Saipem wins $1.8bn Middle East offshore EPCI contract as backlog stays near €30bn

Saipem S.p.A. (BIT: SPM) has secured an offshore engineering, procurement, construction and installation contract in the Middle East valued at approximately US$1.8 billion, reinforcing a commercial pipeline that remained close to €30 billion at mid-year despite extraordinary logistical and security costs across the region. The Italian contractor said its scope includes offshore and subsea facilities and will use its regional construction vessels, engineering capabilities and pipeline expertise, but it has not disclosed the customer, country, installation quantities, water depth, execution timetable or specific field involved. That limited disclosure prevents the contract from being tied responsibly to any named operator or development, but its financial scale alone makes it one of Saipem’s more substantial recent awards.

The August 12 award arrived after Saipem reported €5.74 billion of new contracts during the first half and another €2.3 billion secured in July. Backlog stood at €29.86 billion on June 30, of which €18.66 billion was in Asset Based Services, €10.11 billion in Energy Carriers and €1.09 billion in Offshore Drilling. The company expects 2026 order intake to exceed the 2025 level, giving the new Middle East contract strategic importance not only as revenue visibility but as evidence that customers continue sanctioning major offshore work despite regional security disruption.

What does Saipem’s $1.8bn Middle East contract actually cover?

Saipem has disclosed only a high-level scope: engineering, procurement, construction and installation of offshore and subsea facilities. The project will use the company’s regional fleet and engineering organisation, which indicates that the contract is asset-intensive rather than a design-only or procurement-only assignment.

EPCI contracts place substantially more execution responsibility on the contractor than conventional engineering work. Saipem must coordinate design, sourcing, fabrication, marine installation and integration, meaning profitability depends on procurement discipline, vessel productivity, weather, client interfaces and the accuracy of cost estimates made when bidding.

The missing details matter. Without pipe length, platform quantities, subsea structures or schedule, it is impossible to estimate revenue recognition by year or determine which vessels will be dedicated to the project. Saipem’s disclosure should therefore be interpreted narrowly rather than supplemented with assumptions based on other Middle Eastern tenders.

How significant is $1.8bn against Saipem’s existing backlog?

Saipem entered the second half with backlog just below €30 billion, providing several years of forward activity across offshore engineering, onshore projects and drilling. The US$1.8 billion contract meaningfully extends that visibility even though direct percentage comparisons require a common currency and updated backlog incorporating other awards.

The timing is especially useful because €7.32 billion of the June backlog was expected to be executed during the remainder of 2026. Contractors continually need new orders to replace revenue recognised from existing projects, making order intake a critical indicator alongside revenue growth.

Saipem had already secured €8 billion of orders through the first half and July combined. Adding another large offshore package strengthens management’s view that 2026 order intake can exceed the prior year, assuming no major cancellations or delays elsewhere.

Why is the Middle East both Saipem’s opportunity and its biggest operating risk?

The Middle East contains some of the world’s largest continuing offshore oil and gas investment programmes, providing contractors with unusually deep pipelines of platforms, subsea infrastructure and pipelines. Saipem’s regional vessels and fabrication capabilities position it to capture those programmes without mobilising every asset from other continents.

The same concentration has created cost pressure during the current regional conflict. Saipem absorbed approximately €70 million of additional logistics, operating and personnel-safety expenses during the first half, contributing to a reduction in its 2026 adjusted EBITDA outlook to approximately €1.75 billion from the earlier €1.9 billion target. Revenue guidance remained around €15.5 billion.

Management has not included potential client reimbursement of those extraordinary costs in guidance because recovery remains subject to commercial discussions. That approach is relatively conservative, but it illustrates the margin risk attached to executing fixed or semi-fixed contracts when shipping routes, personnel movements and supply chains become disrupted.

Can Saipem protect margins while executing another major regional award?

First-half adjusted EBITDA rose 9.4% to €836 million even after the Middle East disruption costs, while revenue increased 1.9% to €7.35 billion. The resulting adjusted EBITDA margin improved to 11.4% from 10.6% a year earlier, suggesting that improved project quality and execution elsewhere more than offset part of the external pressure.

Second-quarter EBITDA did weaken 2.7% to €402 million despite revenue growth, showing that the cost pressures are not theoretical. The economics of the new US$1.8 billion project will depend heavily on contractual protections covering escalation, logistics changes and extraordinary disruption, none of which Saipem has disclosed.

Cash conversion has been stronger. First-half free cash flow after lease repayments reached €388 million, while pre-IFRS 16 net cash improved to €1.08 billion even after €330 million of dividend payments. Saipem retained its approximately €600 million full-year free cash flow target despite cutting EBITDA guidance, arguing that better working-capital management and project terms can absorb the conflict-related profit impact.

Does Saipem have enough financial capacity for a growing offshore workload?

Liquidity was €2.87 billion at June 30, including €1.29 billion of available cash, while post-IFRS 16 net debt was only €109 million. That balance-sheet position is considerably stronger than during Saipem’s earlier restructuring period and gives the company more flexibility to invest in vessels and working capital as backlog grows.

Capital expenditure was €133 million during the first half against full-year guidance of roughly €450 million. Offshore projects can require significant mobilisation expenditure before milestone payments arrive, so contract terms and advance payments can affect cash consumption even when final project margins are attractive.

The company’s 17 owned construction vessels and broader offshore asset base reduce its dependence on third-party marine capacity, but utilisation must remain high enough to justify those fixed costs. Large multi-year EPCI awards help by securing vessel employment while reducing idle periods between projects.

How did Saipem shares trade after the $1.8bn contract announcement?

Saipem closed at €4.40 on August 12 and rose 3.6% to €4.56 on August 13, the first full trading session after the contract disclosure. By August 21, the shares had eased to €4.484, leaving them roughly 3% above their July 21 level and relatively close to a reported 52-week high of €4.846.

The price action suggests investors welcomed the contract but did not treat it as sufficient to erase concerns over Middle East execution and the lowered EBITDA outlook. That is a reasonable distinction because backlog creates revenue visibility, whereas project margins determine value.

The $1.8 billion award strengthens Saipem’s commercial position at precisely the point when the company needs new work to replenish a large existing backlog. Its ultimate contribution will depend on information that remains undisclosed: customer identity, project schedule, contract protections and execution requirements. Until those emerge through future results, the contract is best viewed as a substantial backlog win with equally substantial delivery responsibilities.