SBM Offshore to Take $600 Million Hit to Make the Pain Stop at Yme
AMSTERDAM–Dutch oil services company SBM Offshore N.V. (SBMO.AE) Thursday announced a raft of new measures to put an end to a lengthy conflict over a troubled oil and gas platform offshore Norway.
SBM Offshore, which makes floating platforms for offshore oil and gas producers, has been dogged by problems related to the construction of the Yme platform. The issues have led to more than $1 billion in charges, several profit warnings and the departure of two senior executives.
The platform, which is operated by Canada-based Talisman Energy Inc. (TLM), has been hampered by setbacks and was evacuated in July due to cracks in the structure. It led Talisman to take a $497 million impairment charge in the third quarter and launch legal proceedings against SBM Offshore.
In a bid to clear the decks, SBM Offshore said it will take a $400 million hit to write off the book value of the Yme platform on the expectation that it will be decommissioned. It also said it has put aside $200 million to cover the estimated costs of a settlement with Talisman. In addition, the company will book a $29 million charge for additional costs related to a second project, the Deep Panuka in Canada, which is operated by Encana Corp. (ECA).
SBM Offshore shareholders will have to pay a price, however. The company said it will scrap dividend payments for 2012 and 2013. And to remain compliant with bank covenants, it plans to raise $193 million by issuing shares through a private placement with HAL Investments BV, a Rotterdam-based investment firm.
HAL will buy a 9.95% stake in SBM Offshore and will also fully underwrite a rights issue, on the condition that SBM Offshore reaches a settlement with Talisman.
Investors applauded the announcement and SBM Offshore shares traded up to 15% higher in the Amsterdam market.
“This is a major step forward for SBM, recognizing that the Yme job has been extremely disappointing, and moving on with sufficient equity to bid on new jobs,” Credit Suisse said.
Some analysts were skeptical. “SBM still has to reach an agreement with Talisman, so there is no guarantee yet that this is indeed the end,” KBC Securities analyst Michael Roeg said in a note. “SBM’s decision to throw the towel looks like a one-sided decision, and this makes us feel uneasy.”
– Maarten van Tartwijk, (c) 2012 Dow Jones & Company
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