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SBM Offshore says agents may have bribed officials in Africa

Source: Reuters - Wed, 2 Apr 2014 12:18 GMT
Author: Reuters
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In this 2008 file photo, Venezuela's then President Hugo Chavez takes a sample of crude during his weekly broadcast at a nationalized oil field at Orinoco's belt in the southern strip of the eastern Orinoco River REUTERS/Miraflores Palace/Handout
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By Anthony Deutsch

AMSTERDAM, April 2 (Reuters) - Dutch oil and gas services company SBM Offshore NV said a two-year internal investigation had found evidence that agents in Angola and Equatorial Guinea may have bribed government officials.

But the company said it found no evidence of such practices in Brazil, where it does much of its business, and shares in SBM Offshore jumped more than 5 percent on Wednesday.

An ING analyst said the company's statement held no surprises and Rabobank said it was lowering its estimate for expected settlement costs with Dutch and U.S. authorities by $150 million to $350 million.

Both banks have a "buy" recommendation on SBM Offshore.

"These authorities will form their own judgment on these issues," SBM Offshore said in a statement. "New information could surface in the context of the review by these authorities."

The company announced the internal investigation in April 2012 and voluntarily informed national authorities. On Wednesday it said it "is still not in a position to estimate the ultimate consequences, financial or otherwise, if any, of that review."

The inquiry was conducted by Paul Hastings LLP, De Brauw Blackstone Westbroek, and PwC Forensics and looked into alleged payments involving sales via intermediaries between 2007 and 2011.

SBM Offshore later said it may have violated anti-corruption laws and could be subject to criminal investigation for alleged payments of bribes to officials in African countries.

Its shares have been under pressure as investors pondered the potential impact of the investigation on its business prospects. It has also suffered mishaps on major projects in Norway and Canada.

Last year, it swung to a net loss after being hit by provisions for disputes with customers and a management shake-up. In November, it dismissed Chief Operating Officer Jean-Philippe Laures without giving a reason.

SBM Offshore has suffered losses of more than $1.4 billion since 2011 on the failed Yme platform project, developed for oil firms Talisman Energy and Lotos off the Norwegian coast. It was forced to scrap dividend payments for three years running.

RED FLAGS

The company's shares rose 5.3 percent on Wednesday but are still down nearly 11 percent this year.

"In our view, SBM is a high-risk investment," Rabobank analyst Michel Aupers wrote in a note on Wednesday, citing the unknown size and timeframe for a settlement of any bribery charges and the possible impact on future orders.

ING said SBM Offshore "has taken remedial actions and in our view it has now become one of the most ethical firms in this industry".

But the bank said it was disappointed that the company did not say anything about fines after the investigation.

SBM Offshore said on Wednesday that between 2007 and 2011 it had paid sales agents around $200 million in commissions, mainly in Equatorial Guinea, Angola and Brazil.

"In respect of Angola and Equatorial Guinea, there is some evidence that payments may have been made directly or indirectly to government officials," SBM Offshore said in the statement.

In Brazil, SBM Offshore said, "there were certain red flags, but the investigation did not find any credible evidence that the company or the company's agent made improper payments to government officials".

The announcement came after Brazil's state-run oil company, Petrobras, said on Monday its own internal investigation found no evidence of alleged corruption or bribes paid to Petrobras employees.

The company, whose main area of business is floating, production, storage and offloading platforms, has been growing rapidly in Brazil, where it has billions of dollars of long-term contracts with Petrobras.

Since opening its Brazilian office in 2008 in Rio de Janeiro, SBM has identified the country as a leading growth market, increasing its staff there from 4 to 220. (Reporting By Anthony Deutsch; editing by Matt Driskill and Tom Pfeiffer)

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