UPDATE 1-Saipem says Brazil accident won't derail profit goal

Thu Apr 24, 2014 11:36am EDT

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MILAN, April 24 (Reuters) - Italian oil service group Saipem said a charge relating to an offshore accident in Brazil earlier this year would not stop it from meeting its 2014 profit target.

Saipem said it will be hit with a 40 million euro ($55.32 million) charge for dropping a steel pipe into the Atlantic Ocean and delaying efforts to expand an oilfield.

Saipem, 43 percent owned by oil major Eni, delivered first quarter earnings on Thursday and confirmed earlier guidance that it expects to report net profit of 280-380 million euros in 2014 after a restated net loss of 159 million euros in 2013.

The company lost around half its market value last year after two profit warnings triggered by lower-than-expected margins and a probe into alleged corruption in Algeria.

"We confirm 2014 will be a transitional year but we are creating the grounds for a recovery that will boost profits in the medium term," Saipem CEO Umberto Vergine said in the statement.

Earlier on Thursday French oil services group Technip stuck to targets for this year after first quarter sales beat its expectations.

Oil contractors have seen slimmer pickings in recent years due to delays and overspending at mega projects such as the giant Kashagan oilfield in Kazakhstan.

Saipem is looking to phase out unprofitable legacy projects and replace them with higher margin work.

In the first three months of the year new orders were 3.9 billion euros, Saipem said, adding orders acquired since the end of March totalled more than 3 billion euros.

The company was awarded deals worth 2 billion euros in March to build a first underwater stage of the giant South Stream project that will carry Russian gas into Europe, bypassing Ukraine.

Saipem's net profit in the first quarter fell 44.5 percent to 61 million euros ($84 million), above an average consensus of five analysts polled by Reuters of 51 million euros.

"The results were pretty much in line with our expectations except for the higher debt but that should come down as new high margin contracts come in," one Milan-based analyst said.

Debt at the end of March was around 5.6 billion euros compared to 4.7 billion euros at the end of 2013.

Sources have told Reuters Eni, which currently consolidates the whole of Saipem debt, is considering moves to make its subsidiary financially independent.

At 1529 GMT Saipem shares were up 3.6 percent while the European oil and gas sector was up 1 percent.

($1 = 0.7231 Euros) ($1 = 0.7231 Euros) (Reporting by Stephen Jewkes; Editing by Elaine Hardcastle)

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