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Thursday, August 18, 2011

SBM Offshore CEO to Step Down after Cost Over-runs Hit Profits

- SBM Offshore CEO to Step Down after Cost Over-runs Hit Profits

Thursday, August 18, 2011
Dow Jones Newswires
by Robin van Daalen & Patrick Buis

SBM Offshore Thursday reported semi-annual results that bested analyst expectations, but announced plans to replace its chief executive after a large cost-overrun pushed its results into the red.

SBM, which owns and operates offshore units for the oil and gas industry, reported a net loss of $265.3 million, a big drop from the $77.6 million net profit a year ago, but somewhat higher than analyst expectations. SBM pointed to record orders and cited heavy interest for additional work from Brazil, Angola and other petroleum centers.

But company results have been tarnished by a $450 million impairment charge related to two problem projects that has weighed on shares since it was announced in July. SBM announced that "in light of recent events," Chief Executive Tony Mace would step down and it would recommend Chief Operating Officer Bruno Chabas for the top spot.

"Stepping down is a matter of taking responsibility," Mace said at a meeting without giving further detail.

SBM shares opened higher Thursday following the disclosure, but later gave up their gains following a broader market retreat. At 11:52 GMT, SBM shares were down 3.2% to EUR13.50, while the Amsterdam index was down about 2.6%.

SBM Offshore booked a $450 million impairment charge after it was unable to reach a settlement for additional compensation for cost overruns on SBM Offshore's Yme and Deep Panuke platforms which have been installed on their respective offshore locations in Norway and Canada. Legal action in the case of the Deep Panuke platform has been initiated in April against EnCana and arbitration proceedings were initiated in January for the Yme platform against Talisman But SBM said the outcome is uncertain.

Neither EnCana nor Talisman were available for comment Thursday. Talisman Chief Executive John Manzoni has publicly complained that a "poorly executed fabrication contract" has hindered the project.

ING said SBM's underlying results were "reasonable" and praised the decision to replace Mace as "a valuable step" that could spur a "fresh look" at the firm. But ING said it wanted more details on the "huge" $450 charge.

Turnover for the first six months of 2011 rose 6% to $1.46 billion, driven by fleet operations, where SBM operates Floating Production Storage Offloading (FPSO) units for its clients on a leasing basis.

Earnings before interest and taxes, or Ebit, excluding the impairment charge was $236 million, compared to $146 million a year ago. The increase was mainly driven by the solid performance of the Turnkey Systems segment, the company said.

Copyright (c) 2011 Dow Jones & Company, Inc.

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