SBM Offshore has seen its first half profit nosedive.
Strong and rising revenue was held back by SBM's massive capital expenditure and one-off outlays.
The FPSO specialist posted net profit of $61m during the first half, equivalent to earnings per share of $0.30.
The result is down 81% compared to the first six months of 2018, in which profit totalled $314m or $1.54 per share.
Bruno Chabas, SBM's chief executive, said the company's financial results were "trending ahead of expectation for the year as it enters a period of significant growth".
Expenses and debt
SBM's capital expenditure was $320m during the six-month period, including investment in three hulls being built under its Fast4Ward concept.
The company also paid out $180m to Repsol, which is a share in proceeds and costs recovered from insurers relating to the failed Yme development project in offshore Norway.
This is the first installment of a payout that will total $390m.
SBM also spent around $270m on shareholder returns during the six-month period.
These expenses caused the company's net debt to increase by $600m to $3bn during the first half.
Backlog improvement
On the upside, SBM said it has revised its directional revenue guidance for 2019 upwards from “around $2.0bn” to “above $2.0bn".
The company estimates $1.3bn of this revenue will come from its Lease and Operate segment and over $700m will come from its Turnkey segment.
SBM has received $6.3bn in orders since 2019 began, which has boosted its contract backlog by 36% compared to its fiscal year 2018.
Revenue from SBM's Turnkey segment, was $319m for the first half of 2019, which is double the level seen at the same point last year.
The Turnkey segment has four major projects under execution including three FPSOs, of which two are based on SBM's Fast4Ward concept.
Revised fines
Legal wranglings in Brazil continue, which could see SBM paying a lower fine following a cash-for-contracts scandal in the country.
A federal judge in Brazil has declined a request by the Federal Prosecutor’s Office (MPF) to approve a leniency agreement with SBM, which was signed in September but is not yet effective.
Approval of the agreement would have prompted SBM to pay a BRL 200m ($50.3m) fine to Petrobras, but the judge has questioned this amount.
The judge considered that redress for damages appeared to deviate by BRL 194m compared to earlier calculations, SBM said in its report.
"The MPF and the company both filed motions to address this concern," SBM said.
In December, a Brazilian court approved an agreement with the MPF, under which the MPF’s lawsuit against SBM will be terminated.
FPSO stake
SBM is planning to sell a stake of up to 35% in the companies that own the FPSO Mero 2 and said it is in discussions with prospective partners.
"Good progress" is being made on construction of Mero 2's standard multipurpose hull at the China Merchants Industry Holdings shipyard, SBM said. Completion is expected in 2020.
The company is currently negotiating a target financial structure for the project with potential lenders and export credit agencies.
In June, SBM announced it had signed a letter of intent with Petrobras, which will lease and operate the FPSO for 22.5 years at the Mero field in the Santos Basin, offshore Brazil.
Share buyback
SBM's financial report gave an update on its share buyback programme and stated that the company plans to cancel 7 million shares currently held in treasury, equivalent to two-thirds of the total shares repurchased.
SBM launched a €175m ($196m) share repurchase programme in February, which will be completed by the end of 2019.
The buyback plan will reduce SBM’s share capital and provide stock for regular management and employee share programmes.
