Call it a tale of corporate over-reach. SBM Offshore, an Amsterdam-listed oil services company, signed in 2007 to provide an offshore platform for Talisman Energy, a Canadian oil and gas producer. Six years later, this mobile offshore production unit has become a ghost platform, abandoned in the Norwegian North Sea and beset by delays, technical problems and safety concerns. On Tuesday, SBM agreed to pay Talisman $470m to terminate the project, sending its shares up 20 per cent. That barely begins to hide its embarrassment.
The episode is a warning about the perils of companies venturing beyond what they do best. SBM specialises in building floating production, storage and offloading (FPSO) vehicles – the workhorses of the deepwater oil business. Talisman’s requirement was a seabed platform supporting an above-surface superstructure, to be used to restart production at the Yme oilfield in Norwegian waters. SBM, worried about its concentration on FPSOs, seems to have wanted the new business too badly, and failed to appreciate the technical, financial, contractual and construction risks.
The resulting episode has been damaging. Including Tuesday’s settlement, SBM has had to make provisions of $1.4bn, and suspended its dividend payments. Bruno Chabas, who took over as chief executive in January last year, was determined to bring the issue (and a separate mishap in Canadian waters, which is outstanding) to a close. It has damaged SBM’s reputation as a contractor: there is a worry that the episode will cost it future business.
SBM’s shares are up two-thirds to nearly €13 since mid-November amid signs that a settlement was likely. They trade at a 2013 earnings multiple of 7.6, against the sector average of 13.5. Seven years ago the price hit €25 as takeover rumours swirled. Could exorcising the ghost platform saga reignite them?
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