Clarification On the Approval Process of the Leniency Agreement

195September 23, 2016

SBM Offshore (“Company”) is providing an update on the approval process in Brazil of the Leniency Agreement totaling US$273 million with the Brazilian Ministry of Transparency, Oversight and Control (Ministério da Transparência, Fiscalização e Controle – “MTFC”), the Public Prosecutor’s Office (Ministério Público Federal – “MPF”), the General Counsel for the Republic (Advocacia Geral da União – “AGU”), Petróleo Brasileiro S.A. – Petrobras (“Petrobras”).

The Leniency Agreement was signed July 15, 2016 after almost two years of good-faith negotiations, and would become effective following approval by the Fifth Chamber for Coordination and Review and Anti-Corruption of the MPF (the “Fifth Chamber”).  These negotiations were conducted within a framework for discussions on a mutually acceptable settlement as agreed in a Memorandum of Understanding (“MoU”) signed March 17, 2015.  This MoU was signed by The Comptroller General’s Office (“CGU”), now MTFC, the AGU and the Company.  This MoU also provided for an agreed process to share information.  As of mid-2015, Petrobras joined the negotiations, followed by the MPF in August 2015. Mindful of the difficulties in negotiating, drafting and signing a Leniency Agreement involving so many parties, the Company has been transparent, candid and open to discuss the conditions imposed by each of the parties. The Company cooperated with the MPF, the AGU and the MTFC and, under terms of confidentiality, has granted the MPF and the MTFC access to the database containing Brazil related documents SBM Offshore recovered during its internal investigation.

The parties to the MoU and Petrobras and the MPF all signed the Leniency Agreement and committed to obtain the necessary approvals and defend the Leniency Agreement. The MPF submitted the Leniency Agreement for approval to the Fifth Chamber.  The MTFC sent the Leniency Agreement to the Federal Court of Accounts (“TCU”).

In its decision of September 1, 2016, the Fifth Chamber refers the Leniency Agreement of July 15, 2016 to a new prosecutor within the MPF for further review, consideration, and next steps.  Although it was neither involved nor consulted in the process that led up to the decision of Fifth Chamber, the Company understands that the Fifth Chamber raised a number of concerns regarding the Leniency Agreement.  The decision of the Fifth Chamber is not final in the sense that the decision is open to internal appeal within the MPF.  SBM Offshore understands that the AGU has recently filed such an appeal.

Specific to SBM Offshore, concerns raised by the Fifth Chamber relate inter alia to (i) the cooperation and documents to be provided by SBM Offshore to the authorities pursuant to the Leniency Agreement; (ii) certain assumptions made by the Fifth Chamber concerning the calculation of the amounts payable under the Leniency Agreement; and (iii) some specific clauses of the Leniency Agreement.  The Company has since provided the Fifth Chamber with input to answer these concerns. Other concerns raised by the Fifth Chamber include matters of Brazilian law and the mandate of authorities.

SBM Offshore continues to engage with all authorities and Petrobras while remaining committed to the Leniency Agreement as signed on July 15, 2016.  Only upon approval of the Leniency Agreement by the Fifth Chamber will the Leniency Agreement become effective and binding upon the parties.  SBM Offshore has not made payments, and until approved, is not under any obligation to make payments under the Leniency Agreement.

In light of the foregoing, it is currently not possible to predict the timing or final outcome of these developments.