Partial divestment agreement of FPSO Turritella
On 30 June 2015, the Company entered into an agreement with Mitsubishi Corporation and Nippon Yusen Kabushiki Kaisha for the disposal of 45% of the Company’s share in companies incorporated for the purpose of owning and operatingTurritella at the shares nominal value. After the completion of this transaction, the Company has kept the control of its subsidiaries under 10 ‘Consolidated financial statements’ and the transaction has been therefore accounted for as an equity transaction. As a result, the equity attributable to the shareholders of the parent company has increased by US$ 38 million, and no gain or loss has been recognized in the Consolidated Income Statement prepared in accordance with standards.
In the operating segments disclosure, the Company has recognized under Directional Reporting accounting principles, the share of construction revenues and gross margin made from the new partners in the company owningTurritella (Stones Sarl), which was eliminated in consolidation prior to the completion of the divestment.
FSO Yetagun (Myanmar)
In May 2015, the client extended its lease contract of the Yetagunby 3 years, ending May 2018. This extension has been classified as financial lease according to IAS17, triggering a gross margin impact of US$ 16 million on the period in accordance with standards. In the operating segments disclosure, this extension remains classified as operating lease under Directional Reporting accounting principles, triggering a linear recognition of related revenues and gross margin during the extended lease period.
Review of fleet residual value
The residual values of operating and finance leased assets are reviewed and adjusted, if appropriate at each statement of financial position reporting date. The Company measures the residual value ofs, platforms and other floating facilities as the scrapping values of the assets (based on steel price multiplied by the Light Diplacement Tonne of the facility) after deducting the estimated cost of disposal. The significant decrease of the market steel price at the end of 2015 lead the Company to reduce the residual value of the fleet, resulting in a non-cash impairment of US$ 31 million accountied for in the Consolidated Income Statement prepared in accordance with standards and an impairment of US$ 13 million in the operating segment disclosures, under Directional reporting accounting principles.
As a result of an on-going review of the cost structure and continued market downturn, the Company has reduced its workforce by approximately 2,000 positions worldwide over the periods of 2014 and 2015. Restructuring costs, accounted for as ‘Other operating expense’ over the period, represent US$ 55 million, of which US$ 46 million relate to Monaco based employees. The restructuring liabilities represent US$ 8 million as of 31 December 2015 for the Company.
Provision for settlement in Brazil
On 17 March 2015, the Company announced the signing of a Memorandum of Understanding (MoU) with the Brazilian Comptroller General’s Office (Controladoria-Geral da União – ‘CGU’) and the Attorney General’s Office (Advocacia-Geral da União – ‘AGU’), and explained that this MoU set a framework between the Company, the CGU and the AGU for discussions on a potential mutually acceptable settlement and for the disclosure by SBM Offshore of information relevant to the CGU’s investigations.
Whilst these discussions, which now also include the Public Prosecutor’s Office (Ministério Público Federal – ‘MPF’) and Petrobras, are presently still ongoing, it has become sufficiently clear that a resolution of the issues will have a financial component. Consequently, based on information currently available to it, the Company has recorded a non-recurring provision of US$ 245 million in the year-end financial results of 2015.
Although no assurance can be given that a settlement will actually be reached, or for what amount, and until the matter is concluded, the Company has considered it more likely than not that an outflow of resources embodying economic benefit of US$ 245 million will be required to settle the Company’s obligation in Brazil within the foreseable future.
Release of accruals for sales consultancy fees
Although all payments to sales consultants were suspended from February 2012 onwards, the Company continued to accrue over the period 2012 to 2014 for potential liabilities under contracts with those sales consultants that were under internal investigation. Most of these accruals relate to Equatorial Guinea, Angola and Brazil. In 2014, the Company reviewed the contractual situation of these sales consultants in light of the findings of its own internal investigation and those from the Dutch Public Prosecutor (‘OM’). In 2015, the Company took the necessary steps to terminate the consultancy contracts relating to Equatorial Guinea and Angola. More recently, it reviewed the contractual situation in relation to its former main consultant in Brazil in light of the developments in Brazil in relation to that consultant, including the recent criminal charges filed by the Brazilian Public Prosecutor’s Office (Ministério Público Federal – ‘MPF’) against that consultant.
Based on the various reviews referenced above, the Company has come to the conclusion that there is sufficient evidence to conclude that the consultants that represented the Group in Equatorial Guinea and Angola in the period 2007-2011 and the main consultant that represented the Group in Brazil in that period acted in breach of applicable laws, and thus, in contravention of their obligations. As a result, the Company concluded that it is no more a liability to these sales consultants. In 2015, the amount of US$ 51.8 million was accordingly released to the gross margin of the Turnkey segment and US$ 36.7 million was released to the Gross margin of the Lease and Operate segment.