SEA.L Regulatory News (SEA)

29 August 2013

SeaEnergy PLC

("SeaEnergy" or the "Company")

2013 Interim Results

SeaEnergy (LSE: "SEA"), the innovative energy services group, today announces half year results for the six months ended 30 June, 2013.

Highlights:

Operational

· R2S reporting substantial growth with new North Sea clients and international expansion

· Ship Management business launched in June

· Knowledge Transfer Partnership announced to develop an operational and economic model for life cycle cost of operations and maintenance ("O&M") strategies in offshore wind farms

· Repsol warranty claim settled in full in favour of SeaEnergy

· Operations Director appointed and continuing focus on delivery of strategy

Financial

· Strong revenue growth driven by R2S

· Strong financial position with cash on the balance sheet and no debt

· Group cash balance at 30 June 2013 of £5.4 million (30 June 2012: £19.0 million) (31 Dec 2012: £5.5 million)

· Loss from continuing operations after tax reduced to £0.6 million for the first six months of 2013 (H1 2012: loss of £1.7 million)

· Loss per share (basic and diluted) 1.10 pence (H1 2012: loss per share 2.53 pence)

Commenting on today's announcement David Sigsworth, Chairman, said:

"SeaEnergy has made substantial progress with its energy services strategy and is moving towards profitability. We have made significant advances with R2S, as well as in the Consulting business and in Marine with the recent addition of the Ship Management unit. We believe that our strategy is beginning to deliver sustainable growth in shareholder value."

For further information contact:

www.seaenergy-plc.com

www.r2s.co.uk

www.seasm.com

www.lansdowneoilandgas.com

Notes

Appointment of Operations Director

Michael Brendan Comerford, age 52

Mike joined the Company in July 2012 and is already a director of SeaEnergy subsidiaries, Return To Scene Limited and SeaEnergy Ship Management Limited, and of Aegir SRA Limited and The Moray Firth Partnership. In the last five years he has also been a director of Rubicon Response Limited, Petrofac Training Limited and International Energy Skills And Training Alliance Limited.

Mike has an interest in 1,386,485 shares in SeaEnergy PLC. These shares are held jointly with the Company's Employee Benefit Trust ("EBT") as described in detail in our 2012 Annual Report.

Save as set out above, Mr Comerford has confirmed that there are no disclosures required to be made for the purposes of paragraph (g) of Schedule Two to the AIM Rules.

SeaEnergy PLC

Interim Results for the six months ended 30 June 2013

Chairman's Statement

Dear Shareholder,

We described in some detail, in our 2012 Annual Report, the steps the Company has made towards delivering the energy services strategy we set out in early 2012. In this mid-year report, we are very pleased to show for the first time how this strategy is impacting our financial results and moving the Group towards sustainable profitability.

Strategy

Progress is being made on each of the key elements of the strategy - Return to Scene ("R2S"), Consulting and Marine - and we touch on each of these in more detail in this report. Our plan to build a group of complementary and innovative businesses is progressing well, and we have recently added Ship Management to the Group's range of marine services. We remain confident that our strategy offers an attractive investment opportunity for shareholders.

In addition, we are continuing with our plans to divest legacy assets over time as appropriate opportunities arise.

Financial Review

In this period we are reporting the first full six months activity from both R2S and Consulting, together with the first activity from Ship Management. A turnover of £2.2 million was recorded compared with £nil for the same period of 2012. From this level of activity a gross profit of £1.3 million was achieved.

Administrative expenses rose slightly to £1.9 million from £1.8 million in 2012, including costs of £0.3 million relating to the recent board restructuring.  When combined with other operating income of £45,000 from the rental of surplus office space the Group operating loss fell sharply to £0.6 million from £1.8 million.

Net finance income was £33,000 (6 months to 30 June 2012: income of £0.17 million). Our share of associates' results and other related movements improved from a loss of £0.12 million in 2012 to a loss of £71,000. The Group loss before taxation was £0.6 million (6 months to 30 June 2012: £1.7 million). It is expected that any tax payable by R2S on its profit for this period will be relieved by losses from elsewhere within the Group leaving a Group loss after tax of £0.6 million for the first six months of 2013 compared to a loss of £1.7 million for the first six months of 2012.

Group cash balances at 30 June 2013 were £5.4 million (30 June 2012: £19.0 million), marginally reduced from £5.5 million at 31 December 2012.

Cash outflows from operating activities totalled £0.4 million (6 months to 30 June 2012: £5.3 million). Cash inflows from investing activities totalled £0.3 million (6 months to 30 June 2012: £2.4 million). The major inflow in the period was £0.9 million, being the receipt of the final payment plus interest from Repsol following the successful resolution of the warranty claim. The payment to the vendors of £0.5 million of deferred consideration in connection with the R2S acquisition was the other main element. Payments relating to the recent board changes will fall into the second half of the year, although these have been accrued at the half year.

Cash outflows from financing activities totalled £6,000, the same as in the corresponding period last year.

Total equity attributable to the equity holders of the Company has decreased by £7.9 million from £26.0 million at 30 June 2012 to £18.1 million as at 30 June 2013. The decrease arises primarily from the tender offer in July 2012 which returned £6.9 million to shareholders.

Return to Scene ("R2S")

In the year since we acquired R2S, it has achieved growth in line with the challenging targets we set at the time of acquisition. As part of the SeaEnergy Group, R2S has continued on a strong growth trajectory, and is now active in US markets as well as in the UK and Northern Europe. Earlier this year, we opened an R2S office in Houston, Texas, to target the Gulf of Mexico market and this has already generated our first photographic capture and R2S model build of a Gulf of Mexico platform.

Since the acquisition, the technical scope of the R2S offering has expanded to include the full life cycle of captured assets. R2S now provides "pre-visualisation" in which spherical images are constructed of platforms and other structures which have yet to be built and for major modifications of existing structures, by interpreting 3D construction drawings. These pre-visualisations allow for collaborative working, the planning of building and commissioning tasks and for early familiarisation of new assets, before they are built. 

At the opposite end of the life cycle R2S has also, for the first time, started providing support for decommissioning operations, in which R2S spherical images allow for safe and efficient planning of the tasks required in safely disassembling retired assets.

In the near future, we expect to capture our first wind turbines with the R2S process, and we continue to broaden the business across the oil & gas sector as well as entering other sectors.

In addition, R2S's forensic and media divisions continue to trade well, and we are also working to develop additional sources of revenue. This work has included use of the R2S visualisation capability in security preparations for the recent G8 conference of world leaders in Enniskillen, Northern Ireland.

In the six months to 30 June 2013, R2S contributed nearly £1 million to Group earnings. R2S is on track to achieve the level of earnings required to trigger the maximum earn-out payment under the acquisition agreement.

Consulting

The Consulting division had a successful first half of 2013, securing its first direct projects, for large international energy companies, DNV KEMA in their support of the Carbon Trust and the Scottish Government (funded by Scottish Enterprise).

These projects have included working with an international owner/operator of European offshore wind farms to develop and implement a fleet-wide strategic approach to asset integrity management. Asset integrity management involves developing an organised approach to managing the immediate, near term and long term inspection and maintenance requirements of operating assets. In this case we are assisting the client to identify and implement the optimal strategy for their wind turbines and associated balance of plant, targeting cost reduction whilst maximising turbine availability. SeaEnergy has valuable expertise in the area of asset integrity, and is making a positive difference to our clients in this area.

Another consulting project, undertaken for the Scottish Government, has involved a wide-ranging review of the potential for converting and using fishing vessels in support of offshore wind farm activities. Rather than scrapping vessels in response to European fishing quota constraints, the Government tasked SeaEnergy with assessing whether some of these vessels might be put to work in offshore wind roles and with estimating associated conversion costs and charter rates. This study, which involved close liaison with the fishing vessel-owning community, shipyards and the wind farm developers, has confirmed that there is both a capability and appetite among fishing vessel owners to participate in this market sector, and also that there are suitable roles for these vessels to take on. SeaEnergy is very well qualified to undertake this study, having the relevant market connections and experience, whilst recognising the importance and sensitivities of the topic.

SeaEnergy's Consulting activities will continue to develop in the second half of 2013. The business is already developing a reputation as an attractive place to work, with a healthy culture and interesting projects, and it will continue to add additional resources as its development continues. The recently announced Knowledge Transfer Partnership project with Robert Gordon University, under which we are collaborating to develop new tools to help optimise operations and reduce cost at offshore wind farms, is an example of this development.

Marine

SeaEnergy's impact on the market for offshore wind farm operations and maintenance ("O&M") has been significant. Service Operations Vessels ("SOVs"), of the type developed by SeaEnergy over the past three years, are now expected to dominate the delivery of O&M, particularly for the new, larger and further-offshore wind farms. One of the leading turbine manufacturers has recently endorsed this approach by ordering two such SOVs for offshore wind farms in German waters. Unfortunately we were not the successful bidder for that project but our vessel design was commended and we were one of the short listed bidders for the project.

Tendering activity for offshore wind farm support vessels is accelerating, and we are doing all that we can to ensure that our SOV design will secure its first new-build tender soon. In addition, SeaEnergy is working with wind farm developers, including a number of Carbon Trust Offshore Wind Accelerator group members, and wind turbine manufacturers, to secure nearer term charter work, in which charters of existing vessels would provide O&M support to operational wind farms. Such charters will enable the customer to capture higher yield and greater revenue than would be the case under existing O&M strategies, and could also be utilised to accelerate commissioning activities to bring forward first production. The customers would at the same time gain first-hand experience of the many and varied benefits that SOVs offer over the more limited crew transfer vessel alternative, helping them understand and evaluate the full potential that a purpose designed vessel would bring.

The launch of the SeaEnergy Ship Management business has significantly strengthened our capabilities in this area, and will enhance our offering into current and future tenders, as well as generating revenue in the near term from managing third party vessels and placing professional marine personnel with vessel owners and builders.

Legacy Assets

It remains our plan to realise the value of our legacy oil & gas assets over time and to return a proportion of that realised value to shareholders. The current market value of our holding in Lansdowne Oil & Gas plc is £12.2 million and the historic cost net book value is £5.6 million.

Board Changes

On 18 June 2013, we announced that following a consolidation of Board roles, Steven Bertram had assumed the combined role of Finance and Commercial Director for SeaEnergy PLC and that Christopher Moar had resigned as Finance Director and left the Company. I would like to take this opportunity to restate our thanks to Chris for his many years of service with the Group, and to wish him well for the future.

SeaEnergy continues to keep its Board structure under review, to ensure that it has the right resources, at the right levels, to deliver our strategy. The Board is pleased to announce the appointment of Mike Comerford as Operations Director with immediate effect. Mike has made a significant impact within the Company since joining the business in 2012, and his contribution at Board level will help to drive the business forward on all fronts.

Health, Safety and the Environment

We are pleased to report that the Group has had no incidents or near misses in the period. SeaEnergy continues to take an active and mindful stance towards minimising its HSE risk exposure in the workplace.

Outlook

SeaEnergy is taking significant and measurable steps towards the delivery of its business strategy. We believe that strategy is beginning to deliver sustainable growth in shareholder value, and distributions of value over time to shareholders from the gains on sales of legacy assets will further enhance shareholder returns.

David Sigsworth

Chairman

Consolidated Interim Balance Sheet

Consolidated Interim Statement of Comprehensive Income

Consolidated Interim Statement of Cash Flows

Consolidated Statement of Changes in Equity

Notes to the Interim Statement

1. Basis of Presentation

Accounting Policies

The interim financial information for the six months ended 30 June 2013 has been prepared on the basis of the accounting policies which will be adopted in the 2013 Annual Report and Accounts, and IAS 34, "Interim Financial Reporting" as adopted by the European Union.

The interim financial information does not comprise statutory accounts within the meaning of section 434 of the Companies Act 2006. The results for the six months to 30 June 2013 and the comparative results for six months to 30 June 2012 are unaudited. The comparative figures for the year ended 31 December 2012 do not constitute the statutory financial statements for that year. The interim financial information should be read in conjunction with the annual financial statements for the year ended 31 December 2012, which have been prepared in accordance with IFRSs as adopted by the European Union. Those financial statements have been delivered to the Registrar of Companies and include the auditor's report which was unqualified and did not contain a statement under Section 498 of the Companies Act 2006.

Going Concern

The Directors have prepared the interim financial information on the going concern basis which assumes that the Group and Company and its subsidiaries will continue in operational existence for the foreseeable future.

Principal Risks and Uncertainties

The management of the business and the execution of the Group's strategy are subject to a number of risks. Risks are reviewed by the Board and appropriate processes put in place to monitor and mitigate them. If more than one event occurs, it is possible that the overall effect of such events would compound the possible adverse effects on the Group. Further details of the Group's risk profile analysis can be found on pages 20 to 22 of our Annual Report for 31 December 2012, available from the website: www.seaenergy-plc.com

2. Loss per Ordinary Share

The calculation of the basic loss per share attributable to equity holders of the Company is based on the loss for the period of £612,000 (6 months to 30 June 2012: £1.7 million) and 55,459,383 (6 months to 30 June 2012: 69,110,790) ordinary shares, being the weighted average number of shares in issue during the period. 

For diluted earnings per share, the weighted average number of ordinary shares in issue is adjusted to assume conversion of all dilutive potential ordinary shares. At the reporting date the Company had one class of potential ordinary shares; share options. As a loss was recorded in the current period, the issue of potential ordinary shares would have been anti-dilutive.

Half year ended 30 June

2013 2012

Pence per share

3. Goodwill and Other Intangible Assets

4. Trade and Other Payables

5. Taxation

It is anticipated that Corporation tax payable by the Group's subsidiaries will be fully absorbed by group relief and therefore no provision for tax payable has been made.

6. Reconciliation of Loss for the Period to Net Cash Used in Operating Activities

7. Business Combination

 Acquisition of Return to Scene Limited ("R2S")

On 23 August 2012, the Group acquired the entire issued share capital of R2S an unlisted company based in Aberdeen and specialising in Visual Asset Management. The Group acquired R2S in line with its strategy of building and acquiring innovative and complementary energy services businesses.

Deferred cash consideration

In accordance with the purchase agreement contingent consideration of £500,000 was due to the vendors of

R2S subject to certain revenue targets being met. These targets were met in February 2013 and accordingly the payment of £500,000 was made to the vendors in March 2013.

Earn-out consideration

Additional Earn-out consideration of up to a maximum of £4.6 million may become payable in March 2014 subject to the achievement by R2S of certain profit targets (and not linked to continuing employment of directors). For the maximum Earn-out consideration to become payable R2S would have to report annual earnings before interest, tax, depreciation and amortisation in the year to 28 February 2014 in excess of £2.5 million. The Earn-out consideration can be settled through the issue of shares in SeaEnergy, subject to certain restrictions, at the sole election of SeaEnergy.

As at the acquisition date, the fair value of the Earn-out consideration was estimated to be £4.6 million. As at 30 June 2013, given the performance of R2S over the first half of 2013, the Directors believe that it is probable that the profit targets will be achieved.

8. Related Party Transactions

(a) Directors

Prior to his appointment as Chief Executive, J H Aldersey-Williams undertook consultancy for the Group. His consultancy fees, which ceased on his appointment as Chief Executive, totalled £nil in the six months to 30 June 2013, (6 months to 30 June 2012: £34,000).

In addition to his role as a Non-Executive Director, D K Laing is a partner in Ledingham Chalmers, legal advisers to the Company. In the six months to 30 June 2013 the Company incurred legal fees of £nil (6 months to 30 June 2012: £15,000) for services provided by Ledingham Chalmers.

 (b) Associates

During the period to 30 June 2013 the Group made payments for administrative expenses on behalf of its associate company Mesopotamia Petroleum Company Limited ("MPC"). The balance owed by MPC to the Group as at 30 June 2013 is £415,000 (30 June 2012: £378,000). In January 2011 the Company, along with all other MPC creditors, agreed to defer the amount owed by MPC until January 2013. The Company has subsequently extended the deferred period until January 2014. No interest is charged and no guarantee has been given. The Company has made full provision against this debt.

During the period to 30 June 2013 the Group made payments for administrative expenses on behalf of its associate company Lansdowne Oil & Gas plc. The balance owed by Lansdowne to the Group as at 30 June 2013 is £nil (30 June 2012: £47,000).

9. Post Balance Sheet Events

Payments totalling £311,000, relating to the recent board restructuring and the departure of C G Moar, will fall into the second half of the year, although these costs have been accrued at the half year.

10. Contingent Liability

Under the terms of a joint venture ("JV") agreement dated 26 February 2009 between the Iraqi Drilling Company ("IDC") and the Company's associate Mesopotamia Petroleum Company Limited ("MPC"), MPC was required to confirm its share of the initial JV funding by a prescribed date and failure to do so was to result in liability for a penalty of US $2.2 million. MPC's liability for this penalty was guaranteed jointly and severally by the Company, another MPC shareholder and an associate of that shareholder.

In July 2009 IDC unilaterally purported to terminate the JV while MPC argued that it was entitled to an extension of the date by which its share of JV funding was to be confirmed.

In October 2011 IDC commenced an action against MPC in the Specialised Commercial Civil Court in Baghdad claiming payment of the penalty sum. A Power of Attorney has been provided to local Counsel to allow them to manage the Court proceedings as appropriate. On 28 August 2012 the Court upheld a ruling against MPC that it is liable to pay the penalty. MPC has appealed against this decision and is awaiting the Court's decision which has no fixed date for determination. The MPC Directors will review the Court's decision when it is announced and the options available to it.

11. Copies of the Interim Report

Copies of the interim report can be obtained from the Company Secretary, SeaEnergy PLC, Britannia House, Endeavour Drive, Arnhall Business Park, Westhill, Aberdeenshire, AB32 6UF and from the Company's website www.seaenergy-plc.com.