SBM OFFSHORE : Sees First Ruling In Talisman Case In Second Half
01/24/2012| 12:05pm US/Eastern
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Dutch oil services company SBM Offshore NV (SBMO.AE) said Tuesday that it expects a first ruling in an arbitrage case with customer Talisman Energy Inc (TLM) on the costs of a severe delay to a project in the Norwegian Yme oil and gas field in the second half of 2012.
Worsening cost overruns at SBM Offshore claimed the scalp of a second senior executive Tuesday as the company warned it is likely to make a loss for 2011. The announcement that SBM's Chief Financial Officer, Mark Miles, will depart in May deepens a crisis that claimed the company's chief executive last year and left it unable to capitalize on a booming oil services sector.
The latest delays to commissioning the Yme oil and gas platform offshore Norway "are expected to lead to a significant additional adverse impact on the company's 2011 results," SBM said. The company had previously indicated it would break even for the whole of 2011 after reporting a $265.3 million net loss in the first half of the year.
Analysts estimated that SBM could take additional charges of anywhere between $100 million and $350 million on the latest delays.
SBM blamed bad weather and "unreasonable client demand" for increasing the amount of work needed on the platform and for slowing down the project. It said it was aggressively resisting the demands of its client.
Prior to the latest delay, SBM was already involved in legal action over cost overruns on the Yme project, operated by Canada's Talisman Energy Inc. (TLM), and for a second project in Canada, Deep Panuke operated by EnCana Corp. (ECA). SBM hopes to recover the extra costs from its clients, but has been forced to write down the overruns immediately because it isn't certain the legal challenges will be successful.
The initial ruling in the arbitrage case will cover the build of the platform in the Middle East and its move to Norway. The date for a ruling in the second part of the arbitrage case with Talisman, regarding delays after the platform arrived offshore Norway, isn't yet scheduled.
Talisman wasn't immediately available for comment.
SBM's woes run counter to the mood in the oil services industry as a whole, which has boomed as international oil prices hovered consistently around $100 a barrel. In its November trading update, SBM said it took in more than $6 billion in fresh orders in 2011 and said the market for its services remains "buoyant".
-By Patrick Buis, Dow Jones Newswires; +31 20 5715 201; patrick.buis@dowjones.com
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