SeaEnergy: Plenty of news flow to come in H1 2012

Since we first began following SeaEnergy (LON:SEA) in January 2010 the business has undergone quite a transformation.

Originally an oil exploration-focused business called Ramco, SeaEnergy has retained its oil interests but changed its name in order to reflect a new focus on the burgeoning sector of offshore wind energy. 

Back at the start of last year, SeaEnergy was attracting a lot of investor interest thanks to its participation, along with Portuguese partner EDP Renováveis, in the UK Crown Estate’s Round Three bidding process that would allocate 25 gigawatts of offshore wind projects in nine zones around the UK to successful bidders.

SeaEnergy, through its then 80 per cent-owned subsidiary SERL (SeaEnergy Renewables Limited), and EDP Renováveis were soon awarded acreage in the Moray Firth, Scotland, to develop offshore wind farms with capacity of around 1.3GW. SERL had a 25-per cent interest in the scheme

In the end, however, SeaEnergy opted to relinquish its stake in SERL by selling it to Repsol Nuevas Energias in June this year. After transaction costs SeaEnergy retained net proceeds of around £27 million.

“It means we’ve been paid during the past few years to learn everything we can about offshore wind. That’s how I see it,” said chairman Steve Remp at the time, explaining that SeaEnergy’s management believes that rather than get involved in directly supplying energy from offshore wind its expertise will be better utilised by supplying the equipment needed to help operate and maintain offshore wind turbines. 

The firm has been developing SeaEnergy Marine for a year and a half. This business is pursuing its plans to construct an operations and maintenance vessel that is aimed specifically at maximising the time that offshore wind farm developers can put technicians onto offshore turbines – so reducing periods when turbines are not producing electricity.

Indeed, it is making progress with this business, having engaged with “many potential customers”.

The company’s specifications for its vessels are designed for the challenging wave, tide and weather conditions encountered in the North Sea, where the requirement for the first such vessels is expected to emerge in 2014. SeaEnergy is actively preparing to participate in the first of such tenders for the North Sea. 

“We are expecting the first tenders for specialised operations and maintenance [O&M] vessels by the end of the year or in early January,” says Remp. “We believe we have the right vessel for the tenders that are coming out, but we’ve got to go out and win these tenders.”

Another sign that SeaEnergy is in a good position in this new sector was its being able to secure support to the tune of £88,500 from Scottish Enterprise. This will supplement £345,000 invested by the company itself into the detailed design and tank testing for the firm’s X-Bow vessel.

Remp does not just see the UK offshore wind market as a target, though, pointing out that with Germany turning its back on nuclear power that country is favouring offshore wind as part of a bundle of alternative energy options. “Germany is emerging as a lead market for us as well as the UK,” he says.

A big question among investors in SeaEnergy is what the firm should do with the cash that is now on its balance sheet after the SERL sale. As analysts who follow the company have previously pointed out, the winning of tenders for O&M vessels – as well as the success of the firm’s oil and gas investments – is of equal importance in driving shareholder value as is the distribution of funds to investors, so how the funds are used is a crucial issue.

In any case, it will be some months yet before investors learn how and when funds will be distributed, according to Remp. “We have just received approval from the court in Scotland for the reconstruction. The second quarter of next year should be when we will be able to say something about what distribution might be made against the backdrop of our business activities at the time.”

Meanwhile, Remp is hopeful about Lansdowne Oil & Gas (LON:LOGP), the oil and gas explorer that is currently focused on the Celtic Sea and in which SeaEnergy holds a 24.68 per cent stake. Lansdowne recently spudded an appraisal well in the North Celtic Sea Basin, where it has reported “very good” seismic results. 

“We know the oil is there. The key thing is going to be flow rates and the team’s plans to use new technology,” says Remp. “This has the potential to have a significant impact on us.”

Indeed, one of the reasons why it is still too early to decide on the distribution of the cash pile is “because there are plenty of shareholders who would like to see us invest further in oil and gas”, according to Remp, who points out that there are plenty of opportunities in the sector because banks have become “extremely reluctant” to lend to oil and gas companies in Europe.