New Wave Media

Italian oil major Eni has put the sale of its stake in Saipem on hold after the cancellation of the lucrative South Stream gas pipeline project and plunging oil prices shaved off almost half the oil contractor's market value in two months.

 

In July state-controlled Eni laid out plans to sell assets, including its 43 percent stake in Saipem, to help fund its transformation into a leaner oil and gas outfit.

 

On Thursday Eni said in a statement it still considered Saipem as non strategic but that it had put any assessment of options on hold because of difficult market conditions.

 

Saipem CEO Umberto Vergine said this month the company may lose 1.25 billion euros in 2015 sales due to Russia's scrapping of South Stream, warning more time was needed to recover profitability and cut debt.

 

South Stream's demise is the latest blow for Saipem following two profit warnings last year and a cut to this year's profit forecast in July.

 

Eni, which said this week paying dividends was a priority, still needs to raise 6 billion euros under an 11-billion-euro asset sales programme to strengthen its balance sheet.

 

The Italian oil major consolidates Saipem in its accounts and selling the stake would allow Eni to clear around 6 billion euros of gross debt from its balance sheet.

 

The sharp drop in oil prices since July has triggered concern that Saipem's outlook could worsen as producers, already hit by delays and overspending on projects, cut back further on their investments.

 

Saipem shares closed on Thursday at 8.685 euros, compared with a peak in September 2012 of 40 euros, giving the company a market capitalisation of 3.8 billion euros.