Saipem S.p.A. (MIL:SPM, Financial) soared 6.6% on the Borsa Italiana on Tuesday on the news it won two contracts worth $700 million for projects in Guyana and the Republic of Congo.
In regard to the first contract, the Italian oil and gas contractor will execute the second phase of work on the development of the Liza field for an estimated production of 220,000 barrels of oil per day.
The Liza field is located off the coast of Guyana in the Stabroek Block. The project is operated by Esso Exploration and Production Guyana Ltd., a subsidiary of Exxon Mobil Corp. (XOM, Financial).
Saipem also carried out the first phase of the project in 2017. The second phase continues the development, but on a higher number of wells and associated underwater equipment.Â
The company has also been involved in the construction of a power plant in the Republic of Congo. For that purpose, it was granted a new offshore engineering and construction contract. Saipem will act through its subsidiary, Boscongo SA.
Saipem is a leading provider of engineering and construction services for oil and gas projects. The company is also a supplier of drilling rig, drillship and services for floating production storage and offloading operation.
While Saipem is a good investment option, I would wait for a significant pullback before buying shares since it is not paying a dividend. The current share price is just a whisper away from its 52-week high of $5.34 and 55% above its 52-week low of $3.37.
The stock has risen nearly 49% in one year and is trading far above the 200-, 100- and 50-day simple moving average lines.
The price-book ratio is 1.09, the price-sales ratio is 0.55 and the enterprise value-to-earnings before interest, taxes, depreciation and amortization ratio is 7.11.
The recommendation rating is 2.4 out of 5. The target price is $5.25 per share, which is the average of 20 estimates ranging between a low of $3.43 and a high of $7.55.
Saipem closed fiscal 2017 with $10.8 billion in revenue and a net loss of about $393 million.
The company has approximately $15 billion in total assets and around $10 billion in total liabilities. Approximately 36.5% of its total liabilities is long-term debt.
The company has 996.15 million shares outstanding, of which 56.43% is float. Among the guru hedge funds invested in the stock, Dodge & Cox has the largest position with 5.64% of outstanding shares.
Disclosure: I have no positions in any securities mentioned in this article.
