Rio court stops Petrobras payment to SBM Offshore

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SBM Offshore said the Federal Prosecutor’s Office has stopped Petrobras from paying the company pending the time it will pay off its corruption case.

The court filed a claim based on the Brazilian Improbity Act with the Federal Court in Rio de Janeiro against, among others, SBM Offshore Group Companies.

The Improbity Lawsuit relates to the alleged improper sales practices before 2012 that are also the subject of the Leniency Agreement discussion with Brazilian authorities and Petrobras. In the context of the Improbity Lawsuit, the MPF asked the court to impose a provisional measure as a means to secure payment of damages potentially awarded.

On July 4, 2018 the Company became aware of an interim decision by the judge handling the case. From what the Company understands thus far, the judge has partially granted the request for a provisional measure. The provisional measure aims to order Petrobras to start withholding a percentage of monthly payments due to SBM Offshore companies under certain charter contracts in escrow as collateral in respect of the Improbity Lawsuit. The decision references the fact that SBM Offshore is headquartered overseas and that recovery from the Company of any damages may depend on international legal cooperation and (un)availability of assets in the future.

Before taking a decision on the amounts to be withheld, the judge is requesting more information from Petrobras and the Company. Petrobras is requested to indicate its interest in becoming a plaintiff in the Improbity Lawsuit as well as to present evidence on the impact of the retention of amounts. The Company is requested to provide financial information on the contracts that are part of the object of this litigation. The Federal Government is also requested to indicate its interest in this litigation.

The Company strongly disagrees with the interim decision, is seeking further clarification and is taking all appropriate measures to defend its interests. The Company will inform the markets if and when new information becomes available.

Over the past months, the discussion between the Ministry of Transparency, Oversight and Control (Ministério da Transparência, Fiscalização e Controle – “MTFC”), the General Counsel for the Republic (Advocacia Geral da União – “AGU”), Petrobras and SBM Offshore relating to the leniency agreement have progressed. The Company has contacted the parties in this discussion to evaluate next steps in light of the development in the Improbity Lawsuit.

Under the current circumstances, the Company cannot guarantee that a satisfactory resolution will be reached.