SBM Offshore allocates $240M for potential bribery settlement

SBM Offshore, the world’s largest provider of floating production storage and offloading units, has set aside $240 million it may have to give away in a potential bribery settlement case.

The company has been accused of bribery and improper sales practices involving third parties in Angola, Equatorial Guinea and Brazil.

SBM Offshore, which in 2012 initiated an internal investigation regarding the allegations, has today said is discussing a potential settlement of the issues arising from the investigation.

“While these discussions are ongoing, it is sufficiently clear that a resolution of the issues will have a financial component, and consequently SBM Offshore has recorded a non-recurring charge of US$240 million in the first half of 2014, reflecting the information currently available to the Company,” SBM Offshore said in its report.

“Until the matter is concluded, SBM Offshore cannot provide further details regarding a possible resolution of the issues arising from the investigation, and no assurance can be given that a settlement will actually be reached,” reads the statement by the Dutch FPSO supplier.

No bids in Brazil

Petrobras, Brazil’s state-controlled oil company, in May said that it would not be seeking bids for FPSO projects from as long as the Dutch supplier of floating production units was under bribery investigation in Brazil.

Following consultations with Petrobras, SBM Offshore on June 12 said it would not take part as an international contractor in the current tenders for the supply of FPSOs for the Tartaruga Verde and Libra fields.

An FPSO is an offshore unit which produces and stores the crude oil from subsea fields and offloads onto transporting vessels.

Decades long track record

Bruno Chabas, CEO of SBM Offshore acknowledged that the company is going through a challenging period. However, Chabas expressed his belief that a “decades-long track record of close cooperation with Petrobras” would provide “a basis to resume a successful working relationship, once the investigation is properly completed.”

As for the financial and operational results Chabas said: “In financial and operational terms, the first half of 2014 has been a period of solid performance.”

“Tendering activity remains high, and there is industry consensus on a substantial number of new FPSOs and turrets due for award in the coming years.  Thus, while we remain cautious on the timing of individual awards in the short term, we have a sound basis for confidence in our medium and long term prospects.”

Financial Highlights 1H 2014

• Directional revenue ahead of expectations at US$1,729 million
• Underlying Directional EBIT decreased by 37% to US$184 million, compared to a strong 1H 2013
• Directional Backlog stands at US$21.5 billion, including the O&M contract for the Shell FPSOTurritella
• Cash at the end of the period stood at US$154 million; undrawn credit facilities of US$939 million
• Net debt at the end of June stood at US$4,302 million, under new IFRS reporting standards
• Project financing secured for Cidade de Maricá totaling US$1.45 billion at an average cost of debt of 5.3% with 12 and 14 year maturity tranches
• US$240 million provision related to the compliance investigation

Guidance 

Management has reiterated 2014 Directional revenue guidance of US$3.3 billion, of which US$2.3 billion is expected in the Turnkey segment and US$1.0 billion in the Lease & Operate segment.