UPDATE 4-SBM Offshore takes $629 mln charge on troubled project

Thu Dec 20, 2012 2:48pm EST

* No dividend in 2012 or 2013

* Net loss of $100 mln seen in 2012

* Shares surge 17 pct

* Total provisions for Yme rise to $1.1 bln

By Anthony Deutsch and Gilbert Kreijger

AMSTERDAM, Dec 20 (Reuters) - SBM Offshore, the Dutch maritime services group, will take charges totalling $629 million, mostly to write down a troubled Norwegian oil platform project, and will also issue new shares worth up to 20 percent of its capital.

SBM Offshore has been struggling since last year with the Yme platform, developed for oil firms Talisman Energy and Lotos off the Norwegian coast. A share or rights issue was expected by analysts.

The Yme project is in limbo, having been evacuated over safety concerns last summer, and Talisman, the operator, has no indication when production will ever start. Following numerous delays, it is more than a year and half behind schedule.

SBM Offshore shares, which have been under pressure, surged as much as 17 percent as investors were relieved by prospects of an end to the costly dispute.

SBM Offshore said in a statement on Thursday its management would propose not paying a dividend in 2012 or 2013, after missing a payout in 2011.

The latest provisions and additional charges will push its results to a net loss of around $100 million in 2012, SBM said. In 2011, it took $407 million in charges on Yme, which has suffered from multiple technical problems, and a second project in Nova Scotia.

SBM Offshore will take an additional $400 million charge this year to fully write down Yme, make a $200 million provision for expected settlement costs, and take a $29 million charge for additional costs related to the Deep Panuke gas platform with Encana Corp. in Canada, it said on Thursday.

The start-up of Deep Panuke, a natural gas development off the coast of Nova Scotia, was recently pushed back from the end of this year to a new target of the first half of 2013 due to problems with the equipment.

The measures take the total provisions over the past two years for Yme to $1.1 billion and $1.5 billion, when including Deep Panuke.

"For SBM it means that a file with a lot of uncertainty is taken a step closer to a final solution," Chief Financial Officer Peter van Rossum told reporters.

"We aren't there yet, but it is clear which direction it is going with the platform."

SBM Offshore said the most likely scenario is for the platform to be dismantled, but the costs and timing of such an operation, and the breakdown between parties, remain unclear.

"It is likely the project will not be finished and the value of the project is being reduced to zero. We will write off the total value of the platform," Van Rossum said.

Talisman, which has taken its own hefty write-downs on the project, said on Thursday it was a "step in the right direction," but it was surprised to hear about the development through a press release and not from SBM Offshore directly.

"We still want to dismantle the platform and move it to land so it can be properly repaired and adapted for Norwegian conditions," Talisman spokesman Vidar Nedreboe said.

Early this year, the company removed any contribution from Yme from its production forecasts, blaming the chronic delays. However, Talisman said on Thursday it has not ruled out the chances that Yme will start up and eventually produce oil at the 40,000 barrel per day design rate.

LEGAL WORRIES

The troubled platform projects led to a management shake-up at SBM Offshore and have pressured its stock price.

Credit Suisse said in a trading note "this is a major step forward for SBM, recognising that the Yme job has been extremely disappointing," but added that uncertainty remains.

"The main outstanding item is the possibility of litigation from the Yme partners which in our view is now the main downside risk to the stock," it said.

SBM Offshore, a maker of oil and gas platforms, said it would also issue new shares worth 9.95 percent of its capital in a private placement with Dutch investor HAL to raise $193 million to make sure bank covenants are met.

In addition, it plans a 10 percent rights issue if it reaches a settlement with Talisman over the Yme project, to strengthen its equity position. The value of that transaction would be linked to the potential settlement with Talisman.

In July, Yme was evacuated over concerns it could collapse during the winter months and it has been empty since.

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