time Injury) any work-related injury that renders the

injured person temporarily unable to perform any regular job

or restricted work on any day/shift after the day or shift on

which the injury occurred.

-Midstream sector comprising all those activities relating to

the construction and management of the oil transport

infrastructure.

-Moon pool opening in the hull of a drillship to allow for the

passage of operational equipment.

-Mooring buoy offshore mooring system.

-Multipipe system subsea gas/liquid gravity separation

system using a series of small diameter vertical separators

operating in parallel (for deep water application).

-National Oil Companies State-owned/controlled companies

engaged in oil exploration, production, transportation and

conversion.

-NDT (Non Destructive Testing) series of inspections and tests

used to detect structural defects conducted using methods

that do not alter the material under inspection.

-NDT Phased Array non-destructive testing method that

employs ultrasound to detect structural or welding defects.

-Offshore/Onshore the term offshore indicates a portion of

open sea and, by extension, the activities carried out in this

area, while onshore refers to land operations.

-Oil Services Industry companies that provide services to the

oil exploration and production sector but which are not

directly engaged themselves in oil production.

-Pig piece of equipment used to clean, descale and survey a

pipeline internally.

-Piggy backed pipeline small-diameter pipeline, fixed to a

larger pipeline, used to transport a product other than that of

the main line.

-Pile long, heavy steel pylon driven into the seabed. A system

of piles is used as the foundation for anchoring a fixed

platform or other offshore structures.

-Pipe-in-pipe subsea pipeline system comprising 2 coaxial

pipes, used to transport hot fluids (oil and gas). The inner pipe

transports the fluid, whereas the outer pipe carries the

insulating material necessary to reduce heat loss to the sea.

The outer pipe also protects the pipeline from water pressure.

-Pipe-in-pipe forged end forged end of a coaxial double pipe.

-Pipelayer vessel used for subsea pipelaying.

Saipem Interim Consolidated Report as of June 30, 2015 / Glossary

001-058SaipemSem15Ing.qxd 6-08-2015 11:41 Pagina 11

-Pipeline pipes and auxiliary equipment used principally for

transporting crude oil, oil products and natural gas to the

point of delivery.

-Pipe Tracking System (PTS) an electronic system used to

ensure the full traceability of the components of subsea pipes

installed on a project.

-Piping and Instrumentation Diagram (P&ID) diagram

showing all plant equipment, piping and instrumentation with

associated shutdown and safety valves.

-Pre-commissioning phase comprising pipeline cleaning out

and drying.

-Pre-drilling template support structure for a drilling platform.

-Pre-Salt layer geological formation present on the continental

shelves offshore Brazil and Africa.

-Pre-Travel Counselling health and medical advice designed to

take into account the health of the individual worker and

ensure that he/she is furnished with adequate information on

the specific risks present in his/her country of destination

and the preventive measures that should be adopted.

-Pulling minor operations on oil wells for maintenance or

marginal replacements.

-QHSE Quality, Health, Safety, Environment.

-Rig drilling installation comprising the derrick, the drill deck

(which supports the derrick), and ancillary installations that

enable the descent, ascent and rotation of the drill unit, as

well as mud extraction.

-Riser manifold connecting the subsea wellhead to the surface.

-ROV (Remotely Operated Vehicle) unmanned vehicle, piloted

and powered via umbilical, used for subsea surveys and

operations.

-Shale gas unconventional gas extracted from shale deposits.

-Shallow waters see Conventional waters.

-Sick Building Syndrome a combination of ailments associated

with a person’s place of work. The exact causes of the

syndrome are not known but the presence of volatile organic

compounds, formaldehyde, moulds and dust mites may be

contributing factors.

-S-laying method of pipelaying that utilises the elastic

properties of steel, making the pipe configuration resemble

the letter ‘S’, with one end on the seabed and the other under

tension on-board the ship. This configuration is suited to

medium to shallow-water pipelaying.

-Slug catcher equipment for the purification of gas.

-Sour water water containing dissolved pollutants.

-Spar floating production system, anchored to the seabed by

means of a semi-rigid mooring system, comprising a vertical

cylindrical hull supporting the platform structure.

-Spare capacity relationship between crude oil production and

production capacity, i.e. quantity of oil that is not currently

needed to meet demand.

-Spool connection between a subsea pipeline and the platform

riser, or between the terminations of two pipelines.

-Spoolsep unit used to separate water from oil as part of the

crude oil treatment process.

-Stripping process through which volatile compounds are

removed from the liquid solution or the solid mass in which

they have been diluted.

-Subsea processing operations performed in offshore oil

and/or natural gas field developments, especially relating to

the equipment and technology employed for the extraction,

treatment and transportation of oil or gas below sea level.

-Subsea tiebacks lines connecting new oil fields with existing

fixed or floating facilities.

-Subsea treatment new process for the development of

marginal fields. The system involves the injection and

treatment of sea-water directly on the seabed.

-SURF (Subsea, Umbilicals, Risers, Flowlines) facilities,

pipelines and equipment connecting the well or subsea

system to a floating unit.

-Tandem Offloading method used for the transfer of liquids

(oil or LNG) between two offshore units in a line via aerial,

floating or subsea lines (unlike side-by-side offloading, where

the two units are positioned next to each other).

-Tar sands mixture of clay, sand, mud, water and bitumen.

The bitumen in tar sands is composed principally of high

molecular weight hydrocarbons and can be converted into a

variety of oil products.

-Template rigid modular subsea structure where the oilfield

well-heads are located.

-Tender Assisted Drilling unit (TAD) offshore platform

complete with drilling tower, connected to a drilling support

tender vessel housing all necessary ancillary infrastructures.

-Tendon pulling cables used on tension leg platforms to ensure

platform stability during operations.

-Tension Leg Platform (TLP) fixed-type floating platform held

in position by a system of tendons and anchored to ballast

caissons located on the seabed. These platforms are used in

ultra-deep waters.

-Tie-in connection between a production line and a subsea

wellhead or simply a connection between two pipeline

sections.

-Tight oil oil ‘trapped’ in liquid form deep below the earth’s

surface in low permeability rock formations, which it is

difficult to extract using conventional methods.

-Topside portion of a platform above the jacket.

-Train series of units that perform a complex refining,

petrochemical, liquefaction or natural gas regasification

process. A plant can be made up of one or more trains of

equal capacity operating in parallel.

-Trenching burying of offshore or onshore pipelines.

-Trunkline oil pipeline connecting large storage facilities to the

production facilities, refineries and/or onshore terminals.

-Umbilical flexible connecting sheath, containing flexible pipes

and cables.

-Upstream relating to exploration and production operations.

-Vacuum second stage of oil distillation.

-Wellhead fixed structure separating the well from the outside

environment.

-Wellhead Barge (WHB) vessel equipped for drilling, workover

and production (partial or total) operations, connected to

process and/or storage plants.

-Workover major maintenance operation on a well or

replacement of subsea equipment used to transport the oil to

the surface.

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001-058SaipemSem15Ing.qxd 6-08-2015 11:41 Pagina 12

Market conditions

Global market conditions further deteriorated in the first half of

2015.

The causes of the deterioration are essentially a change in the

energy market scenario triggered by oil supply outstripping

demand, leading to a collapse in oil prices that saw West Texas

Intermediate fall to below 50 dollars a barrel, before stabilising at

around 60 dollars a barrel in the second quarter. The declining

trend began towards the end of 2014, with the decision by the

Organisation of the Petroleum Exporting Countries (OPEC) not to

regulate the market by reducing their production output. OPEC’s

decision has had a negative adverse impact on oil company

investments, as well as on all oil-producing countries, who have

seen significant drops in their revenues. Recent months have

seen these new conditions take its toll on the market. With new

construction projects on the table constantly growing in

complexity, the principal impact has been the award of a limited

number of contracts, as well as the adoption by clients of an

increasingly inflexible attitude during negotiations for change

orders and claims.

New contracts and backlog

New contracts awarded to the Saipem Group during the first half

of 2015 amounted to €3,500 million (€13,132 million in the first

half of 2014).

Saipem Group - New contracts awarded during the first half of 2015

Financial year 2014 (€million) First half 2014 First half 2015

Amount % Amount % Amount %

5,729 32 Saipem SpA 3,568 27 659 19

12,242 68 Group companies 9,564 73 2,841 81

17,971 100 Total 13,132 100 3,500 100

10,043 56 Offshore Engineering & Construction 8,238 63 2,742 78

6,354 36 Onshore Engineering & Construction 4,328 33 431 12

722 4 Offshore Drilling 142 1 189 6

852 4 Onshore Drilling 424 3 138 4

17,971 100 Total 13,132 100 3,500 100

529 3 Italy 406 3 136 4

17,442 97 Outside Italy 12,726 97 3,364 96

17,971 100 Total 13,132 100 3,500 100

1,434 8 Eni Group 1,040 8 214 6

16,537 92 Third parties 12,092 92 3,286 94

17,971 100 Total 13,132 100 3,500 100

New contracts by geographical area

(€3,500 million)

€136 Italy

€145 Rest of Europe

€1,663 CIS

€43 Far East

€700 Middle East

€32 North Africa

€468 West Africa and rest of Africa

€313 Americas

Operating review

Saipem Interim Consolidated Report as of June 30, 2015 / Operating review

78% of all contracts awarded were in the Offshore Engineering

& Construction sector, 12% in the Onshore Engineering

& Construction sector, 6% in the Offshore Drilling sector and 4% in

the Onshore Drilling sector.

New contracts to be carried out abroad made up 96% and

contracts awarded by Eni Group companies 6% of the overall

figure. Orders awarded to the parent company Saipem SpA

amounted to 19% of the total.

The backlog of the Saipem Group as at June 30, 2015 stood at

€19,018 million. This was impacted by the effects of the

001-058SaipemSem15Ing.qxd 6-08-2015 11:41 Pagina 13

Saipem Group - Backlog as at June 30, 2015

Dec. 31, 2014 (€million) June 30, 2014 June 30, 2015

Amount % Amount % Amount %

7,167 32 Saipem SpA 7,071 29 5,176 27

14,980 68 Group companies 17,144 71 13,842 73

22,147 100 Total 24,215 100 19,018 100

11,161 51 Offshore Engineering & Construction 13,374 55 9,283 49

6,703 30 Onshore Engineering & Construction 6,552 27 6,086 32

2,920 13 Offshore Drilling 2,976 12 2,547 13

1,363 6 Onshore Drilling 1,313 6 1,102 6

22,147 100 Total 24,215 100 19,018 100

689 3 Italy 928 4 613 3

21,458 97 Outside Italy 23,287 96 18,405 97

22,147 100 Total 24,215 100 19,018 100

2,458 11 Eni Group 2,850 12 2,067 11

19,689 89 Third parties 21,365 88 16,951 89

22,147 100 Total 24,215 100 19,018 100

Backlog by geographical area

(€19,018 million)

€613 Italy

€784 Rest of Europe

€3,519 CIS

€841 Far East

€5,215 Middle East

€37 North Africa

€5,834 West Africa and rest of Africa

€2,174 Americas

cancellation of outstanding orders totalling €1,232 million from

the South Stream contract, which was terminated by the client

under a termination for convenience provision, and the

suspension by the client Statoil of a €24 million contract for the

charter of the semi-submersible rig Scarabeo 5.

The breakdown of the backlog by sector is as follows: 49% in the

Offshore Engineering & Construction sector, 32% in the Onshore

Engineering & Construction sector, 13% in Offshore Drilling and 6%

in Onshore Drilling.

97% of orders are on behalf of overseas clients, while orders from

Eni Group companies represent 11% of the overall backlog.

The parent company Saipem SpA accounted for 27% of the total

order backlog.

Saipem Interim Consolidated Report as of June 30, 2015 / Operating review

001-058SaipemSem15Ing.qxd 6-08-2015 11:41 Pagina 14

Capital expenditure

Year First half

2014 (€million) 2014 2015

117 Saipem SpA 48 24

577 Group companies 281 244

694 Total 329 268

260 Offshore Engineering & Construction 135 82

55 Onshore Engineering & Construction 20 17

180 Offshore Drilling 105 107

199 Onshore Drilling 69 62

694 Total 329 268

Capital expenditure

Capital expenditure in the first half of 2015 amounted to €268

million (€329 million in the first half of 2014) and mainly related

to:

-€82 million in the Offshore Engineering & Construction sector,

relating mainly to the maintenance and upgrading of the

existing asset base;

-€17 million in the Onshore Engineering & Construction sector

relating to the purchase of equipment and the maintenance of

existing assets;

-€107 million in the Offshore Drilling sector, relating mainly to

class reinstatement works on the drillships Saipem 10000 and

Saipem 12000 and on the drilling jack-up Perro Negro 8, as well

as maintenance and upgrading to the existing asset base;

-€62 million in the Onshore Drilling sector, relating to upgrading

work on the existing asset base.

The following table provides a breakdown of capital expenditure in

the first half of 2015:

Details of capital expenditure for the individual business units are

provided in the following pages.

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General overview

The Saipem Group possesses a strong, technologically advanced

and highly versatile fleet, as well as world class engineering and

project management expertise. These unique capabilities and

competencies, together with a long-standing presence in strategic

frontier markets, represent an industrial model that is particularly

well suited to EPCI projects.

The latest addition to the fleet is the Castorone – a 330-metre

long, 39-metre wide mono-hull pipelay vessel equipped with a

class 3 dynamic positioning (DP) system, an S-lay system and

features allowing for the installation of a J-lay tower.

The Castorone has been designed for challenging large-diameter,

deep-water pipelay projects, but it also possesses the flexibility

and productivity necessary for effective deployment on less

complex projects. The vessel’s distinctive features include a class

3 DP system, the capacity to fabricate and lay triple joint pipes of

up to 48” in diameter (60” including coating) with a tensioning

capacity of up to 750 tonnes (up to 1,500 tonnes in flooded pipe

conditions, using a special patented clamp), a highly automated

firing line made up of 7 workstations (3 welding and

4 completion/inspection stations), an articulated stinger for

pipelaying in shallow and deep water with an advanced control

system, and the capacity to operate in extreme environments

(Ice Class A0).

Meanwhile, the current trend for deep-water field developments

continues to drive the success of the FDS 2, which is a 183-metre

long, 32-metre wide mono-hull equipped with a cutting-edge class

3 DP system and a pipeline fabrication system. The FDS 2 has a

vertical J-lay tower with a holding capacity of 2,000 tonnes

capable of laying quad joint sealines of up to 36” in diameter and

also possesses the capability to lay pipe in S-lay mode.

With its 1,000 tonne crane and two 750 and 500 tonne capstan

winches (the latter featuring a heave compensation system), the

FDS 2 is suited to even the most challenging of deep-water

projects.

Saipem’s fleet of technologically advanced vessels also includes

the Saipem 7000, which is equipped with a dynamic positioning

system, has a 14,000-tonne lifting capacity, is capable of laying

subsea pipelines in ultra-deep waters using the J-lay system and

can handle a suspended load of up to 1,450 tonnes during pipelay

operations. The fleet further comprises the Castoro Sei, a

semi-submersible pipelay vessel capable of laying large diameter

subsea pipelines, the Field Development Ship (FDS), which is a

special purpose vessel used in the development of deep-water

fields, equipped with a dynamic positioning system, a 600-tonne

lifting capacity crane and a vertical pipelaying system capable of

operating in water depths of over 2,000 metres and the Saipem

3000, which is capable of laying flexible pipelines and installing

umbilicals and mooring systems in deep waters and installing

subsea structures of up to 2,200 tonnes.

Saipem is involved on an ongoing basis in the management and

development of its fleet, carrying out constant maintenance and

continuous upgrading and improvement of its assets in line with

technological developments and client requirements, with the aim

of maintaining its operating capacity and high safety standards in

a continuously evolving market.

With its portfolio of cutting-edge mobile assets, such as ROVs and

specially equipped robots capable of carrying out complex

deep-water interventions on pipelines, Saipem also enjoys a

strong position in the subsea market.

Finally, the Company is active in the Leased FPSO segment, with a

fleet comprising the Cidade de Vitoria and the Gimboa, which are

currently operating in Brazil and Angola, respectively.

The review of Saipem’s competitive positioning in a highly

deteriorated market environment has led to the rationalisation of

a fabrication yard and the disposal of vessels for which there is

poor visibility with regard to their future deployment (Castoro

Sette, S355 and Saibos 230). Following the revision of the

depreciation schedule on December 31, 2014, Semac 1, which has

been slated for scrapping, was fully depreciated as of June 30,

2015.

Market conditions

2015 is shaping up to be a year of growth, with global GDP

forecast to increase by approximately 3.5 % against 2014. Levels

of growth in advanced countries are exceeding expectations and

would appear to be capable of offsetting an overall slowdown in

emerging markets. The price of Brent crude remained significantly

below the levels recorded in 2014, contributing to major market

uncertainty and leading to a significant contraction in orders from

oil companies, as well as repeated postponements of major

projects compared with the previous year. Overall, the contraction

is greater for North American and Brazilian operators. Current

market conditions have led oil companies to adopt a more prudent

approach, with the current goal continuing to be cost

containment. As a consequence, a number of investments, such

as North Sea field developments Johan Castberg and Snorre C, the

deep-water field Bonga SW/Aporo in West Africa and the Jupiter

field in Brazil, have either been postponed or cancelled.

Another sign, in addition to the significant revisions and delays to

development plans, of the difficult period the market is

Offshore Engineering & Construction

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experiencing has been the adoption by clients of an increasingly

rigid negotiating position. Since continuous interaction with clients

with a view to overcoming any difficulties that may arise during

project execution is a typical feature of the construction sector,

this change in client attitudes during negotiations is proving to be

a major critical factor in project operations.

In the subsea developments market, activities recorded in the

first six months of the year were in line with 2014. Installations

continue to be driven by activities in the North Sea, the Gulf of

Mexico and South America, where the major projects assigned in

recent years, such as Goliat and Roncador (Eni and Petrobras,

respectively) are nearing completion.

The pipelay segment on the other hand is undergoing a

contraction in 2015, with a significant number of projects either

cancelled or delayed, particularly in Northern Europe and North

America. The flowlines segment is also experiencing a decline in

volumes. This is being driven in particular by the Asia-Pacific

Region, which is seeing a significant slowdown, with numerous

projects awarded in recent years now close to completion.

The decline in installations is affecting both the shallow and

ultra-deep water markets, with the former affected mainly by the

trend in South-East Asia and the latter influenced by a drop-off in

areas that have historically been very active, such as the Gulf of

Mexico and Brazil.

The fixed platform fabrication segment is continuing to experience

numerous delays on major investment projects, such as Kasawari

in Malaysia (Petronas) and West White Rose (Husky) – a sign of

the difficult period the segment is at present undergoing. In terms

of platform type, the biggest contribution to activities at this

halfway stage of the year has been from lighter platform

installations in South-East Asia, with larger size platform

installations so far relatively few in number.

In the FPSO segment, 2015 is expected to come in below

expectations after a good 2014. At present, there have been only

two awards, in Ghana (Eni) and Iran (PEDCO) and a limited

number of orders for new units are expected during the remainder

of the year. A large number of projects are experiencing delays

and difficulties securing a final investment decision, such as

Camelia and Chissonga in Africa, Gendalo/Gehem in the

Asia-Pacific Region and Johan Castberg in North Europe. In Brazil,

after the large number of contract awards registered in recent

years, activities are expected to be concentrated on the

completion of units currently under construction, with forecasts

showing a drastic slowdown in new unit orders in the area.

The first half of the year brought no new FLNG contract awards,

mainly due to the uncertainty prevailing with regard to the market

outlook, especially in relation to the LNG supply and demand

balance and the technical complexity of projects in this sector.

A number of projects have been recently cancelled, such as the

FLNG unit slated for construction in Guinea, and others may be

set to experience delays, such as Browse FLNG in the Asia-Pacific

Region (Woodside) and Lavaca Bay in North America (Excelerate).

There are, however, a number of other initiatives that are

continuing to move through the approval process with their

respective operators which may in 2015 receive a FID, such as

Abadi (Inpex) in Indonesia, Coral (Eni) in Mozambique and

Scarborough (Exxon) in Australia. At present, there are six FLNG

units under construction.

New contracts

The most significant contracts awarded to the Group during the

period were as follows:

- a contract with the North Caspian Operating Co (NCOC) for the

construction of two 95 kilometre pipelines, which will connect D

island in the Caspian Sea to the Karabatan onshore plant in

Kazakhstan. The scope of work includes the engineering, the

supply of welding materials, the conversion and the preparation

of the vessels, dredging, and the installation, burial and

pre-commissioning of the two pipelines. Construction is due to

be completed by the end of 2016;

- an EPC contract in Saudi Arabia encompassing the engineering,

procurement, fabrication, transportation and installation of new

offshore structures, three production modules, and

approximately 5 kilometres of subsea pipelines and cables,

under the Long Term Agreement with Saudi Aramco, which was

recently renewed until 2021.

Capital expenditure

Capital expenditure in the Offshore Engineering & Construction

sector mainly related to maintenance and upgrading of the

existing asset base.

Work performed

The biggest and most important projects underway or completed

during the first half of 2015 were as follows.

In Saudi Arabia, for Saudi Aramco:

-under the Long Term Agreement for the engineering,

procurement, construction, transport and installation of

structures, platforms and pipelines, construction work was

completed on two jackets, two pipelines and a deck, while

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work is underway on the construction and installation of three

decks;

- installation work has almost been completed as part of the Al

Wasit Gas Program for the development of the Arabiyah and

Hasbah offshore fields. The contract encompasses the

engineering, procurement, construction and installation of 15

fixed platforms, an export pipeline, offshore lines, and subsea

and control cables. Operations are also underway under the

same contract supplementing the scope of work with the

engineering, procurement, transport, installation and

commissioning of 2 trunklines in the Arabiyah and Hasbah

fields;

- work continued on the Marjan Zuluf contract for the

engineering, procurement, fabrication, transport and

installation of new offshore facilities, including three platforms,

three jackets and associated pipelines and subsea cables.

Engineering and procurement work is ongoing, while fabrication

work has just commenced, for Eni Muara in Indonesia on the

Jangrik EPCI project. The project encompasses engineering,

procurement and fabrication of the FPU and the installation of a

mooring system, as well as hook-up, commissioning and

assistance to the start-up.

Pipelaying activities are currently in full swing in Australia for

Inpex on the Ichthys LNG project, which consists of the

engineering, procurement, construction and installation of a

subsea pipeline connecting the offshore central processing

facility to the onshore processing facility in Darwin.

In West Africa:

- work was completed for ExxonMobil, in Angola, on the Kizomba

Satellite Phase 2 project at the yards in Soyo and Ambriz.

The scope of work included engineering, procurement,

fabrication and installation of production and water injection

pipelines and flowlines, rigid jumpers and other related subsea

structures;

- work was completed for Eni Congo, in Congo, on two contracts

– WP4 and WP10 – encompassing the engineering,

procurement, fabrication and transportation of the Litchendjili

jacket, piles and related appurtenances;

- project management and procurement work continued for Total,

in Angola, on the Kaombo Field Development Project, which

comprises engineering, procurement and commissioning of

two FPSO vessels;

- work continued for Total Upstream Nigeria Ltd on the EPCI

contract for the subsea development of the Egina field.

The scope of work includes engineering, procurement,

fabrication, installation and pre-commissioning of subsea oil

production and gas export pipelines, flexible jumpers, and

umbilicals;

- work continued for Cabinda Gulf Oil Co Ltd (CABGOC), in Angola,

on the Mafumeira 2 project, comprising engineering,

procurement, fabrication, installation and pre-commissioning of

URF (umbilical, riser and flowline) facilities and export

pipelines;

- work continued for CABGOC, in Angola, on the EPCI 3 contract

encompassing the engineering, procurement and

pre-fabrication activities for subsequent offshore modifications

and tie-ins on the existing Mafumeira Norte platform and the

future Mafumeira Sul production platforms;

- work continued for Total Exploration and Production on the GirRI

(Girassol Resources Initiatives) contract, in Block 17, in

Angola, which encompasses engineering, procurement,

fabrication, installation and commissioning of changes to the

topside of the pumping system on the FPSOs Girassol and Dalia;

- work continued for CABGOC on the fourth and fifth installation

campaign of the Congo River Crossing Pipeline project, in

Angola, which comprises engineering, procurement, fabrication

and the installation of three subsea pipelines and subsea

spools, as well as trenching and crossing works. The project is

being carried out off the coasts of Angola and the Democratic

Republic of the Congo;

- work continued for Aker Solutions, in Congo, on the fabrication

of subsea structures, including suction anchors, for the Moho

Nord project.

In the North Sea:

- work continued for Det Norske Oljeselskap ASA on a contract

encompassing the transportation and installation of the Ivar Aasen

jacket and topside, in the Norwegian sector of the North Sea;

- in addition, various structures were installed using the Saipem

7000 for ConocoPhillips (Eldfisk), Statoil (Statoil

decommissioning), Nexen (Golden Eagle) and Lundin.

In Russia, work was completed for Lukoil-Nizhnevolzhskneft on

the Filanovsky contract for the engineering, procurement,

fabrication and installation of an oil pipeline and a gas pipeline in a

maximum water depth of 6 metres, along with related onshore

pipelines connecting the riser block in the offshore field to the

onshore shut-off valves. Work was also completed on the

additional scope, which comprised the transport and installation

of four platforms.

In Azerbaijan, work continued for BP on a T&I contract involving

the transportation and installation of jackets, topsides, subsea

production systems and subsea structures for stage 2 of the Shah

Deniz field development project.

In Kazakhstan:

- work began on a contract with the North Caspian Operating Co

(NCOC) for the construction of two 95-kilometre pipelines,

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which will connect D island in the Caspian Sea to the Karabatan

onshore plant in Kazakhstan. The scope of work includes the

engineering, the supply of welding materials, the conversion

and the preparation of the vessels, dredging, and the

installation, burial and pre-commissioning of the two pipelines;

- work continued for Agip Kazakhstan North Caspian Operating Co

NV on the contract for the EP Clusters 2 and 3 project in the

framework of the Kashagan field development. The contract

includes engineering, procurement, fabrication, and

transportation of three topside production manifold modules;

- work continued for North Caspian Production Operations Co BV

on the Major Maintenance Services project. The contract

encompasses the provision of maintenance and services for

offshore (D island) and onshore (OPF) facilities;

- work continued for Teniz Burgylau Llp on the fabrication,

outfitting and commissioning of a jack-up rig in consortium

with Keppel Kazakhstan Llp.

In the Gulf of Mexico, engineering and procurement work started

on the Lakach project for Pemex. The contract encompasses the

engineering, procurement, construction and installation of the

system connecting the offshore field with the onshore gas

conditioning plant.

In Brazil, for Petrobras:

- work continued on the Sapinhoà Norte and Cernambi Sul

project, encompassing the engineering, procurement,

fabrication, installation and pre-commissioning of the SLWR

(Steel Lazy Wave Riser) for the collection system at the

Sapinhoà Norte field, and of the FSHR (Free Standing Hybrid

Risers) for the gas export systems at the Sapinhoà Norte and

Cernambi Sul fields. Work also continued on the Sapinhoà Norte

and Iracema Sul project;

- work continued on the contract for the construction of the Rota

Cabiúnas gas export trunkline, situated in the Santos Basin

Pre-Salt Region. The development comprises the engineering

and procurement of subsea equipment and the installation of a

gas pipeline in a maximum water depth of 2,200 metres.

The pipeline will connect the Central Gathering Manifold in the

Lula field, in the Santos Basin, to the onshore processing plant

of Cabiúnas, located in the Macaé district, in the State of Rio de

Janeiro;

- work continued on the Lula Norte, Lula Sul and Lula Extremo

Sul project, which encompasses the engineering, procurement,

fabrication and installation of three offshore pipelines and two

Free Standing Hybrid Risers for the gas export systems.

In Venezuela:

- work has almost been completed for Cardon IV on the Perla EP

project encompassing the transport and installation of three

platforms and three pipelines;

- work continued for PDVSA on the construction of the Dragon -

CIGMA project involving the transportation and installation of a

gas pipeline which will connect the Dragon gas platform to the

CIGMA complex.

In Italy, work is underway for Eni E&P as part of its 2015 Offshore

Campaign on a contract for the transportation and installation of

two platforms and two subsea pipelines in the Mediterranean Sea.

In the Leased FPSO segment, the following vessels carried out

operations during the period:

-the FPSO Cidade de Vitoria carried out operations as part of an

eleven-year contract with Petrobras on the second phase of

development of the Golfinho field, situated off the coast of

Brazil at a water depth of 1,400 metres;

-the FPSO Gimboa carried out operations on behalf of Sonangol

P&P under a contract for the provision and operation of an FPSO

unit for the development of the Gimboa field, located in Block

4/05 offshore Angola, at a water depth of 700 metres.

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Offshore fleet at June 30, 2015

Saipem 7000 Self-propelled, semi-submersible, dynamically positioned crane and pipelay vessel capable of lifting

structures of up to 14,000 tonnes and J-laying pipelines at depths of up to 3,000 metres.

Saipem FDS Dynamically positioned vessel utilised for the development of deep-water fields at depths of over

2,000 metres. Capable of launching 22” diameter pipes in J-lay configuration with a holding capacity of up to

550 tonnes (upgrade to 750 tonnes currently underway) and a lifting capacity of up to 600 tonnes.

Saipem FDS 2 Dynamically positioned vessel utilised for the development of deep water fields, capable of launching pipes

with a maximum diameter of 36” in J-lay mode with a holding capacity of up to 2,000 tonnes. Also capable of

operating in S-lay mode with a lifting capacity of up to 1,000 tonnes.

Castoro Sei Semi-submersible pipelay vessel capable of laying large diameter pipe at depths of up to 1,000 metres.

Castorone Self-propelled, dynamically positioned pipe-laying vessel operating in S-lay mode with a 120-metre long S-lay

stern ramp composed of 3 articulated and adjustable stinger sections for shallow and deep-water operation, a

holding capacity of up to 750 tonnes (expandable to 1,000 tonnes), pipelay capability of up to 60 inches,

onboard fabrication facilities for triple and double joints and large pipe storage capacity in cargo holds.

Castoro Otto Derrick pipelay ship capable of laying pipes of up to 60” diameter and lifting structures weighing up to

2,200 tonnes.

Saipem 3000 Self-propelled, dynamically positioned derrick crane ship, capable of laying flexible pipes and umbilicals in

deep waters and lifting structures of up to 2,200 tonnes.

Bar Protector Dynamically positioned, multi-purpose support vessel used for deep water diving operations and offshore

works.

Castoro II Derrick lay barge capable of laying pipe of up to 60” diameter and lifting structures of up to 1,000 tonnes.

Castoro 10 Trench/pipelay barge capable of burying pipes of up to 60” diameter and of laying pipes in shallow waters.

Castoro 12 Pipelay barge capable of laying pipes of up to 40” diameter in ultra-shallow waters of a minimum depth of

1.4 metres.

Castoro 16 Post-trenching and back-filling barge for pipes of up to 40” diameter in ultra-shallow waters of a minimum

depth of 1.4 metres.

Ersai 1 Heavy lifting barge equipped with 2 crawler cranes, capable of carrying out installations whilst grounded on

the seabed. The lifting capacities of the 2 crawler cranes are 300 and 1,800 tonnes, respectively.

Ersai 2 Work barge equipped with a fixed crane capable of lifting structures of up to 200 tonnes.

Ersai 3 Support barge with storage space, workshop and offices for 50 people.

Ersai 4 Support barge with workshop and offices for 150 people.

Ersai 400 Accommodation barge for up to 400 people, equipped with antigas shelter for H2S leaks.

Castoro 9 Cargo barge.

Castoro XI Heavy-duty cargo barge.

Castoro 14 Cargo barge.

Castoro 15 Cargo barge.

S42 Cargo barge, currently used for storing the J-lay tower of the Saipem 7000.

S43 Cargo barge.

S44 Launch cargo barge, for structures of up to 30,000 tonnes.

S45 Launch cargo barge, for structures of up to 20,000 tonnes.

S46 Cargo barge.

S47 Cargo barge.

S 600 Launch cargo barge, for structures of up to 30,000 tonnes.

FPSO - Cidade de Vitoria FPSO unit with a production capacity of 100,000 barrels a day.

FPSO - Gimboa FPSO unit with a production capacity of 60,000 barrels a day.

With poor visibility into their prospects of deployment on future projects, the vessels Castoro Sette, S355 and Saibos 230 were written

down during the first half of 2015 and have been slated for scrapping. Following the revision of the depreciation schedule on December

31, 2014, Semac 1, which has been slated for scrapping, was fully depreciated as of June 30, 2015.

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Saipem Interim Consolidated Report as of June 30, 2015 / Operating review

General overview

The Saipem Group’s Onshore Engineering & Construction expertise

is focused on the execution of large-scale projects with a high

degree of complexity in terms of engineering, technology and

operations, with a strong bias towards challenging projects in

difficult environments and remote areas.

Saipem enjoys a worldwide leading position in the Onshore sector,

providing a complete range of integrated basic and detailed

engineering, procurement, project management and construction

services, principally to the oil&gas, complex civil and marine

infrastructure and environmental markets. The Company places

great emphasis on maximising Local Content during project

execution phase in a large number of the areas in which it operates.

The review of Saipem’s competitive positioning in the light of a

significant deterioration in market conditions led to the

rationalisation of a fabrication yard and has made more complex

the negotiations for the recognition of change orders and claims

with clients.

Market conditions

The volume of EPC contracts assigned on the Onshore E&C market

(Upstream, Midstream and Downstream) in the first half of 2015

dropped significantly compared with the same period of previous

years.

At global level, a significant share of EPC project awards were

located in the United States in the Pipeline, Petrochemical, LNG

and Fertilizer segments. In the Middle East (Kuwait and United

Arab Emirates), awards were almost exclusively concentrated in

the Upstream segment. In the CIS (Russia and Azerbaijan), the

principle focus of contracting activity were the Refining, Fertilizer

and Petrochemical segments. Central Africa (Uganda) registered

the award of a project in the Refining segment, while in Europe

(Slovak Republic), the period saw a project awarded for the

construction of a Fertilizer facility.

The value of EPC contracts awarded in the Upstream segment

during the first half of 2015 were comparable with the average for

the same period in recent years – confirmation that the market is

holding up in spite of the unfavourable conditions.

Most new EPC contracts awarded during the reporting period were

concentrated in the Middle East, confirming both its strategic

importance and its countercyclical nature, while important

contracts were also awarded in Kuwait and the United Arab

Emirates. Canada on the other hand saw a sudden and dramatic

fall-off in contracting activity, which saw the cancellation and

postponement of planned projects.

The Upstream segment continues to show good short to medium

term growth potential driven by gas and oil field discoveries and

developments, but there is an increasingly pressing need for

investments to maintain gradually declining production levels in

existing fields.

Activity during the period in the Pipeline segment was driven by

the award of a major EPC contract award in China for the

construction of a third gas pipeline on the West-East China Gas

Pipeline (Stage 2) project. Smaller gas pipeline awards were also

made in the Middle East (Kuwait) and South America.

With the pipeline segment heavily driven by the abundance of

available gas and, consequently, by the need to transport the gas

from the production fields to the end user markets, recent years

have seen projects to build new gas pipelines or to expand

existing ones outnumbering oil pipeline initiatives. This trend is

expected to continue in the short to medium term, particularly in

countries opting to develop non-conventional fields, as this will

require them to make investments to upgrade their distribution

infrastructure.

Following a year in which awards were abundant, the LNG

segment registered a downturn, with relatively few awards

registered, mainly in North America (United States), but also in

Asia-Pacific (Malaysia), either for the construction of additional

units or the expansion of existing facilities.

North America’s growing role as an exporter of LNG is being driven

by a continuous and constant abundance of gas from

non-conventional fields, which is enabling natural gas to be

produced at low cost. Henry Hub natural gas prices are currently

much lower than gas prices on the rest of the world’s markets,

and with American gas likely to remain affordable in the short to

medium term, liquefaction terminal projects represent an

increasingly attractive investment opportunity.

The Refining segment – which has always been one of the drivers

of the E&C market in terms of EPC contract awards – saw a

considerable drop in the overall value of contract awards

compared with prior years. The fall in awards notwithstanding, the

first half of 2015 nevertheless saw two contracts assigned in the

CIS (Russia) and the construction of a refinery in Central Africa

(Uganda).

The increasingly strict environmental legislation in force,

particularly in OECD countries (and especially in Europe), is

requiring the refining industry to modernise continually, with

existing facilities forced to revamp constantly in pursuit of

process efficiencies. The effect of this has been to encourage

small and medium size investments, the closure of outdated

refineries and the construction of new Mega Export Refineries in

crude producing countries, particularly in the Middle East.

In the short to medium term, the volume of future investments

continues to be considerable and pertains to all of the

geographical areas being monitored by the Company.

The largest investments are planned in Asia-Pacific and the Middle

East, although all other geographical areas continue to present

interesting opportunities.

Onshore Engineering & Construction

001-058SaipemSem15Ing.qxd 6-08-2015 12:44 Pagina 21

Saipem Interim Consolidated Report as of June 30, 2015 / Operating review

After a year featuring a large number of important major project

awards in 2014, the Petrochemical segment experienced a

significant downward turn in the first few months of 2015.

The period saw the award of a project for the construction of an

ethylene plant in the United States, as well as contracts for two

smaller facilities in the Asia-Pacific Region (China and Singapore).

The Fertilizer segment also registered a significant drop in overall

volumes of awards compared with the same period of 2014, but

there were important contract awards for the construction of

ammonia plants in both Russia and the United States.

New contracts

The most significant contract awarded to Saipem during the

period was a contract for Fermaca relating to the El Encino

Pipeline project situated in Mexico, encompassing the

engineering, procurement, construction and commissioning

support for a compressor station at El Encino.

Capital expenditure

Capital expenditure in the Onshore Engineering & Construction

sector focused mainly on the acquisition of equipment and the

maintenance of the existing asset base.

Work performed

The biggest and most important projects underway or completed

during the first half of 2015 were:

In Saudi Arabia:

- work continued for Petrorabigh (a joint venture between Saudi

Aramco and Sumitomo Chemical) on the contract for the

Naphtha and Aromatics Package of the Rabigh II project, which

encompasses the engineering, procurement, construction and

pre-commissioning of two processing units: a naphtha reformer

unit and an aromatics complex;

- work continued for Saudi Aramco on two EPC contracts

(Packages 1 & 2) relating to the Jazan Integrated Gasification

Combined Cycle project to be undertaken approximately

80 kilometres from the city of Jazan, in south western Saudi

Arabia. The Package 1 contract comprises the gasification,

soot/ash removal, acid gas removal and hydrogen recovery

units. The Package 2 contract includes six sulphur recovery

units (SRU) trains and relevant storage facilities. The scopes of

work of both packages include engineering, procurement,

construction, pre-commissioning, assistance to commissioning

and performance tests of the concerned facilities;

- work continued for Saudi Aramco on the Complete Shedgum -

Yanbu Pipeline Loop 4&5 contract, encompassing detailed

engineering, the procurement of all materials except for the

pipeline supplied by the client Aramco, installation,

commissioning and start up assistance for two pipelines;

- work commenced for Saudi Aramco on the EPC project relating

to the expansion of the onshore production centres at the

Khurais, Mazajili and Adu Jifan fields;

- work continued for Safco on the Safco V contract, which

encompasses the engineering, procurement and construction of

a urea production plant, together with associated utilities and off-

site systems and interconnecting structures to existing plants.

In the United Arab Emirates:

- construction work for the three product lines (sales gas, natural

gas liquids and condensate) have almost been completed on

the contract for Abu Dhabi Gas Development Co Ltd forming part

of the development of the high sulphur content Shah sourgas

field. The development project encompasses the treatment of

28 million cubic metres of gas a day from the Shah field, the

separation of the sulphur from the gas, the transportation of the

gas product lines by pipeline to Habshan (where it is injected

into the national gas network) and to Ruwais, and the

transportation of the sulphur by separate pipeline to the

granulation facility at Habshan and from there to Ruwais by

railway. Negotiations are underway to secure approval by the

client of change orders and claims occurring during project

execution;

- work continued on a project for the Etihad Rail Co in Abu Dhabi,

encompassing the engineering and construction of a railway

line for the transportation of granulated sulphur, linking the

natural gas production fields of Shah and Habshan (located

inland) to the port of Ruwais.

In Kuwait, work continued for Kuwait Oil Co (KOC) on the BS 171

contract, which encompasses the engineering, procurement,

construction and commissioning of a new gas booster station

comprising three high and low-pressure gas trains for the

production of dry gas and condensate. Negotiations are underway

to secure approval by the client of change orders and claims

occurring during project execution.

In Iraq:

- work continued for Fluor Transworld Services Inc and Morning

Star for General Services Llc on the West Qurna project.

The contract comprises engineering, procurement,

construction, pre-commissioning and commissioning of water

treatment and conveyance infrastructure, a pipeline and a

water injection system;

- work started for Shell Iraq Petroleum Development on the FCP

GAS project, encompassing the installation of two

001-058SaipemSem15Ing.qxd 6-08-2015 11:41 Pagina 22

Saipem Interim Consolidated Report as of June 30, 2015 / Operating review

turbocompressors and auxiliary equipment, as well as tie-ins to

existing facilities. The facilities will supply gas to the North

Rumaila power plant;

- construction work is underway for Basrah Gas Co (BGC) on the

Inlet Booster Compressors (IBC) project, encompassing the

installation of three turbocompressors and related auxiliary

systems, as well as interconnections to the existing facility;

- work continued on the Zubair Gathering System project for

Morning Star for General Services Llc and ExxonMobil Iraq Ltd,

which encompasses the construction of a gathering system,

flowlines and interconnecting facilities, as well as the

distribution node.

In Turkey, work continued for Star Refinery AS on the Aegean

Refinery project, encompassing the engineering, procurement

and construction of a refinery.

In Nigeria:

- complex work is underway for Southern Swamp Associated Gas

Solution (SSAGS) on the Southern Swamp contract, comprising

engineering, procurement, construction and commissioning of

compression facilities at four sites and of new central

production facilities at one of the sites, which will treat the

routed associated gas;

- work continued for Dangote Fertilizer Ltd on the Dangote

project for a new ammonia and urea production complex.

The facility was originally due to be located in Edo State, but

was reallocated by the client to the Lekki Free Trade Zone in

Lagos State. The scope of work encompasses engineering,

procurement and construction of two twin production streams

and related utilities and off-site facilities;

- work continued for Total Exploration and Production Nigeria Ltd

(TEPNG) on the Northern Option Pipeline project, comprising

engineering, procurement, construction and commissioning of

a pipeline that will connect Rumuji to Imo River;

- work is underway for Shell Petroleum Development Co on the

Otumara-Saghara-Escravos Pipeline contract, which

encompasses the engineering, procurement, fabrication and

commissioning of a network of pipelines in a swamp area, to

connect the client’s flowstations in the Otumara, Saghara and

Escravos fields;

- work continued for the Government of Rivers State (Nigeria) on the

contract for the engineering, procurement and construction of the

first and second train of the Independent Power Plant at Afam.

In Congo, work continued for Eni Congo on the Litchendjili project

for the construction of an onshore treatment facility which will

treat the feed stream from the Litchendjili Offshore Platform and

separate the fluid into two main streams: the gas product

(delivered to Centrale Electrique du Congo) and liquid

hydrocarbons.

In Italy:

- work is underway for Rete Ferroviaria Italiana SpA (Ferrovie

dello Stato Group) on the contract for the detailed engineering,

project management and construction of a 39-kilometre section

of high-speed railway line and of an additional 12 kilometres of

interconnections with the existing conventional railway, along

the Treviglio-Brescia section across the Milan, Bergamo and

Brescia provinces, as well as all associated works, such as

power lines, works to reduce road interference, road crossings

and environmental mitigation;

- work started on an EPC contract for Versalis-Ferrara IT for the

construction of a fourth production line to operate alongside

three existing lines, in addition to increasing production

capacity and upgrading the plant’s outside battery limit

auxiliary systems.

In Poland, engineering work continued for Polskie LNG on the

Polskie contract for a re-gasification terminal. The contract

encompasses the engineering, procurement and construction of

the regasification facilities, including two liquid gas storage tanks.

On certain Canadian projects in relation to which the clients

(Canadian Natural Resources Ltd and Husky Oil) announced the

contract termination, the parties are in the process of

negotiations relating to claims and change orders. From an

operating point of view, the period saw the completion of the

U&O/Williams projects, while Phase 3 and SRU-SWC continue

according to schedule.

In Mexico:

- work is underway for Transcanada (Transportadora de Gas

Natural Norte - Noroeste) on the El Encino project, comprising

engineering, procurement and construction of a pipeline from

El Encino (Chihuahua State) to Topolobampo (Sinaloa State).

The project includes two compressor stations and three

metering stations;

- work continued for Pemex on the Tula and Salamanca contract

for the construction of two desulphurisation units and two

amine regeneration units to be built at two of the client’s

refineries. The facilities will be built at the Miguel Hidalgo

refinery, located 2,000 metres above sea level near the town of

Tula and at the Antonio M. Amor refinery, located 1,700 metres

above sea level near the town of Salamanca.

In Suriname, for Staatsolie, work has almost been completed on

the contract encompassing engineering, procurement, fabrication

and construction for the expansion of the Tout Lui Faut refinery,

located south of the capital Paramaribo.

In Azerbaijan and Georgia, work is underway for the Shah Deniz

consortium on the SPCX Pipeline contract, which encompasses

001-058SaipemSem15Ing.qxd 6-08-2015 11:41 Pagina 23

the construction of two pipelines and associated above ground

installations.

In Australia, work was completed for Gladstone LNG Operations Pty

Ltd on the Gladstone LNG contract involving the engineering,

procurement and construction of a gas pipeline connecting the

Bowen and Surat fields to the Gladstone State Development Area

(GSDA) near the city of Gladstone, Queensland, where an LNG

liquefaction and export plant is due to be built. Negotiations are

underway to secure approval by the client of change orders and

claims occurring during project execution.

Saipem Interim Consolidated Report as of June 30, 2015 / Operating review

001-058SaipemSem15Ing.qxd 6-08-2015 11:41 Pagina 24

General overview

At June 30, 2015, the Saipem offshore drilling fleet consisted of

fifteen vessels: seven deep-water units for operations at depths in

excess of 1,000 metres (the drillships Saipem 10000 and Saipem

12000 and the semi-submersible drilling rigs Scarabeo 5,

Scarabeo 6, Scarabeo 7, Scarabeo 8 and Scarabeo 9), one for

mid-water operations at depths of up to 500 metres

(the semi-submersible Scarabeo 3), two high specification

jack-ups for operations at depths of up to 375 feet (Perro Negro 7

and Perro Negro 8), four standard jack-ups for activities at depths

up to 300 feet (Perro Negro 2, Perro Negro 3, Perro Negro 4 and

Perro Negro 5) and one tender-assisted drilling rig (TAD). All units

are the property of Saipem. The fleet also includes other minor

units operating offshore Peru. During the first half of 2015,

Saipem’s offshore drilling fleet operated in the Norwegian sector

of the North Sea and the Barents Sea, in the Mediterranean Sea

(Italy, Egypt and Cyprus), the Red Sea, the Persian Gulf, in West

Africa, Indonesia, offshore Ecuador and Peru.

The semi-submersible platform Scarabeo 4 was fully written down

during the first half of 2015 and slated for scrapping.

Market conditions

The negative cycle that commenced in 2014 continued to prevail

during the first few months of 2015, with the oil price environment

remaining fairly weak, and the general climate of uncertainty

surrounding the medium term outlook, which emerged during the

second half of 2014, continuing to obtain.

The unfavourable market conditions in the offshore drilling

segment impacted principally on spending by oil and gas

companies. The declining trend affecting spending on drilling

services, which began in 2014, continued during the period, with a

fall of 13% registered compared to forecasts made at year end

2014. Data for rig utilisation continued to follow a general

downward trend, with all types of rig affected. Only the latest

models (i.e. deep water floaters and high spec jack-ups) were able

to maintain rates close to 90%. The negative cycle affecting the oil

and gas industry also led to a number of industry operators opting

to retire and dismantle older units. Since year end 2014, over

30 rigs have been retired from the market due to a lack of work

and poor medium-term prospects. The trend has had a particularly

significant impact on the mid-water segment, where the number

of rigs dropped by approximately 20% compared with 2014.

Day rates for contracts awarded during the period continued the

downward trend that began in 2014, with falls registered in

particular for ultra-deep water operations (where rates have

stabilised at below $400,000 per day, even dipping below

$300,000 per day, compared with rates in excess of $600,000

per day in 2013) and high spec jack-ups (which went from peaks

in 2013 of more than $200,000 per day to $110,000 per day in

the first half of 2015).

The significant number of orders placed in previous years enabled

new offshore drilling rig construction activities to remain at

healthy levels, with 176 new rigs under construction

(115 jack-ups, 21 semi-submersibles and 40 drillships),

156 of which are slated for delivery by the end of 2016. Overall,

only 43 of these units have already secured contracts, while the

remainder will in the short to medium term contribute to a

significant increase in the global drilling services fleet. The

negative cycle affecting the market has however led to a number

of client companies postponing their newbuild rig deliveries

pending improved market conditions. The significant number of

new builds scheduled for delivery in the medium term, combined

with the retirements of a portion of the existing fleet cited above

represent a structural change in the offshore drilling segment

that may have significant effects over the medium to long term.

New contracts

The most significant contract awarded to Saipem during the

period was with National Drilling of Abu Dhabi in the United Arab

Emirates, involving the charter of the Perro Negro 8 for a

thirty-month period starting June 2015.

Capital expenditure

The principal investments made in the Offshore Drilling sector

during the first half of 2015 related principally to class

reinstatement works on the drillships Saipem 10000 and Saipem

12000 and on the drilling jack-up Perro Negro 8, as well as

maintenance and upgrading works on the existing asset base.

Work performed

In the first half of 2015, Saipem’s offshore units drilled 42 wells

totalling 84,848 metres.

The fleet was deployed as follows:

- deep-water units: the drillship Saipem 12000 continued to

operate in Angola for Total, while the drillship Saipem 10000

operated under a long-term contract with Eni in Cyprus and

then started planned maintenance operations; the

semi-submersible rig Scarabeo 9 operated in Angola on a

long-term contract with Eni; the semi-submersible rig

Scarabeo 8 continued to work in the Norwegian sector of the

Barents Sea for Eni Norge; the semi-submersible rig Scarabeo 7

continued to operate in Indonesia for Eni Muara Bakau under a

long-term contract; the semi-submersible rig Scarabeo 6

Offshore Drilling

Saipem Interim Consolidated Report as of June 30, 2015 / Operating review

001-058SaipemSem15Ing.qxd 6-08-2015 11:41 Pagina 25

Vessel Days under contract (1)

Semi-submersible platform Scarabeo 3 144

Semi-submersible platform Scarabeo 4 (2) 95

Semi-submersible platform Scarabeo 5 175

Semi-submersible platform Scarabeo 6 174

Semi-submersible platform Scarabeo 7 181

Semi-submersible platform Scarabeo 8 181

Semi-submersible platform Scarabeo 9 180

Drillship Saipem 10000 90

Drillship Saipem 12000 152

Jack-up Perro Negro 2 107

Jack-up Perro Negro 3 181

Jack-up Perro Negro 4 171

Jack-up Perro Negro 5 179

Jack-up Perro Negro 7 181

Jack-up Perro Negro 8 -

Tender Assisted Drilling Unit 172

Ocean Spur (3) 96

(1) For the remaining days (to 181) the vessel underwent class reinstatement and maintenance works as a result of technical issues.

(2) Vessel fully written down and slated for scrapping.

(3) Third party rig returned to client.

Saipem Interim Consolidated Report as of June 30, 2015 / Operating review

continued to operate in Egypt for Burullus; in mid-February the

semi-submersible rig Scarabeo 5 recommenced work in the

Norwegian sector of the North Sea for Statoil. Operations had

previously been suspended by the client due to adverse market

conditions. The vessel received the standby rate during this idle

period, which was used to complete upgrades;

- mid-water units: the semi-submersible rig Scarabeo 4

continued activities in Egypt on a contract for International

Egyptian Oil Co (IEOC) and was subsequently transferred to

Cyprus, placed in standby and slated for scrapping; after

completing operations in Nigeria for Addax,

the semi-submersible rig Scarabeo 3 carried out planned

maintenance operations and then began preparations for work

for FASL, which started towards the end of the reporting

period;

- high specifications jack-ups: the Perro Negro 8 completed

maintenance and upgrades before starting operations for

National Drilling Co (NDC) in the United Arab Emirates towards

the end of the period; the Perro Negro 7 continued operations

for Saudi Aramco offshore Saudi Arabia;

- standard jack-ups: the Perro Negro 3 and Perro Negro 2

continued operations in the United Arab Emirates for NDC, while

the Perro Negro 5 continued work for Saudi Aramco in Saudi

Arabia; the Perro Negro 4 continued to operate in the Red Sea

for Petrobel; the Ocean Spur, which is operated by Saipem and

owned by third parties, completed operations in Ecuador for

Petroamazonas and was then returned to its owners;

- other activities: in Congo, the tender assisted drilling unit TAD

continued work for Eni Congo SA, while operation of the

Loango-Zatchi platforms also proceeded; offshore Peru, work

was carried out for Pacific Offshore Energy and Savia.

Utilisation of vessels

Vessel utilisation in the first half of 2015 was as follows:

001-058SaipemSem15Ing.qxd 6-08-2015 11:41 Pagina 26

General overview

At June 30, 2015, Saipem’s onshore drilling rig fleet was

composed of 107 units. Of these, 100 are owned by Saipem, while

7 are owned by third parties but operated by Saipem. The areas of

operations were South America (Peru, Bolivia, Colombia, Ecuador,

Chile and Venezuela), Saudi Arabia, the Caspian Sea Region

(Kazakhstan and Turkmenistan), Africa (Congo), and Europe

(Italy).

Market conditions

The overall volume of investments by oil companies during the

first half of 2015 was down compared with the previous year.

Unlike in the previous period, where the Onshore Drilling segment

was less affected by the unfavourable market conditions than its

offshore counterpart, in the first half of 2015 the negative

market cycle and the weak oil price environment had a more

significant impact overall.

One of the geographical areas registering the biggest drops in

activity was the United States. During the second half of 2014,

the general market slowdown had been offset by the increase in

gas demand to meet storage requirements for winter use, but in

the first half of 2015, with this no longer a requirement, there

was a drastic fall in active rigs of approximately 50% compared

with the previous year.

Levels of activity on the international market, on which Saipem

operates, were not immune to the negative cycle either.

South America, which historically has always been an oil price

sensitive region, recorded the biggest fall in activity, of

approximately 30%. Given the Company’s significant deployment

of vessels in the country, the situation in Venezuela is

particularly critical for Saipem. The drops in activity seen in other

regions were smaller, although the only exception to the

declining trend was the Middle East, where levels of activity

remained substantially stable, thanks to the region’s key market,

Saudi Arabia, as well as to other countries with significant major

development programmes in place, such as Kuwait.

New contracts

New contracts for the use of fourteen drilling rigs in Italy and

South America, with durations ranging in length from four months

to two years, were awarded to the Group during the reporting

period by various clients.

Capital expenditure

The main investments made during the period in the Onshore

Drilling segment related to upgrading work on the existing asset

base.

Work performed

204 wells were drilled during the period, totalling approximately

401,837 metres drilled.

In South America, Saipem operated in a number of countries:

in Peru, work was carried out for various clients, including Cepsa,

China National Petroleum Corp, Pluspetrol, Gran Tierra, Perenco,

Hunt, and Savia, deploying nineteen company-owned rigs and

operating five rigs owned by clients or third parties; in Bolivia,

four rigs were deployed for YPFB Andina, Pluspetrol and Repsol;

in Chile, work continued for Empresa Nacional del Petróleo

(ENAP), deploying one rig, while operations on a second rig

started for Yacimientos Petrolíferos Fiscales (YPF); in Colombia,

where Saipem has six rigs, work was performed for various

clients, including Equion, Canacol, and Ecopetrol, while operations

were completed for Schlumberger; in Ecuador, four

company-owned rigs were deployed for various clients, including

Agip Oil and Petroamazonas, while work was completed for

Tecpeservices; finally, in Venezuela, work continued for PDVSA

involving the deployment of twenty-eight rigs.

In Saudi Arabia, Saipem deployed twenty-six rigs, continuing

operations for Saudi Aramco under previously acquired long-term

contracts.

In the Caspian Sea Region, Saipem operated in Kazakhstan for

various clients, including Karachaganak Petroleum Operating BV,

Agip KCO, and Zhaikmunai, using 4 rigs supplied by a partner and

4 owned rigs, one of which operated until May and then, at the

client’s request, was stacked due to adverse market conditions.

The stacking period will be paid for by the client. Operations with

the rig are due to start up again in October. In Turkmenistan, work

continued for Burren/Rheinisch-Westfälisches Elektrizitätswerk

AG using one rig.

In West Africa, Saipem continued to operate in Congo for Eni

Congo SA, using one company-owned rig and operating one

client-owned rig.

Saipem has one rig in both Tunisia and Mauritania. Neither rig

carried out operations during the first half of 2015.

Operations in Italy saw the deployment of one rig which

performed work for Total in the Tempa Rossa area. Another rig is

currently undergoing upgrading works in the country.

Onshore Drilling

Saipem Interim Consolidated Report as of June 30, 2015 / Operating review

001-058SaipemSem15Ing.qxd 6-08-2015 11:41 Pagina 27

Saipem Interim Consolidated Report as of June 30, 2015 / Operating review

Utilisation of rigs

The average utilisation of rigs in the first half of 2015 was 93.5%

(96.5% in the first half of 2014). At June 30, 2015,

company-owned rigs amounted to 100, located as follows: 28 in

Venezuela, 28 in Saudi Arabia, 19 in Peru, 6 in Colombia, 4 in

Kazakhstan, 4 in Bolivia, 4 in Ecuador, 2 in Italy, 1 in Chile, 1 in

Congo, 1 in Mauritania, 1 in Tunisia, and 1 in Turkmenistan.

Additionally, 5 third-party rigs were deployed in Peru, 1 in Congo

and 1 in Chile.

001-058SaipemSem15Ing.qxd 6-08-2015 11:41 Pagina 28

Financial and economic results

Saipem Interim Consolidated Report as of June 30, 2015 / Financial and economic results

As previously stated, revenues and associated profit levels,

particularly in the Engineering & Construction sectors, and, to a

lesser extent, in the Drilling sector, are not consistent over time,

as they are influenced not only by market performance but also

by climatic conditions and individual project schedules.

Consequently, the results from any one particular fiscal period

can vary significantly, thereby precluding a direct comparison

with the same period in other fiscal years or extrapolation of

figures from a single quarter to the entire year.

Given the conditions described over the preceding pages, market

prospects in the oil services sector are steadily worsening. Clients

are focusing on cost reduction, which results in a more rigid

approach to negotiations, demands for greater efficiency on

awarded projects, delays in new contract awards and, in some

cases, the cancellation of already approved projects.

Results of operations

Saipem Group - Income statement

Year First half

2014 (€million) 2014 2015 % Ch.

12,873 Net sales from operations 5,966 5,373 (9.9)

9 Other income and revenues 4-

(9,262) Purchases, services and other costs (4,118) (4,349)

(2,408) Payroll and related costs (1,197) (1,221)

1,212 Gross operating result (EBITDA) 655 (197) ..

(1,157) Depreciation, amortisation and impairment (362) (593)

55 Operating result (EBIT) 293 (790) ..

(199) Net finance expense (110) (110)

24 Net income from investments 17 7

(120) Result before income taxes 200 (893) ..

(118) Income taxes (64) (13)

(238) Result before non-controlling interests 136 (906) ..

8 Non-controlling interests -(14)

(230) Net result 136 (920) ..

Net sales from operations for the first half of 2015 amounted to

€5,373 million, representing a decrease of 9.9% compared to the

same period of 2014.

The gross operating result (EBITDA) amounted to -€197 million.

Depreciation and amortisation of tangible and intangible assets

amounted to €593 million.

The operating result (EBIT) for the first half of 2015 was -€790

million. The largest variations are analysed in detail in the

subsequent sections describing the performance of the various

business units.

Net finance expense increased by €110 million, which was in line

with the first half of 2014.

Net income from investments amounted to €7 million.

The result before income taxes amounted to -€893 million.

Income taxes amounted to €13 million. The decrease compared

to the first half of 2014 was principally due to a decrease in

taxable income.

The net result for the period was -€920 million.

Year First half

2014 (€million) 2014 2015

55 Operating result (EBIT) 293 (790)

410 Depreciation -211

465 Adjusted operating result (EBIT) 293 (579)

001-058SaipemSem15Ing.qxd 6-08-2015 11:41 Pagina 29

Saipem Interim Consolidated Report as of June 30, 2015 / Financial and economic results

In the first half of 2015, the Saipem Group reported net sales from

operations of €5,373 million, representing a decrease of

€593 million compared to the same period of the previous year.

This was mainly due to lower volumes registered in the Middle

East, Australia and North America.

Production costs (which include direct costs of sales and

depreciation of vessels and equipment) amounted to

€5,690 million, representing an increase of €255 million over the

first half of 2014. This was mainly due to the effect of the

write-downs of non-current assets and the increase in the

country risk.

Idle costs increased by €25 million, mainly due to the

semi-submersible Scarabeo 3, which was not under contract in

March, as well as to inactivity of a number of vessels in South

America.

Selling expenses amounted to €63 million.

Research and development costs included in operating costs

increased by €1 million.

General and administrative expenses amounted to €99 million,

representing an increase of €5 million.

The results of the business units were as follows:

Year First half

2014 (€million) 2014 2015 % Ch.

12,873 Net sales from operations 5,966 5,373 (9.9)

(11,916) Production costs (5,435) (5,690)

(116) Idle costs (61) (86)

(143) Selling expenses (70) (63)

(11) Research and development costs (5) (6)

(21) Other operating income (expenses) (8) (8)

(201) General and administrative expenses (94) (99)

465 Adjusted operating result (EBIT) 293 (579) ..

Operating result and costs by function

The write-down of €211 million against non-current assets is

related to vessels that are due to be scrapped because they are

no longer commercially viable for the execution of projects in the

order backlog and to Saipem’s components within logistics bases

that have been affected by the rescheduling and/or cancellation

of projects by their main clients, leading to reduced utilisation

compared with forecasts.

Year First half

2014 (€million) 2014 2015 % Ch.

12,873 Net sales from operations 5,966 5,373 (9.9)

9 Other income and revenues 4-

(9,262) Purchases, services and other costs (4,118) (4,349)

(2,408) Payroll and related costs (1,197) (1,221)

1,212 Gross operating result (EBITDA) 655 (197) ..

(747) Depreciation, amortisation and impairment (362) (382)

465 Adjusted operating result (EBIT) 293 (579) ..

(199) Net finance expense (110) (110)

24 Net income from investments 17 7

290 Adjusted result before income taxes 200 (682) ..

(118) Income taxes (64) (13)

172 Adjusted result before non-controlling interests 136 (695) ..

8 Non-controlling interests -(14)

180 Adjusted net result 136 (709) ..

001-058SaipemSem15Ing.qxd 7-08-2015 9:56 Pagina 30

Saipem Interim Consolidated Report as of June 30, 2015 / Financial and economic results

Revenues for the first six months of 2015 amounted to €1,048

million, representing a 44.6% decrease compared to the same

period of 2014. This was mainly attributable to lower volumes

recorded in the Middle East, Australia and North America.

The cost of sales, which amounted to €1,735 million, also

decreased compared with the same period of the previous year.

Depreciation and amortisation amounted to €21 million, which

was in line with the figure for the same period of 2014.

Adjusted operating result (EBIT) for the first half of 2015

amounted to -€708 million, compared with €81 million for the

same period of 2014. This was mainly due to lower revenues

generated by projects in the Middle East and Australia.

The operating result (EBIT) for the first half of 2015 amounted to

negative €758 million, compared with -€81 million for the same

period of 2014 due to the write-down of a yard.

Offshore Engineering & Construction

Year First half

2014 (€million) 2014 2015

7,202 Net sales from operations 3,184 3,388

(6,470) Cost of sales (2,857) (3,192)

732 EBITDA 327 196

(297) Depreciation, amortisation and impairment (147) (160)

435 Adjusted operating result (EBIT) 180 36

(160) Impairment -(150)

275 Operating result (EBIT) 180 (114)

Onshore Engineering & Construction

Year First half

2014 (€million) 2014 2015

3,765 Net sales from operations 1,890 1,048

(4,138) Cost of sales (1,952) (1,735)

(373) EBITDA (62) (687)

(38) Depreciation, amortisation and impairment (19) (21)

(411) Adjusted operating result (EBIT) (81) (708)

- Impairment -(50)

(411) Operating result (EBIT) (81) (758)

Revenues for the first half of 2015 amounted to €3,388 million,

representing a 6.4% increase compared to the same period of

2014, due mainly to higher volumes recorded in Azerbaijan and

Kazakhstan, which offset lower volumes registered in North and

South America.

The cost of sales amounted to €3,192 million, increasing

compared with the first half of 2014 consistently with the increase

registered in volumes. Depreciation and amortisation rose by

€13 million compared to the first six months of 2014, due to an

adjustment of the economic useful life of a vessel at December 31,

2014, which led to a revision of its depreciation schedule.

Adjusted operating result (EBIT) for the first half of 2015 amounted

to €36 million, compared with €180 million for the same period of

2014. This was mainly due to the cancellation of the South Stream

project and to lower revenues from projects in South America.

Operating result (EBIT) for the first half of 2015 amounted to

-€114 million versus €180 million in the first half of 2014, due to

write-downs of one yard and certain vessels.

Offshore Drilling

Year First half

2014 (€million) 2014 2015

1,192 Net sales from operations 556 538

(580) Cost of sales (278) (274)

612 EBITDA 278 264

(262) Depreciation, amortisation and impairment (123) (113)

350 Adjusted operating result (EBIT) 155 151

(250) Impairment -(11)

100 Operating result (EBIT) 155 140

001-058SaipemSem15Ing.qxd 6-08-2015 11:41 Pagina 31

Saipem Interim Consolidated Report as of June 30, 2015 / Financial and economic results

Onshore Drilling

Year First half

2014 (€million) 2014 2015

714 Net sales from operations 336 399

(473) Cost of sales (224) (369)

241 EBITDA 112 30

(150) Depreciation, amortisation and impairment (73) (88)

91 Operating result (EBIT) 39 (58)

Revenues for the first half of 2015 amounted to €399 million,

representing an increase of 18.8% compared with the same period

of 2014, due principally to an increase in activity in Saudi Arabia

and South America.

The cost of sales increased by €145 million compared with the

same period of 2014, principally due to an increase in the country

risk.

Depreciation and amortisation amounted to €88 million,

representing an increase of €15 million compared with the same

period of 2014, due mainly to a higher level of activities in Saudi

Arabia and South America.

EBIT for the first half of the year totalled -€58 million compared

with €39 million for the first half of 2014 due to the write-down

recorded against a portion of overdue receivables in the light of an

increase in the country risk.

Revenues for the first half of 2015 amounted to €538 million,

down 3.2% on the same period of 2014. This was due to decreases

in revenue from the drillship Saipem 10000 and the drilling

jack-up Perro Negro 8 as a result of class reinstatement works

performed during the period and from the semi-submersible

platform Scarabeo 3, which was not under contract in March.

The drop in revenue from the above vessels was partially offset

by an increase in revenue from the Scarabeo 7, which was fully

operative during the period, having undergone preparatory works

during the same period of 2014.

The cost of sales €274 million was almost in line with the same

period of 2014.

Depreciation and amortisation fell by €4 million compared with

the first half of 2014.

Adjusted operating result (EBIT) for the first half of 2015

amounted to €151 million, compared with €155 million in the

first half of 2014, with the margin on revenues remaining almost

unchanged.

The operating result (EBIT) for the first half of 2015 amounted to

€140 million, compared to €155 million in the first half of 2014,

while the margin on revenues fell from 27.9% to 26% due to the

write-down of the semi-submersible Scarabeo 4.

001-058SaipemSem15Ing.qxd 6-08-2015 11:41 Pagina 32

Saipem Interim Consolidated Report as of June 30, 2015 / Financial and economic results

Management uses the reclassified consolidated balance sheet to

calculate key ratios such as the Return On Average Capital

Employed (ROACE) and leverage (used to indicate the robustness

of a company’s capital structure).

Non-current assets at June 30, 2015 stood at €8,248 million, a

decrease of €225 million compared to December 31, 2014.

The decrease was the result of capital expenditure of €269

million; negative changes in investments accounted for using the

equity method of €11 million, depreciation and amortisation of

€382 million, write-downs of €211 million and the positive effect

of €110 million deriving mainly from the translation of financial

statements in foreign currencies and other changes.

Net current assets increased by €572 million, from positive

€297 million at December 31, 2014 to positive €869 million at

June 30, 2015.

The provision for employee benefits amounted to €240 million,

representing an increase of €3 million compared with December

31, 2014.

As a result of the above, net capital employed increased by

€275 million, reaching €8,877 million at June 30, 2015,

compared with €8,602 million at December 31, 2014.

Shareholders’ equity, including non-controlling interests,

decreased by €832 million, to €3,346 million at June 30, 2015,

compared with €4,178 million at December 31, 2014.

This decrease reflected the negative effect of the net result for the

period of €906 million, the negative effect of changes in the fair

value of exchange rate and commodity hedging instruments of

€15 million and the positive effect of the translation into euro of

financial statements expressed in foreign currencies and other

variations amounting to €89 million.

The increase in net capital employed, which was greater than the

increase in shareholders’ equity, led to an increase in net

borrowings which, at June 30, 2015, stood at €5,531 million,

compared with €4,424 million at December 31, 2014,

representing an increase of €1,107 million.

The reclassified consolidated balance sheet aggregates asset and

liability amounts from the statutory balance sheet according to

function, under three basic areas: operating, investing and

financing.

Management believes that the reclassified consolidated balance

sheet provides useful information that helps investors to assess

Saipem’s capital structure and to analyse its sources of funds and

investments in fixed assets and working capital.

June 30, 2014 (€million) Dec. 31, 2014 June 30, 2015

7, 910 N e t t a n g i b l e a s s e t s 7, 6 01 7, 3 83

759 Net intangible assets 760 758

8,669 8,361 8,141

3,804 - Offshore Engineering & Construction 3,666 3,462

590 - Onshore Engineering & Construction 590 544

3,332 - Offshore Drilling 3,034 3,031

943 - Onshore Drilling 1,071 1,104

169 Investments 112 107

8,838 Non-current assets 8,473 8,248

1,308 Net current assets 297 869

(221) Employee termination indemnities (237) (240)

- Assets (liabilities) available for sale 69 -

9,925 Net capital employed 8,602 8,877

4,773 Shareholders’ equity 4,137 3,288

48 Non-controlling interests 41 58

5,104 Net debt 4,424 5,531

9,925 Funding 8,602 8,877

Leverage (net borrowings/shareholders’ equity

1.06 including non-controlling interests) 1.06 1.63

441,410,900 No. shares issued and outstanding 441,410,900 441,410,900

(1) See ‘Reconciliation of reclassified balance sheet, income statement and cash flow statement to statutory schemes’ on page 57

Balance sheet and financial position

Saipem Group - Reclassified consolidated balance sheet (1)

001-058SaipemSem15IngxTipo.qxd 8-09-2015 10:51 Pagina 33

Saipem Interim Consolidated Report as of June 30, 2015 / Financial and economic results

A breakdown by currency of gross debt, amounting to

€7,001 million, is provided in Note 14 ‘Short-term debt’ and Note

19 ‘Long-term debt and current portion of long-term debt’.

Statement of comprehensive income

First half

(€million) 2014 2015

Net profit (loss) for the period 136 (906)

Other comprehensive income:

- change in the fair value of cash flow hedges (*) (48) (68)

- exchange rate differences arising from the translation into euro of financial statements currencies other than the euro 19 86

- share of other comprehensive income of investments accounted for using the equity method (1) -

- income tax relating to other items of comprehensive income 17 53

Total other comprehensive income, net of taxation (13) 71

Total comprehensive income (loss) for the period 123 (835)

Attributable to:

- Saipem Group 123 ( 852)

- non-controlling interests -17

(*) The change in the fair value of cash flow hedges relates almost exclusively to transactions with the parent company Eni.

Shareholders’ equity including non-controlling interests

(€million)

Shareholders’ equity including non-controlling interests at December 31, 2014 4,178

Total comprehensive income for the period (906)

Dividend distribution -

Sale of treasury shares -

Other changes 74

Total changes (832)

Shareholders’ equity including non-controlling interests at June 30, 2015 3,346

Attributable to:

- Saipem Group 3,288

- non-controlling interests 58

Analysis of net borrowings

June 30, 2014 (€million) Dec. 31, 2014 June 30, 2015

(1) Financing receivables due after one year (1) (1)

- Payables to banks due after one year 250 -

3,125 Payables to other financial institutions due after one year 3,064 3,477

3,124 Net medium/long-term debt 3,313 3,476

(1,393) Accounts c/o bank, post and Group finance companies (1,595) (1,424)

- Available-for-sale securities (9) (8)

(8) Cash and cash on hand (7) (5)

(55) Financing receivables due within one year (58) (32)

465 Payables to banks due within one year 277 465

2,971 Payables to other financial institutions due within one year 2,503 3,059

1,980 Net short-term debt 1,111 2,005

5,104 Net debt 4,424 5,531

The fair value of derivative assets (liabilities) is detailed in Note 7 ‘Other current assets’ and Note 18 ‘Other current liabilities’.

001-058SaipemSem15Ing.qxd 6-08-2015 11:41 Pagina 34

Saipem’s reclassified cash flows statement derives from the

statutory cash flow statement. It enables investors to understand

the link existing between changes in cash and cash equivalents

(deriving from the statutory cash flow statement) and in net

borrowings (deriving from the reclassified cash flows statement)

that occurred between the beginning and the end of the period.

The measure enabling such a link is represented by the free cash

flow, which is the cash in excess of capital expenditure

requirements. Starting from free cash flow it is possible to

determine either: (i) changes in cash and cash equivalents for the

period by adding/deducting cash flows relating to financing

debts/receivables (issuance/repayment of debt and receivables

related to financing activities), shareholders’ equity (dividends

paid, net repurchase of treasury shares, capital issuance) and the

effect of changes in consolidation and of exchange differences; or

(ii) changes in net borrowings for the year by adding/deducting

cash flows relating to shareholders’ equity and the effect of

changes in consolidation and of exchange rate differences.

Reclassified cash flow statement (1)

Year First half

2014 (€million) 2014 2015

(230) Net result for the period 136 (920)

(8) Non-controlling interests -14

Adjustments to reconcile cash generated from operating result before changes in working capital:

1,011 Depreciation, amortisation and other non-monetary items 338 487

(2) Net (gains) losses on disposal and write-off of assets (3) (17)

291 Dividends, interests and income taxes 145 106

1,062 Net cash generated from operating result before changes in working capital 616 (330)

569 Changes in working capital related to operations (382) (334)

(433) Dividends received, income taxes paid, interest paid and received (184) (188)

1,198 Net cash flow from (used in) operations 50 (852)

(694) Capital expenditure (329) (268)

(9) Investments and purchase of consolidated subsidiaries and businesses (2) (1)

15 Disposals 797

- Other cash flow related to capital expenditures, investments and disposals - -

510 Free cash flow (274) (1,024)

(10) Borrowings (repayment) of debt related to financing activities 1 28

(170) Changes in short and long-term financial debt 414 817

- Sale of treasury shares --

(45) Cash flow from capital and reserves (44) 1

18 Effect of changes in consolidation and exchange differences 5 5

303 NET CASH FLOW FOR THE PERIOD 102 (173)

510 Free cash flow (274) (1,024)

- Sale of treasury shares --

(45) Cash flow from capital and reserves (44) 1

(129) Exchange differences on net borrowings and other changes (26) (84)

336 CHANGE IN NET BORROWINGS (344) (1,107)

(1) See ‘Reconciliation of reclassified balance sheet, income statement and cash flow statement to statutory schemes’ on page 57.

Net cash flow used in operations (negative €852 million)

together with capital expenditures of €172 million generated a

negative free cash flow of €1,024 million.

Cash flow from capital and reserves amounted to €1 million; the

effect of exchange differences on net borrowings and other

changes produced a net negative effect of €84 million.

As a result, net borrowings increased by €1,107 million.

In particular:

Net cash generated from operating result before changes in

working capital of negative €330 million related to:

- the net result for the period of negative €906 million;

- depreciation, amortisation and impairment of tangible and

intangible assets of €593 million, after negative changes in

investments accounted for using the equity method of

€11 million and other changes of negative €117 million;

- net gains on the disposal of assets, which had an impact of

negative €17 million;

- net finance expense of €93 million and income taxes of

€13 million.

Saipem Interim Consolidated Report as of June 30, 2015 / Financial and economic results

001-058SaipemSem15Ing.qxd 6-08-2015 11:41 Pagina 35

Saipem Interim Consolidated Report as of June 30, 2015 / Financial and economic results

The negative change in working capital related to operations of

€334 million was due to financial flows of projects underway.

Dividends received, income taxes paid, interest paid and received

during the first half of 2015 of €188 million were mainly related

to taxes paid and refunded and to the purchase and sale of tax

credits.

Capital expenditure on tangible and intangible assets amounted to

€268 million. Details of investments by sector are as follows:

Offshore Drilling (€107 million), Offshore Engineering

&Construction (€82 million), Onshore Drilling (€62 million) and

Onshore Engineering & Construction (€17 million). Additional

information concerning capital expenditure during the first half of

2015 can be found in the ‘Operating Review’ section.

Investments and purchase of consolidated subsidiaries and

businesses amounted to €1 million.

Cash flow generated by disposals amounted to €97 million.

Return On Average Capital Employed

(ROACE)

Return On Average Capital Employed is calculated as the ratio

between adjusted net result before minority interest, plus net

finance charges on net borrowings less the related tax effect and

net average capital employed. The tax rate applied on finance

charges is 27.5%, as per the applicable tax legislation.

Return On Average Operating Capital

To calculate the Return On Average Operating Capital, the average

capital employed is netted of investments in progress that did not

contribute to net result for the period, which amounted to €0

million at December 31, 2014, €295 million for the twelve-month

period ended June 30, 2014 and €0 million for the twelve-month

period ended June 30, 2015.

Key profit and financial indicators

Dec. 31, 2014 June 30, 2014 June 30, 2015

Net result (€million) (238) 322 (1,280)

Exclusion of finance costs on borrowings (net of tax effect) (€million) 144 151 144

Unlevered net result (€million) (94) 473 (1,136)

Capital employed, net: (€million)

- at the beginning of the period 9,504 9,193 9,925

- at the end of the period 8,602 9,925 8,877

Average capital employed, net (€million) 9,053 9,559 9,406

ROACE (%) (1.04) 4.9 (12.1)

Return On Average Operating Capital (%) (1.05) 5.1 (12.3)

Net borrowings and leverage

Saipem management uses leverage ratios to assess the

soundness and efficiency of the Group’s capital structure in terms

of an optimal mix between net borrowings and shareholders’

equity, and to carry out benchmark analyses against industry

standards. Leverage is a measure of a Company’s level of

indebtedness, calculated as the ratio between net borrowings and

shareholders’ equity, including non-controlling interests.

June 30, 2014 June 30, 2015

Leverage 1.06 1.63

001-058SaipemSem15Ing.qxd 6-08-2015 11:41 Pagina 36

Sustainability

Saipem Interim Consolidated Report as of June 30, 2015 / Sustainability

Saipem operates a complex network of activities, each of which is

expected to contribute to ensuring balanced and sustainable

development in the communities and geographical areas in which

the Company operates in order to improve competitiveness and

help maintain a long-term license to operate. For this reason, it is

of primary importance for Saipem to be able to build and maintain

strong relations with all of its stakeholders, engaging and

involving them and endeavouring to fully understand their needs

and their expectations.

The Sustainability Committee1, which exercises a sustainability

strategy-setting role and is chaired by the CEO, meets to discuss

and approve the Company’s sustainability strategy, to verify its

implementation on the ground and to monitor the progress being

made on the sustainability initiatives planned at its operating

companies. One of the tools used to do this is a Management by

Objectives system, whose aim is to ensure that sustainability

principles and values are translated into concrete business

actions. The first half of 2015 brought the completion of the

definition of the MBOs targets for the year for 60 managers at

Saipem SpA and Group operating companies, in accordance with

high level Company targets set by top management and focusing

particularly on the material issues identified as a result of the

materiality analysis carried out in 2014.

The Sustainability Committee met in an official capacity during the

first half of the year to discuss the results achieved in 2014, to

approve the 2014 Sustainability Report, and to lay down lines of

action for the forthcoming year. The Committee is scheduled to

meet again during the first half of 2015 to discuss planned

activities and projects underway and to monitor progress being

made.

Measuring value creation

in local communities

Increasing the level of Local Content is one of the key elements of

Saipem’s sustainability strategy. The Company actively pursues

the objective of promoting sustainable development and creating

wealth and well-being by maximising the number of local

employees and suppliers and by contributing to developing their

capabilities and know-how.

Since 2009, Saipem has used a model developed in-house known

as SELCE (Saipem Externalities Local Content Evaluation) that

enables the analysis and quantification of the value generated

(i.e. the direct, indirect and induced effects, measured in terms of

economic value, employment and human capital development) by

the Local Content strategy over a given time frame and in a

specific geographical situation.

The first half of 2015 saw the completion of the model’s

application on the El Encino-Topolobampo project in Mexico at the

request of the client. The principal indicators used by the model

showed a total economic impact of approximately €420 million

for the 2013-2014 period and a contribution of 0.03% to the

country’s GDP in 2014. The model was applied to Chihuahua and

Sinaloa states only, which are the geographical areas most

affected by operations. Respectively, total economic impacts of

€160 million and €64 million and contributions to state GDP of

0.40% and 0.20% were calculated for 2014.

During the second half of the year, the model will be applied to the

other significant operating companies of the Saipem Group.

Saipem continued during the first half of the year with its efforts

to monitor and improve the social impacts of its operations,

particularly in relation to human rights. This drive saw Saipem

dialogue with its external stakeholders, such as ratings agencies

and clients, on initiatives currently underway, including major

projects such as South Stream, as well as working on a Social

Responsibility campaign aimed at Saipem vendors and a Human

Rights Training Programme.

Sustainability reporting

The first half of 2015 saw the completion and publication of the

annual sustainability reporting documents ‘Sustainability

Performance 2014’ – published as an addendum to the Annual

Report – and ‘Saipem Sustainability 2014’. Both documents, which

are approved by the Board of Directors and audited by the

independent auditor Reconta Ernst & Young SpA, are prepared in

accordance with the international guidelines of the Global

Reporting Initiative (GRI - version G3) and are designed to furnish

readers with greater detail with regard to the commitments

undertaken, the initiatives carried out and the results achieved by

Saipem in relation to the issues identified by the materiality

analysis, which is conducted in collaboration with the Company’s

stakeholders.

(1) The Saipem Sustainability Committee is composed of the Chief Executive Officer (Chairman) plus the heads of the Company’s business areas and managers of key functions.

001-058SaipemSem15Ing.qxd 6-08-2015 11:41 Pagina 37

Saipem Interim Consolidated Report as of June 30, 2015 / Research and development

Research and development

Technological innovation is one of the key drivers of Saipem’s

competitiveness. An essential factor in the Company’s success in

most of our activities, innovation enables us to identify and

anticipate the future needs of the Oil & Gas industry and offer our

clients the most advanced solutions, capture new and challenging

opportunities, achieve improved operational performance and

reduce the environmental impact of our construction activities.

Technological innovations at Saipem are usually developed in

steps, from idea through to application or conceived on projects or

the Company’s proprietary assets and vessels as the result of a

problem-solving approach.

Research and development activities at Saipem are organised into

thematic areas directly coinciding with the activities of the

business units with the aim of ensuring clearer alignment with

their strategies and fostering an effective transfer of the fruits of

Saipem’s technology development efforts to the business areas.

During the first half of 2015, the Offshore Business Unit focused

its development efforts primarily on the Subsea (SURF and

Subsea Processing) and pipelines areas. In addition, work was

carried out in relation to materials technologies, which are of

interdisciplinary interest for both of the first two areas.

Significant results were achieved during the reporting period in

the SURF (Subsea, Umbilicals, Risers and Flowlines) segment,

including:

- the first commercial application of an innovative downline for

commissioning and intervention operations on subsea

pipelines;

- work continued during the period for the industrialisation of a

J-lay installation method adapted to plastic-lined pipes.

Tests simulating offshore installation conditions were

conducted successfully;

- in relation to active heating using pipe-in-pipe technology, a

campaign of demonstration tests for the development and

qualification of a technology suitable for J-lay installation was

completed in early 2015. The design arrangement and the

solution for the connection of electrical cables and of the

temperature monitoring system were confirmed. Further

qualification activities are planned for the remainder of 2015.

In the subsea processing segment, work continued during the

period on the development of a number of innovative subsea

processing systems in partnership with various leading oil

companies.

- a second qualification campaign to achieve design

improvements is being carried out on the proprietary ‘Spoolsep’

liquid/liquid gravity separation system. In parallel, a JIP (Joint

Industry Project) funded by leading oil companies and focusing

on the application of the system in cases of specific interest to

the partners was launched in early 2015;

- technology refinements continued during the period on the

subsea water treatment system developed jointly with

Total/Veolia for the removal of sulphates present in seawater.

In parallel with the technology development activities mentioned

above, following the completion of a study to develop

standardised interfaces for subsea processing plants (‘subsea

factories’) carried out in collaboration with Statoil, a programme

for the industrialisation of subsea production technologies

developed by Saipem is now underway.

A number of innovative laying technologies for export lines and

trunklines are ready for commercial application, including:

- development activities for the Anti-Flooding Tool (AFT) system,

which prevents the flooding of the pipe during the installation

phase, were completed and two units have been installed and

are ready for use on a pipelay vessel;

- industrialised versions of the new IAU acoustic measurement

tool for remotely measuring internal pipe ovality to prevent

buckling during S and J-lay operations have been installed on a

number of pipelay vessels and are awaiting final

commissioning. Currently, technological qualification is being

conducted on the measurement system;

- a new automated field joint coating system for sealines,

capable of significantly reducing coating cycle times in the

firing line, was built, qualified and successfully tested on board

a pipelay vessel.

Meanwhile, the plasma welding technology developed in recent

years, which enhances weld seam quality and production rates on

carbon steel and clad pipelines, has seen increasing and

successful application on commercial projects.

The focus of the Floater business line during the half-year period

was primarily on high-end technological solutions, such as FLNG

and floaters for harsh/Arctic conditions. In the Floating LNG

technology segment, the focus was on the following areas:

- creation of innovative solutions for floating liquefaction

facilities with the objective of achieving more efficient and safer

gas production under increasingly challenging conditions;

- qualification of a tandem LNG offloading system using floating

flexible hoses in collaboration with an industrial partner.

The Drilling Business Unit concentrated mainly on the adoption of

new drilling techniques and rigs for harsh conditions. This

involved:

- monitoring of methods and equipment for the Managed

Pressure Drilling market;

- development of designs for drilling rigs suited to Arctic

conditions.

In addition, a recently developed package of new technologies

based on a ‘green design’ approach became available.

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Saipem Interim Consolidated Report as of June 30, 2015 / Research and development

The package offers solutions designed to minimise the

environmental impact and maximise the energy-saving

capabilities of the next generation of drilling semi-submersibles

and drillships (Moss EcoDriveTM, Moss EcoLNGTM and Moss

EcoGreenTM).

The Onshore E&C Business Unit focused mainly on the

optimisation of proprietary licensed process technologies and

innovative solutions for selected non-proprietary business

segments (LNG, heavy oil, gas monetisation) in order to increase

the value proposition to clients, principally in the energy

efficiency and environment fields.

Implementation started of a long-term development plan designed

to ensure that the competitiveness of proprietary fertilizer

production technology ‘SnamprogettiTM Urea’ is maintained at

maximum levels. Activities underway as part of this drive include:

- yield improvement through the use of the innovative

‘SupercupsTM’ trays in the reactor, which were successfully

tested in two commercial facilities in 2014 and which are now

ready to bring to market;

- improved corrosion resistance and cost reductions through the

development of new construction materials;

- a reduction in energy consumption through the optimisation of

utility systems;

- reduction of environmental impact (‘Urea Zero Emissions’

programme) through highly innovative solutions currently

under development.

In relation to non-proprietary technologies, work done during the

period included a comprehensive study of the regasification of

liquefied natural gas, which is nearing completion. The study is

looking at a number of different options for reducing energy

consumption compared with currently technology.

Other work focused on developments to improve energy efficiency

and reduce environmental impacts, with a wide range of potential

applications (e.g. use of renewable energy in process facilities,

optimisation of Life Cycle Assessment methodologies).

The period also saw an increased effort devoted to two significant

cross-business themes, Oil Spill Response and Pipeline Integrity

Management.

Lastly, the 15 patent applications filed by the Company during the

first half of the year provided confirmation of the significant

efforts made by Saipem in the area of technological innovations

during the period.

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Quality, Safety and Environment

Saipem Interim Consolidated Report as of June 30, 2015 / Quality, Safety and Environment

Quality

As part of the Bring Quality to the Next Level programme, work

was carried out for the homogenisation and migration of the

Document Management System at all subsidiaries from November

until its conclusion in January. System content can be accessed

by all Saipem employees.

A gap analysis between existing documentation and the new

Corporate documentation under development has been

commenced at all subsidiaries, with the aim of cutting down on

the number of local documents.

The analysis of processes performed on the project identified

improvements to cross-cutting processes relating to welding and

plant completion.

The final part of the previous year saw the creation of two

cross-cutting work groups. Work on the cross-cutting welding

processes ended with the sharing of a series of responsibility

matrices. A procedure is currently in the process of being issued.

As part of the Cost Structure Optimisation project, the period saw

the start of an analysis of Quality cost centres used worldwide

with the aim of homogenising them and monitoring costs

allocated to them.

A quality management review approved the ISO 9001 multi-sites

certification model. Use of this model will produce a cost saving

and will lead to ISO 9001 certification of the Corporate quality

management system at all companies and branches where it is

required.

Currently, work is being carried out to select the certifying body

which will provide certification services worldwide.

The process will run from December 2015 until recertification of

Saipem SpA. During the subsequent three-year period, Saipem

subsidiaries and branches will also gradually achieve certification.

The period also saw the continuation of the following activities:

- issue of corporate standards and technical instructions with the

aim of ensuring uniformity and integration of quality assurance

and quality control at the business lines (approximately forty

documents issued in the period);

- improvement and redefinition of Technical and Vessel

Document Systems;

- a review of the reporting system launched in 2013 for quality

activities at branches/subsidiaries (Company and project level);

- review of KPIs for all processes in accordance with output of

‘Regulatory System Improvement’ project;

- modification to Quality System Internal Audit planning and

performance in accordance with new Process definition and

Process Owners;

- measurement of customer satisfaction.

Safety

Saipem’s safety performance in the first half of 2015 was

generally in line with the overall performance recorded in 2014.

The recordable incidents index (TRIFR) stood at 1.10, which is very

close to the final result of 1.09 posted in the previous year.

This positive outcome is closely correlated to a series of technical

and cultural initiatives conducted at the Company. The main

initiatives conducted during the reporting period were as follows:

- ongoing delivery to personnel of the cultural change

programme, Leadership in Health and Safety, which from 2007

has seen the participation of Saipem personnel at all levels.

The initial one and a half day interactive workshop for Company

management has now been delivered more than 900 times,

while the cascading event designed to ensure direct

dissemination by management to their own team of the

messages contained in the opening workshop has been held on

over a thousand occasions. Saipem-wide delivery of both the

internal training program, ‘Five Stars’, whose aim is to ensure

the effective management of unsafe behaviours and the

‘Leading Behaviours’ campaign, designed to foster the spread

and embedding within the Saipem DNA of the 5 non-negotiable

behaviours, also continued during the period. Meanwhile, the

fifth phase of LiHS program ‘Choose Life’, which is designed to

raise awareness among employees of the importance of a

healthy lifestyle, reached its 500th edition during the first half

of 2015;

- in parallel with the LiHS programme’s training initiatives, on the

occasion of the World Day for Safety and Health at work on April

28, the LHS Foundation and Saipem launched a three-day

initiative called ‘Italia loves sicurezza’ (Italy loves safety) in

three Italian cities, as part of an international campaign to raise

public awareness about emerging trends in the field of health

and safety at work, with the ultimate goal of furthering the

prevention of occupational injury and illness on a global level;

- the initiatives organised in connection with the day also

included the launch of an in-house competition connected with

the ‘Sharing Love For Health And Safety’ campaign.

The competition, entitled the ‘Safe & Sound Contest’, received

more than 40 video entries from all around the Saipem world;

- also in April, the LHS Foundation and Saipem supported the

participation by Saipem employees in the ‘Milano Relay

Marathon 2015’, with the objective of helping to promote the

adoption of active healthy lifestyles within the Company;

- the ‘Keep Your Hands Safe’ campaign continued during the

period at a number of the Group’s operating sites.

The campaign, which aims to reduce the frequency of hand

injuries, saw a number of workshops connected with the theme

‘Know Your Barriers’ held at various offshore drilling rigs;

- the campaign to promote the ‘Life-Saving Rules’ developed by

the OGP (International Association of Oil & Gas Producers) will

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Saipem Interim Consolidated Report as of June 30, 2015 / Quality, Safety and Environment

shortly be finalised and launched. The campaign aims to step

up efforts to call attention to the life-saving rules and to shine a

spotlight on dangerous activities and on the actions that

individuals can take to protect both themselves and others;

- in terms of information tools and systems, work ongoing during

the period included updates to the HSE training portal ‘Delphi’,

the release of HSE audit application ‘Corinth’, which will enable a

shared database to be established, and the deployment of a

‘Safety Dashboard’, which will enable users to monitor Saipem

accident and incident trends in real-time, with data viewable for

the Group as a whole, by business unit and by activity.

Meanwhile, testing continued on new accident management

application ‘Prometheus’, which is designed to facilitate the

statistical analysis of HSE incidents at the Company.

Environment

Saipem aims to achieve the continuous improvement of its

environmental performance and adopts strategies designed to

reduce all types of impact and to promote the conservation and

enhancement of natural resources.

To achieve this goal means promoting a high level degree of

environmental awareness at all Saipem projects, sites and offices.

During the first half of 2015, Saipem once again stepped up its

effort in relation to a wide number of aspects, including:

- Energy efficiency: energy diagnostics were planned and

conducted at a number of offices and an onshore drilling rig.

Energy diagnostics are also due to be conducted in the coming

months at a fabrication yard. The objective of energy

diagnostics is to identify technical solutions for achieving

enhanced energy efficiency that will be implemented in

2015-2016. Saipem also aims to gather together all of the

‘best practices’ adopted in relation energy efficiency.

- Waste management: Saipem organised a technical workshop on

waste management and related legislative developments in

Italy. Meanwhile, from an operational point of view the Company

focused on reducing the quantity and hazardousness of the

waste it produces.

- Environmental awareness raising initiatives: to coincide with

‘World Environmental Day’ (WED), which was celebrated in

June, a number of initiatives were launched to motivate and

raise the awareness of personnel with regard to environmental

sustainability.

As always, all of the health, safety and environment initiatives

mentioned above are part of a wider process of continuous

improvement based on the careful analysis of incidents and

accidents, the findings of HSE audits and HSE management

reviews. Reviews are conducted at individual business unit level

to ensure a greater depth of analysis.

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Human resources and health

Human Resources Management

The first period of 2015 saw the Human Resources Management

function continue its efforts to define and implement internal cost

structure optimisation initiatives and to align contractual and

expatriation instruments and procedures with developments in

the applicable national and international legislation, pursuant to

its role of guidance, coordination and control over decentralised

Human Resources functions (business and geographical area HR

functions in Italy and abroad).

Meanwhile, the review of Company documentation relating to key

human resource processes currently underway continued during

the period. The aim of the review is to ensure continuous updating

of human resource management processes in accordance with all

relevant developments in national and international legislation

and regulations, as well as to achieve their continuous

improvement. One of the key outcomes of the review was the

issue of a new Company standard, which will enable all Saipem

Group companies around the world to establish shared rules for

assigning company cars.

Process roll-out/digitalisation actions also continued, in step with

the latest relevant technological developments, bringing during

the period the development of dedicated information tools

designed to ensure an even more effective and accurate

monitoring of Human Resource activities. This included the roll out

to a number of important Saipem companies of various tools that

were already in place in Italian offices, thus increasing the

integration of Saipem’s process governance systems.

Industrial Relations

The Company has for many years now been working to

consolidate a model of industrial relations that aims to harmonise

and achieve optimal management of relations with trade unions,

employers’ associations, institutions and public bodies in line with

Company policies.

In view of the global nature of the environment in which Saipem

operates today, which encompasses a wide range of

socio-economic, political, industrial and legislative situations and

conditions, continuous monitoring of the industrial relations

model in place is fundamental.

In Italy, the first half of 2015 saw a large number of important

moments of discussion and dialogue, which were conducted in

accordance with the consolidated working relationship already

established with trade union organisations.

With a view to further reinforcing the participatory model of

Industrial Relations, the Company and the trade union

organisations continued discussions focused on establishing an

Industrial Relations protocol that recognises the centrality of

communication, negotiation and dialogue.

Internationally, the reporting period saw the renewal of important

collective labour agreements in Nigeria, in the engineering and

construction sector, in Peru and Nigeria, in the drilling sector and,

finally, in Canada, in the fabrication sector.

The signing of the new agreements was also an opportunity to

consolidate the provisions of the agreements, through the

introduction of enhanced resolution mechanisms for industrial

disputes and the inclusion of clear references to the Code of

Ethics. The aim of this latter aspect was to encourage our trade

union partners to take full ownership of the fundamental

principles underlying Saipem’s business approach, with the aim of

securing maximum applicability and buy-in, through a

commitment by the unions to respect the principles and to work

to promote them amongst the Saipem workforce.

Finally, the first half of 2015 also brought the renewal for the

2015-2018 period of the Construction Barge Agreement with the

International Transport Workers’ Federation (ITF), which covers

maritime personnel working on twelve vessels in the Saipem fleet.

Development, Organisation,

Compensation and Senior Manager

Administration

In terms of organisational developments, the first half of 2015

brought a redefinition of the operating model for engineering

activities, which saw the Business Units assigned direct

management of engineering competencies specific to their

respective areas, as well as governance of project engineering

activities.

Work also continued during the period to align the organisational

structures of subsidiaries and branches with the newly

introduced organisational models adopted for engineering and

fabrication activities.

The following measures were taken with a view to securing the

continuous improvement of company governance and the system

of internal controls and risk management:

- drive to secure adoption by joint ventures of instruments of

organisational governance;

- continuation of the programme of improvements currently

underway on the Company regulatory system with a view to

achieving rationalisation and simplification.

Saipem’s 2015 Remuneration Policy was again defined in

accordance with the governance model adopted by the Company

Saipem Interim Consolidated Report as of June 30, 2015 / Human resources and health

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Saipem Interim Consolidated Report as of June 30, 2015 / Human resources and health

and the recommendations included in the Corporate Governance

Code, with the aim of attracting and retaining highly skilled

professional and managerial resources and aligning the interests

of management with the priority objective of value creation for the

shareholders in the medium-long term.

The 2015 Remuneration Report was prepared in compliance with

the legal obligations pursuant to Article 123-ter of Legislative

Decree No. 58/1998 and with Article 84-quater of the Consob

Issuers’ Regulation. The Saipem Board of Directors approved the

2015 Remuneration Report on March 10, 2015, while the

Company’s shareholders voted in favour of the First Section of the

Report at their meeting on April 30, 2015.

The 2015 Remuneration Policy Guidelines call for the setting of

challenging 2015 goals, which will be built into management

assessments.

In keeping with the Company’s Strategic Plan, the performance

targets assigned are designed to allow the guidance, monitoring

and assessment of actions related to cost containment and to the

monitoring, development and promotion of skills critical for

business requirements and for the attainment of long-term

business objectives.

In order to provide an incentive-based loyalty program for the

Company’s key managers, with the aim of strengthening their

participation in business risk, improving the Company’s

performances, and maximising value for shareholders in the long

term, the Company confirmed the adoption of the Long-Term

Monetary Incentive Plan for critical managerial resources for the

three-year period 2015-2017 which, as with the plan approved in

2014, uses both Total Shareholder Return and ROACE as

performance parameters. The Plan was approved by the Saipem

Board of Directors on March 10, 2015, while the Company’s

shareholders voted in favour of its adoption at their meeting on

April 30, 2015.

During the first half of 2015, an analysis and review of the

development, training, selection and skill management processes

was launched with a view to consolidating the alignment between

the business strategy and the people strategy and to improving,

simplifying, and increasing the effectiveness of the processes

and tools in place.

The work focused on segmenting criteria, strategic resource

planning, succession plans and the performance assessment

system.

Actions were implemented designed to enable Saipem and its

employees to maint