Saipem's Fourth Quarter 2025: Evaluating the Offshore Contractor's Standing Amid a Declining Oil Market

Saipem's Record-Breaking Fourth Quarter and Year-End Performance

Saipem closed out the year with exceptional financial results, marking a transformative period for the company. In the fourth quarter, adjusted EBITDA reached €515 million, surpassing analyst forecasts and representing a 21.5% increase compared to the previous year. For the full year, adjusted EBITDA climbed to €1.7 billion, up 29% from 2024. Revenue was strong across the board, with €4.5 billion generated in Q4 and €15.5 billion for the year, reflecting a 6.5% rise.

Operational success translated into significant cash generation. Saipem produced €792 million in free cash flow after lease repayments for the year, a 57% improvement year-over-year. This enhanced liquidity gives the company greater financial flexibility as it pursues its strategic goals. The robust cash flow is supported by a substantial order backlog, which exceeded €31 billion at year-end. Notably, €5.4 billion in new contracts were secured in the fourth quarter alone, ensuring a strong pipeline for future projects and revenue.

Looking Ahead: Revenue Guidance and Market Challenges

Saipem anticipates maintaining similar revenue levels in 2026, while projecting adjusted EBITDA to rise to approximately €1.9 billion. This outlook forms the basis of the current investment strategy. Although the company’s backlog and cash reserves provide a solid foundation, Saipem remains exposed to fluctuations in the oil market. Profitability and future cash flow depend on the willingness of oil and gas companies to invest. With oil prices facing downward pressure, the value of the backlog hinges on actual spending by clients. Saipem is counting on the benefits of its merger to capture a larger share of offshore investments, regardless of oil price volatility. The outcome of this strategy will shape the company’s long-term prospects.

Order Intake Surge Versus Oil Price Trends

Saipem demonstrated strong commercial momentum at the end of 2025, closing the year with a significant increase in new orders. The company secured about €5.4 billion in contracts during the last quarter, keeping its backlog above €31 billion and providing a steady stream of work. The board’s guidance for 2026, targeting revenue of around €15.5 billion, is built on this solid foundation. However, this operational strength is set against a backdrop of weakening oil prices.

According to the U.S. Energy Information Administration, oil prices saw a brief uptick, averaging $67 per barrel in January, but are expected to decline. For 2026, Brent crude is forecast to average $55.08 per barrel, lower than 2025 levels. Increased global production and reduced demand are expected to build inventories and put downward pressure on prices. This trend poses a challenge to Saipem’s commercial achievements.

While the backlog offers visibility, sustained low oil prices could dampen demand for offshore construction and installation services. Energy companies may delay or reconsider capital spending when prices are weak. The recent surge in orders may reflect client activity ahead of the price downturn or a strategic move to secure work before market conditions worsen. The future trajectory of order intake now depends on whether oil producers continue investing at current price levels.

Financial Strength and 2026 Outlook

Saipem’s financial position at the end of 2025 provides a strong foundation for the year ahead. The company reported a pre-IFRS 16 net cash position of €999 million, a notable improvement from the previous year. This liquidity, supported by €792 million in free cash flow after lease repayments, gives management flexibility to fund operations, manage debt, and pursue strategic initiatives. The strength of the balance sheet underpins the company’s guidance.

For 2026, management expects revenue to remain stable at about €15.5 billion, matching 2025 levels. The goal is to increase adjusted EBITDA to €1.9 billion, up from €1.72 billion in 2025—an increase of nearly 11%. This growth is supported by a nearly fully booked backlog and ongoing margin improvements. The board is confident in the stable revenue outlook, relying on the existing order book for predictable income.

However, this stability is threatened by weakening oil prices. The guidance assumes continued client investment, but does not factor in further declines in oil prices. The U.S. Energy Information Administration forecasts Brent crude to average $55.08 per barrel in 2026, which could impact capital spending plans. If oil producers reduce or postpone offshore projects, the flow of new work may slow, challenging the company’s margin and EBITDA targets.

In summary, Saipem is well-positioned for 2026 with a strong balance sheet and conservative revenue targets. The path to higher profitability is achievable, but depends on oil market stability. Financial resilience gives the company room to maneuver, but sustained growth will require a supportive investment environment.

Subsea7 Merger: Transforming the Offshore Services Landscape

Saipem’s most significant strategic move is the binding merger agreement with Subsea7, signed in July 2025. This merger will create Saipem7, a new entity poised to reshape offshore energy services. The deal responds to industry trends favoring larger, more complex projects, aiming to establish a global leader with substantial scale advantages.

The combined company will have a backlog of €43 billion, a major increase over Saipem’s standalone position. Annual synergies are expected to reach €300 million, thanks to complementary fleets and operational footprints. The new entity will also benefit from a diversified geographic presence, with no single country accounting for more than 15% of the backlog, reducing client concentration risk.

The merger is expected to be completed in the second half of 2026, just after the current guidance period. Regulatory approvals and shareholder votes are required, but major supporters like Eni and CDP Equity have already pledged their backing. Once finalized, Saipem7 will have a revenue base of around €21 billion and EBITDA exceeding €2 billion, positioning it to compete for and deliver large-scale projects in the sector.

From a market perspective, this merger represents supply-side consolidation, reducing the number of major players capable of handling the largest offshore installations. For Saipem, the deal offers a pathway to accelerated growth and improved margins beyond what its current backlog and guidance suggest. The company is betting that the merger’s scale and efficiency will help it secure a greater share of future offshore investments, regardless of oil price fluctuations. The outcome of this strategy will be crucial for Saipem’s long-term direction.