UPDATE 2-SBM Offshore in $470 mln settlement over Norway project

Tue Mar 12, 2013 9:24am EDT

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By Gilbert Kreijger

AMSTERDAM, March 12 (Reuters) - Dutch maritime services group SBM Offshore has settled a long and costly dispute over a Norwegian project, taking a new charge of $270 million and paving the way for a much-needed fundraising.

Shares in SBM surged over 20 percent to a 10-month high on Tuesday, after the firm settled one of two disputes over its failed move into so-called mobile offshore production units(MOPUs).

The company, whose main business is floating production, storage and offloading (FPSOs) in the oil and gas sector, said its total settlement costs with Canadian oil company Talisman Energy and its partners over the Norwegian Yme project were $470 million, including $200 million set aside in December.

The latest $270 million charge is largely to cover decommissioning the abandoned Norwegian Yme oil platform. Total provisions and costs related to the project now total nearly $1.4 billion over three years.

SBM has also had to write off millions in losses at the Deep Panuke natural gas platform off Canada's Nova Scotia, the future of which has yet to be settled, and has scrapped dividend payments for three years through 2013.

Analysts welcomed the company's plans to refocus on FPSOs and drop MOPUs, in which SBM had no prior experience.

"Resolving one of the two legacy issues that plagued the company for some four years is important, but certainly comes at a price," analyst Andre Mulder wrote in a note.

The Yme deal and a planned rights issue of 10 percent of share capital - which was dependant on a Yme settlement - will help restore financial health, "but more needs to be done here," he wrote.

SBM was building the Yme platform for Talisman and its partners but faced technical difficulties to complete the project, which was evacuated last summer due to safety concerns. SBM's previous chief executive and finance officer both resigned over the problem.

"Today we have resolved the legacy difficulties of Yme at an agreed cost, bringing an end to a period of significant uncertainty for the company," SBM board member Sietze Hepkema, who was appointed in April as chief governance and compliance officer, said in a statement.

SBM is also investigating alleged improper sales practices at third parties. Hepkema said he would report back on that "within months."

Thanks to the settlement, Talisman and its joint venture partner would continue to evaluate options for the Yme field, Paul Warwick, Talisman's executive vice president for Europe-Atlantic, said in a statement.

Polish oil firm Lotos is Talisman's partner in the oil field.

At 1245 GMT SBM shares, which are trading at less than half of the highs they achieved in 2007, were up 20.3 percent at 12.885 euros. (Additional reporting by Anthony Deutsch; Editing by Jane Merriman and Mark Potter)

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