Santorini gets a long-term West Africa campaign, giving Saipem one less idle-rig concern

Saipem S.p.A., listed on Euronext Milan under the ticker SPM, has secured an offshore drilling contract worth approximately $260 million from Eni Côte d’Ivoire Limited. The seventh-generation Santorini drillship will support a long-term development drilling campaign offshore Côte d’Ivoire beginning in early 2027. The firm programme includes the possibility of deploying the rig in neighbouring countries and contains additional optional periods that could extend its utilisation beyond the initial commitment. The award strengthens Saipem’s offshore drilling backlog and gives the company greater visibility over a high-specification asset entering an increasingly active West African market. The central tension is whether the long contract duration and regional flexibility will translate into attractive margins after mobilisation, operating and technical-performance requirements are taken into account.

Why does the $260 million Eni Côte d’Ivoire award matter for Saipem’s offshore drilling backlog?

The contract is strategically important because offshore drilling economics are driven heavily by utilisation. A drillship produces substantial revenue while operating under contract, but continues to incur maintenance, crewing, insurance and financing costs during idle periods.

A long-term development programme beginning in early 2027 reduces uncertainty over the Santorini’s future deployment and gives Saipem more time to organise personnel, maintenance, equipment and logistics around a confirmed campaign.

At March 31, Saipem reported an offshore drilling backlog of approximately €1.21 billion. The new $260 million award, which equates to roughly €220 million at recent exchange rates, is therefore material relative to that segment-specific backlog, even though its revenue will be recognised across several reporting periods.

The contract does not increase Saipem’s annual revenue by the full award value immediately. Offshore drilling revenue is normally recorded as services are performed, and the pace of recognition will depend on the operating schedule, firm duration, mobilisation structure and any subsequent exercise of options.

The potential for deployment in neighbouring countries is also commercially relevant. Moving a deepwater rig between separate regional campaigns is generally more efficient than relocating it across oceans between contracts. Regional continuity can reduce unproductive transit time and preserve established supply chains and crew arrangements.

Optional periods could increase the contract’s ultimate value, but they should not be treated as guaranteed backlog until exercised. Their inclusion nevertheless gives Eni flexibility to extend the campaign while giving Saipem a possible route to longer utilisation without reopening the entire commercial process.

What does the Santorini drillship contribute to Saipem’s high-specification fleet strategy?

The Santorini is a seventh-generation drillship designed for complex deepwater and ultra-deepwater operations. Saipem acquired the vessel in 2022 after previously operating it under a lease arrangement, increasing the company’s ownership exposure to a segment where high technical capability can command premium day rates.

Modern drillships are designed to maintain position without conventional anchoring systems, drill in deep water and manage complex subsurface conditions. Their value depends not only on physical specifications but also on safety performance, operating efficiency, equipment reliability and the experience of the crews running them.

The Santorini has already worked across different offshore regions, including campaigns connected to Eni’s international portfolio. Saipem’s 2025 reporting indicated that the drillship completed work in Namibia before relocating to Côte d’Ivoire for Eni.

That operating history reduces the amount of country-entry uncertainty associated with the new campaign. The vessel, its crews and Saipem’s support organisation have experience in the region and an established working relationship with the customer.

The commercial advantage should not be overstated. A high-specification rig still requires maintenance, periodic certification and upgrades to remain competitive. Equipment failures or safety incidents can interrupt operations and expose the contractor to downtime, remedial costs or contractual penalties.

The new contract strengthens the case for continued investment in the Santorini because a visible future programme can support maintenance and upgrade decisions. Saipem can plan expenditure around a known operating horizon rather than committing capital to a rig with uncertain utilisation.

Is Saipem’s new drilling campaign directly linked to Eni’s Baleine Phase 3 project?

Saipem said the Santorini would undertake a long-term development drilling campaign offshore Côte d’Ivoire, but it did not identify a specific field or development phase in the contract announcement.

The award should therefore not be described as a confirmed Baleine Phase 3 drilling contract unless Saipem or Eni provides additional project-level disclosure.

The timing nevertheless places the contract within a period of substantial offshore investment by Eni in Côte d’Ivoire. Eni and its partners approved the full-field third phase of the Baleine development in May 2026.

Baleine Phase 3 is intended to increase oil production from approximately 60,000 barrels per day to 150,000 barrels per day and gas output from around 80 million cubic feet per day to 200 million cubic feet per day. The development includes an additional floating production, storage and offloading unit and builds on infrastructure established during the first two phases.

Côte d’Ivoire’s offshore sector also includes the Calao discovery and potential exploration, appraisal and development activity across Eni’s wider acreage. That broader portfolio could create demand for drilling beyond a single named project.

The regional deployment language in Saipem’s contract also suggests that the commercial framework is not necessarily limited to one field. Eni may be seeking flexibility to use the Santorini across Côte d’Ivoire and nearby West African markets as drilling requirements evolve.

For investors, the distinction matters because development drilling generally offers stronger programme visibility than a single exploration well, while regional flexibility may extend the rig’s useful campaign. However, the absence of disclosed well numbers, firm duration and day rates prevents a precise estimate of annual revenue or profitability.

Why does Côte d’Ivoire offer a potentially durable offshore growth market for Saipem?

Côte d’Ivoire has moved rapidly from an emerging exploration market toward a more substantial offshore production centre. Eni discovered Baleine in 2021 and brought the first phase into production in 2023, followed by the second phase in late 2024.

The speed of that development has demonstrated that commercially significant offshore discoveries can be progressed quickly when subsurface results, infrastructure choices, regulatory coordination and financing remain aligned.

All gas from Baleine is intended for the domestic market, supporting electricity generation and industrial demand. Oil production is primarily directed toward export markets. This creates a development model connected to both national energy security and international commodity revenues.

Baleine’s planned production expansion could strengthen the commercial case for additional subsea infrastructure, drilling campaigns, maintenance and future field-development services. Saipem is positioned to participate through offshore drilling and potentially through other engineering and construction capabilities, although no additional work should be assumed without contract disclosure.

Côte d’Ivoire also offers Saipem a strategic base within West Africa. Nearby offshore markets include Ghana, Senegal, Mauritania, Angola and Namibia, each with different levels of exploration and development activity.

The ability to move the Santorini between neighbouring markets could support utilisation when individual drilling programmes change. That optionality is valuable because offshore campaigns can be delayed by approvals, partner decisions, equipment availability or project economics.

Regional exposure also creates country and logistics risk. Saipem must manage local-content requirements, customs, port access, workforce development, security and supply-chain coordination. Operating across several jurisdictions can reduce dependence on one market while increasing administrative complexity.

How should investors assess the related-party nature of the Eni Côte d’Ivoire contract?

The contract qualifies as a related-party transaction because Eni Côte d’Ivoire Limited is controlled by Eni S.p.A., which owns 21.19% of Saipem.

Saipem is jointly controlled by Eni S.p.A. and CDP Equity S.p.A., which holds 12.82%. The relationship requires the company to apply its related-party governance and disclosure framework when entering material transactions with Eni-controlled entities.

Saipem classified the contract as a related-party transaction of greater importance because it exceeded the relevant regulatory thresholds. It also stated that the award was an ordinary transaction carried out on market-equivalent or standard conditions, allowing it to fall within an applicable regulatory exclusion.

The classification should not be interpreted as evidence that the terms are unfavourable or that the award was not commercially negotiated. It indicates that the shareholder relationship required formal identification and transparent treatment.

The main investor question is whether the contract economics are consistent with market conditions for a high-specification drillship undertaking a long-term campaign. Saipem did not disclose the day rate, operating-cost structure or expected margin.

That limits external comparison, but it is common for offshore drilling contracts to protect commercial terms. Competitors, customers and rig owners can use disclosed rates when negotiating other contracts, making detailed pricing commercially sensitive.

The strongest evidence will come from future offshore drilling margins, cash generation and utilisation. If the Santorini contributes stable revenue without requiring disproportionate capital or generating operating disruptions, the contract’s commercial quality will become clearer.

Can the award strengthen Saipem’s financial recovery without requiring heavy new investment?

Saipem entered the contract from a materially stronger financial position than it held during its earlier restructuring period. First-quarter 2026 revenue reached €3.53 billion, broadly stable year on year, while adjusted EBITDA increased 23.6% to €434 million.

The adjusted EBITDA margin improved to 12.3% from 10% a year earlier. Net profit reached €78 million, and the company generated €199 million of free cash flow after lease repayments.

Saipem ended March with pre-IFRS 16 net cash of €1.22 billion. Including lease liabilities, the company reported net debt of only €23 million, compared with €272 million at the end of 2025.

The balance-sheet improvement gives Saipem greater flexibility to maintain its offshore fleet and prepare the Santorini for the 2027 campaign without placing immediate pressure on liquidity.

The company spent €18 million on offshore drilling capital expenditure during the first quarter, part of total group expenditure of €44 million. Future spending could rise as Saipem prepares rigs for new programmes and progresses work across its broader contract portfolio.

The Santorini award is attractive because it primarily supports utilisation of an existing asset rather than requiring the purchase of another drillship. This allows Saipem to pursue revenue growth while limiting the capital intensity associated with fleet expansion.

However, preparing a vessel for a long campaign can still require maintenance, equipment upgrades, inspections and mobilisation expenditure. Contract value alone does not reveal how much cash will be retained after those costs.

Saipem’s 2026 guidance calls for approximately €15.5 billion of revenue, €1.9 billion of adjusted EBITDA, €1 billion of operating cash flow after lease repayments and €600 million of free cash flow. The new contract begins in 2027 and therefore has greater relevance to medium-term visibility than to the current-year guidance.

Does the Santorini contract reduce the importance of Saipem’s proposed Subsea7 merger risks?

The drilling award strengthens Saipem’s standalone commercial position, but it does not resolve the regulatory uncertainty surrounding the proposed combination with Subsea7 S.A.

The European Commission opened an in-depth investigation on July 22 into whether the transaction could reduce competition in certain subsea engineering, procurement, construction and installation markets.

The Commission’s concerns relate principally to subsea umbilicals, risers and flowlines services rather than offshore drilling. The Santorini contract therefore sits in a different operational segment from the market being examined.

Turkey approved the merger on July 22, while other jurisdictions have also provided clearance. European Union approval remains a more significant outstanding condition because of the scale and competitive structure of the affected offshore services market.

The $260 million award demonstrates that Saipem continues winning work while the merger review progresses. That matters because shareholders still need the standalone company to maintain backlog, margins and cash generation regardless of the transaction timetable.

The contract does not materially reduce merger-related uncertainty. It does, however, strengthen the operating foundation that Saipem would bring into any combined company and provides evidence that customers continue committing to its assets for long-duration programmes.

Investors should avoid linking the drilling contract directly to the merger’s regulatory prospects. The two developments affect different parts of Saipem’s investment case.

What does Saipem’s share performance indicate after the contract and antitrust developments?

Saipem shares closed at €4.392 on July 22, gaining 0.87% during the session. The contract was announced before the market opened, but the European Commission’s merger investigation was also confirmed during the day.

The positive close therefore reflected a trading session containing both a supportive contract award and a potentially more demanding regulatory process. It would be too precise to attribute the full share-price movement to either event.

The July 22 close was approximately 1.8% above the level recorded a week earlier. Over one month, however, the shares remained about 2.1% lower.

Saipem traded within a 52-week range of €2.449 to €4.846. The July 22 price stood roughly 9.4% below the annual high and approximately 79% above the low.

Based on the company’s issued share capital, the closing price implied a market value of approximately €8.8 billion before adjusting for treasury shares.

The strong recovery from the yearly low shows that investors have already assigned greater value to Saipem’s improving margins, cash generation, backlog and strategic combination with Subsea7.

That recovery also raises the standard required for further rerating. Individual contract wins support confidence, but sustained valuation gains will depend on group-level order intake, project execution, drilling utilisation, free cash flow and the outcome of the merger review.

Which milestones will prove whether the $260 million drilling award creates durable value?

Saipem’s first-half results on July 28 will provide the next immediate test of the company’s broader financial trajectory. Investors will look for updates on order intake, offshore drilling backlog, fleet utilisation, margins and cash generation.

The results may not include substantial financial contribution from the new award because operations are not scheduled to begin until early 2027. They can nevertheless clarify whether Saipem is maintaining momentum across the rest of its portfolio.

The next contract-specific milestone will be confirmation that the Santorini has completed its preceding programme and is available for mobilisation without a material gap or delay.

Mobilisation progress, customer readiness and the start of drilling in early 2027 will determine when revenue recognition begins. Any delay could postpone cash generation even if the overall contract remains valid.

Operational performance will then become the decisive measure. High uptime, safe execution and efficient well delivery could strengthen Saipem’s relationship with Eni and increase the probability that optional periods are exercised.

The investment case would improve if the Santorini enters the campaign on schedule, maintains strong utilisation and contributes to higher offshore drilling margins. It would weaken if mobilisation costs rise, operating downtime develops or optional extensions fail to convert.

The award has improved Saipem’s medium-term drilling visibility. The next proof must come from converting the $260 million backlog addition into reliable revenue, cash flow and profitable utilisation from 2027.

What are the key takeaways from Saipem’s $260 million Côte d’Ivoire drilling award?

• Saipem has secured an approximately $260 million offshore drilling contract from Eni Côte d’Ivoire Limited.
• The seventh-generation Santorini drillship is scheduled to begin a long-term development campaign in early 2027.
• The contract includes possible deployment in neighbouring countries and additional optional periods.
• Optional periods could extend utilisation, but they should not be treated as guaranteed revenue until exercised.
• Saipem did not identify the specific field linked to the contract, so the award cannot yet be definitively labelled as Baleine Phase 3 work.
• The award is material relative to Saipem’s €1.21 billion offshore drilling backlog reported at March 31.
• The transaction is related-party business because Eni owns 21.19% of Saipem, but Saipem classified it as an ordinary transaction on market-equivalent or standard terms.
• Saipem reported improving first-quarter profitability and a pre-IFRS 16 net cash position of €1.22 billion.
• Saipem shares closed at €4.392 on July 22, around 9% below their 52-week high after a substantial recovery from the yearly low.
• Mobilisation, the early-2027 start, operating uptime and option conversion are the next measurable contract catalysts.