SBM Offshore Slumps On Hefty Charge For Cost Overruns

AMSTERDAM (Dow Jones)–SBM Offshore NV’s (SBMO.AE) shares slumped Thursday after the Dutch oil services company booked a $450 million charge related to increased costs at a pair of offshore platforms.

SBM said it was pursuing judicial actions with clients to recover the added costs, but that the charge was necessary “due to the uncertainty as to the company’s ability to secure satisfactory compensation for its claims,” according to a news release.

SBM shares were off EUR2.77, or 14.5%, to EUR16.01 at 1222 CET.

The charge will lead to a net loss for the first half of the year, while full-year after tax profit is expected to be close to break-even, it said.

The company didn’t offer guidance after tax profit so far, which was $276 million in 2010.

SBM Offshore’s Yme and Deep Panuke platforms have now been installed on their respective offshore locations in Norway and Canada, although SBM said the costs had increased.

“Due to one client recently having revised its contractual position and a re-measurement of remaining on-site works, the latest forecast net costs for the two platforms has materially increased,” the statement said.

The volume of the charge is much higher than expected, Bank of AmericaMerrill Lynch said, which has a buy rating with an EUR26 price target.

The more recent major projects in execution by the company are on schedule and are performing in line with or above expectations, SBMOffshore also said in a statement.

The company will not disclose any further information regarding its impairment charge or outlook before unveiling its half year results, scheduled for Aug. 18.

-By Archibald Preuschat, Dow Jones Newswires