SBM Offshore Posts Steep Loss for 2011

AMSTERDAM Dutch oil services firm SBM Offshore posted a steep 2011 net loss Friday and scrapped its dividend payment as charges for delayed projects mounted to almost $1 billion.

The firm has been facing problems finalizing mainly two projects--the Norwegian Yme oil and gas field, and Deep Panuke in Canada. 
The delays in both projects have already triggered the departure of some of the company's top management. In August last year, former Chief Executive Tony Mace announced his intention to step down in order to take responsibility for the delays, while in January, SBM's Chief Financial Officer Mark Miles said he would depart in May. 
For 2011, SBM Offshore posted a net loss of $440.6 million following charges of $978 million, compared with a net profit of $276 million the previous year. 
The company also announced a further $407 million charge for delays in the two projects on top of a previously announced charge of $450 million, plus a couple of minor charges for other projects. 
The extra charge exceeded analysts' expectations for additional charges in a $100 million to $300 million range. 
The company said it will not pay a dividend to investors. 
Revenue in 2011 was slightly up, to $3.2 billion from $3.1 billion a year-earlier. 
The Dutch oil services firm is involved in legal action over cost overruns on Yme, operated by Talisman Energy, as well as for Deep Panuke, operated by EnCana Corporation. SBM said it hopes to recover the extra costs from its clients, but has been forced to write down the overruns immediately due to the uncertainty of success in its legal challenge. 
The company's shares opened Friday 1.2 percent below Thursday's close of EUR 13.28. 
"Resolution of the Yme difficulties is an absolute priority and we are in constructive discussions with both clients on the best way forward," the company's chief executive Bruno Chabas said in a statement. 
Analysts said the size of the write-down is disappointing. "However, we have the feeling that after this kitchen-sinking operation the company is well positioned," Rabobank said in a note. Rabobank maintained its buy rating for SBM Offshore, but said the company's results imply a lowering of the price target by approximately EUR 0.50, to EUR 19.50. 
But the company was more optimistic for the year-ahead. For 2012, SBM Offshore expects $4 billion in turnover on the "strongest order portfolio on record" of $16.9 billion, up from $11.5 billion the previous year.

Copyright (c) 2012 Dow Jones & Company, Inc.


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