SEA.L Regulatory News (SEA)

5 April, 2013

SeaEnergy PLC

("SeaEnergy" or the "Company")

Audited Results for the year ended 31 December 2012

SeaEnergy PLC (AIM: SEA) today announces its audited results for the year ended 31 December 2012.

Operational highlights:

·; Acquisition of Return to Scene Limited, a profitable, cash generative and growing business.

·; Establishment of consultancy business building on our reputation for thought leadership and innovative problem solving.

Financial highlights:

·; Loss for the year of £2.4 million (2011: profit of £25.3 million, including profit of £28.6 on disposal of wind farm development business).

·; Operating expenses reduced from £3.7 million to £3.1 million.

·; Loss per share 3.82 pence (2011: earnings per share 37.08 pence).

·; Net assets at 31 December 2012 £18.7 million (2011: £27.6 million).

·; Cash position at the end of 2012 of £5.5 million (2011: £21.9 million).

·; Current market value of investment in Lansdowne Oil & Gas plc £13.9 million (Dec 2011: £11.0 million).

·; Return of value to shareholders, via a Tender Offer, of £6.9 million (2011: nil).

David Sigsworth, Chairman, said:

"In the first quarter of 2012 we set out a very clear strategy to acquire and develop businesses providing services to the offshore energy industry and I am delighted with the progress made so far. We continue to improve governance, are delivering the growth strategy and have completed a return of value."

For further information contact:

www.seaenergy-plc.com

www.r2s.co.uk

www.lansdowneoilandgas.com

Chairman's Statement

Over the past twelve months, SeaEnergy PLC has made very significant steps in implementing the strategy set out in last year's Annual Report, and in this statement and the Chief Executive's Review which follows, we will describe this in some detail.

Return of value

In my last letter, I set out the Company's intention to return £6.9 million to shareholders, recognising the significant value generated by the sale of its subsidiary SeaEnergy Renewables Limited ("SERL"). After taking advice on the alternatives, the Company chose to make a Tender Offer to buy in shares equivalent to this value, and I am pleased to report that this process was very successful. 

This mechanism was effective in transferring value from the Company to shareholders.

Governance

The Board's principal priorities are to set the strategy for the Group, to provide leadership, to ensure that the necessary resources are available to drive the business, to review management performance and to set the Group's values and standards.

Last year, for the first time in the Annual Report, we stated our Vision and Values for the Company. This year, we have restated them, unchanged, and they remain fundamental to our business. As part of "living our values" the Company has committed to implementing robust management systems across the Group. We have recently initiated a formal anti-bribery policy and are working towards gaining accreditation under the international standard for Management Systems - ISO 9000 - in the near term.

Remuneration

During the year, the alignment of executive management interests with those of shareholders was completed with the implementation of the Long Term Incentive Plan for executive management. Under this Plan, the Executive Directors have made an upfront investment in the Company and will share in the long term increase in share price, but only above a threshold level which represents the baseline of asset value when the Plan was put in place.

Risk Management and HSE

One of SeaEnergy's values is to operate safely, and I am pleased to report that the SeaEnergy Group had no reportable HSE incidents last year. 

Following the acquisition of Return to Scene (R2S), the Board recognises that the risk profile of the Group has materially changed, and we are making significant improvements to our HSE management systems and risk register to ensure that this changing risk profile is well understood and actively managed throughout the Group.

Strategy

As we announced to the market in early 2012, the Board has committed to the energy services strategy comprising three strands of growth and I am pleased to report that these have all seen strong steps forward during the year:

·; acquisition of businesses which offer potential for growth, marked by the deal with R2S,

·; building a consulting business, where we recruited Donald Brown to lead this effort and are already seeing success, and

·; developing the marine services business, in which we are actively tendering vessels to support offshore wind activities and are building further on the foundations already established.

The Chief Executive's Review describes each of these areas in more detail.

In summary, I am pleased that SeaEnergy completed the return of value described last year, has secured our first acquisition of a profitable and cash generative business, has continued to develop its governance systems, has made improvements to remuneration arrangements and is succeeding in implementing the robust strategy we set out last year.

David Sigsworth

Chairman

Chief Executive's Review

During 2012, the Company made significant progress in delivering the strategy we set out early in the year, and in this review I will describe the main developments and the outlook for the business over the next year.

Financial Summary

In 2012, the Group recorded a loss after tax of £2.4 million compared to a profit of £25.3 million for 2011. The prior year included a gain of £28.2 million on the sale of the Group's discontinued offshore wind farm development business.

Group revenue, which arose in the last four months following the acquisition of R2S and the start of consulting activities, was £0.9 million (2011: £nil).  Cost of sales was £0.4 million (2011: £nil). Operating expenses reduced by 16% from £3.7 million in 2011 to £3.1 million in 2012. Non-recurring items relating to restructuring, tender offer and acquisitions totalled £1.3 million.

Share of associate losses for the year and other positive movements totalled £1.3 million (2011: £0.2 million). Net finance income of £0.2 million was recorded in 2012 (2011: £0.2 million), and tax of £0.1 million was paid (2011: £nil).

Group net assets are £18.7 million at 31 December 2012 (2011: £27.6 million). The Group returned capital of £6.9 million to shareholders during 2012.

The Group's overall cash flow, including the acquisition of R2S, the return of capital to shareholders, and operating activities was an outflow of £16.4 million.

Dividend strategy

We have previously announced our intention to realise the value of our legacy oil and gas assets over time and also, in the absence of compelling investment opportunities, to distribute to shareholders a proportion of the proceeds of such disposals, so that shareholders can benefit directly from the realisations from these assets. This remains our plan. 

In addition, the Group is building a sustainable and growing business, which, in time, will allow the implementation of a continuing dividend policy, based on trading profits.

Strategic Update

In February 2012, the Company set out its new strategy, involving a focus on building and acquiring synergistic service businesses, in three primary areas:

·; the acquisition of existing profitable and complementary services business with the potential to add value;

·; the development within the existing group of additional business services for the energy industry ; and

·; the operation and maintenance of vessels from which to deliver offshore wind farm technicians to their work site.

Over the past year, the Company has made significant progress including the acquisition of R2S, the launch of our consulting business and further market development for the planned wind farm service vessels. I will describe each of these in more detail in turn.

Acquisition of R2S

In August 2012, SeaEnergy acquired R2S. R2S is a profitable, cash generative and growing business, with a core service - Visual Asset Management ("VAM") - which is a critical tool for the management of operational, maintenance and asset integrity information.

R2S's current clients are mainly large, multi-national North Sea oil & gas operators, and increasingly R2S is being asked to deliver the VAM service in international locations. In addition, the business generates a steady on-going income from its Max and Co digital media and R2S Forensic divisions.

The terms of the transaction are heavily weighted towards the continuing performance of the business, with a significant part of the consideration tied to R2S's profits in the year from March 2013 to February 2014. R2S has already met the threshold for the first contingent payment of £0.5 million, which was paid in March 2013, by meeting sales targets for the first six months after the acquisition.

The integration of R2S and the development of integrated management systems across the Group, to position SeaEnergy for robust and well managed growth, is making good progress.

Over the coming few months, we plan to diversify the R2S business into a wider range of international locations and into additional market sectors, including offshore wind where the synergies with other strands of the Group's business are most readily available for capture.

Consulting

In September 2012, we were pleased to announce the appointment of Donald Brown as Head of Project Delivery, to lead the development of a consulting business which builds on our established reputation for thought leadership and innovative problem solving.

This aspect of the business is making exciting progress, and has already secured our first contracts with clients ranging from a large offshore wind farm development company to Scottish Enterprise. Over the next year, we plan to grow the consulting business in size and profitability.

The consulting business plans to recognise our emphasis on value-adding relationships and team-working by building a network of companies and expert individuals in relevant fields. SeaEnergy will work with such partners to provide clients with a more rounded and comprehensive offering than it could do alone. In time, these relationships may evolve into acquisitions of complementary businesses in line with SeaEnergy's strategy.

Service Operations Vessels

Over the past three years, SeaEnergy has changed how the offshore wind community thinks about delivering support to offshore wind farms. Our innovative wind farm support vessel designs provide a new and better basis on which to plan offshore wind farm operations and maintenance. They combine a number of innovative features into vessels which provide safe and reliable personnel transfer in often hostile weather conditions from the vessel to the turbine installations.

Our business model involves securing charters from wind farm developers and/or wind turbine manufacturers which have a commercial interest in the long term, cost effective operation of turbines. Medium to long term charters make it possible to raise debt finance for a new-build vessel and allow us to offer competitive day rates to secure a long term return.

We are actively marketing the vessel, and are involved in tenders and Requests for Information which are expected to lead to firm charters in the future.

We are also working with the Carbon Trust's Offshore Wind Accelerator group to identify opportunities to apply similar concepts on existing vessels to wind farms on a shorter term, seasonal basis.

In parallel, we have identified operational niches for our designs and concept in support of oil and gas operations and are now actively marketing these. The synergies between R2S's VAM offering and the potential to deliver asset integrity support from a dedicated vessel are very strong.

Management Team

During the year, we were pleased to announce the appointment of Mike Comerford as Director of Operations. Mike brings a wealth of experience from a range of industrial sectors, as well as a clear understanding of the regulatory regime and the constraints and opportunities it offers. Mike has primary responsibility for the operational and technical aspects of the Group's business.

Outlook

The Company is making excellent progress in delivering the strategy we set out a year ago, and plans to approach break-even in 2013, before moving into trading profit in 2014. This will be achieved by driving the continued growth of R2S and the consulting business, proving our marine capabilities, making additional acquisitions and, where appropriate, the sale of legacy oil & gas assets.

John Aldersey-Williams

Chief Executive

SeaEnergy PLC

Results for the year to 31 December 2012

Consolidated Balance Sheet

As at 31 December 2012

SeaEnergy PLC

Consolidated Statement of Comprehensive Income

For the year ended 31 December 2012

SeaEnergy PLC

Consolidated Statement of Changes in Equity

For the year ended 31 December 2012

SeaEnergy PLC

Consolidated Statement of Cash Flows

For the year ended 31 December 2012

Notes to the Financial Information

For the year ended 31 December 2011

1. Basis of Presentation

The consolidated financial information for the year ended 31 December 2012 has been prepared on the basis of International Financial Reporting Standards ("IFRS") accounting policies to be adopted in the financial statements for the year ended 31 December 2012.

The Directors have prepared the 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.

The financial information for the years ended 31 December 2012 and 2011 contained in this document does not constitute statutory accounts as defined in section 435 of the Companies Act 2006. The financial information for the years ended 31 December 2012 and 2011 has been extracted from the consolidated financial statements of SeaEnergy PLC for the year ended 31 December 2012 which have been approved by the directors on 5 April 2013 and will be delivered to the Registrar of Companies in due course. The auditor's report on those financial statements was unqualified and did not contain a statement under section 498 of the Companies Act 2006.

2. Segmental Reporting

The Group has two operating segments being Energy Services and Oil & Gas. Discontinued operations are discussed in note 9. The Group's operations and non-current assets are concentrated in the UK, and all revenues relate to Energy Services. There has been no aggregation of the operating segments in reporting the segmental performance. During 2011 the Group disposed of its wind farm development business which had been classified in the Renewable Energy segment but is now shown as a discontinued operation. The Group intends to pursue other opportunities in the energy sector.

The Chief Operating Decision Maker (the Board) monitors the operating results and segmental assets and liabilities of its operating segments separately for the purposes of making decisions and performance assessment. Segment performance is evaluated based on operating profit or loss and is measured consistently with operating profit or loss in the consolidated financial statements. However, corporate overheads (including finance costs and finance income) are managed on a Group basis and are not allocated to operating segments.

Corporate overheads include employee costs, office costs and professional fees relating to the parent Company of the Group.

Corporate includes property, plant and equipment, cash and receivables and trade and other payables of the parent company of the Group.

3. Loss per Ordinary Share

(Loss) / earnings per share attributable to owners of the parent arise from continuing and discontinued operations as follows:

The calculations were based on the following information.

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. The Company has one class of potential ordinary shares;

share options. Only share options that are exercisable at the reporting date are potential ordinary shares. The

lowest exercise price of exercisable share options is 34 pence per share. This is above the average market price

of the shares in issue for the year. On that basis none of the share options are considered dilutive.

4. Goodwill and Other Intangible Assets

Oil & gas intangible assets

Oil and gas project expenditures, including geological, geophysical and seismic costs, are accumulated as

intangible fixed assets prior to the determination of commercial reserves. At 31 December 2012, such intangible

fixed assets totalled £1.8 million (31 December 2011: £1.8 million).

Other intangible assets

This category includes customer relationships £251,000 (2011: £nil), research and development expenditure £118,000 (2011: £nil) and other acquired goodwill £19,000 (2011: £nil).

The Directors have considered the need for impairment of all classes of intangible assets at the reporting date

and have concluded that no impairment adjustment is necessary.

5. Tangible Fixed Assets

The carrying value of plant and equipment held under finance leases and hire purchase contracts at 31 December 2012 was £33,000 (2011: £19,000).

6. Investments

The Group's share of the results of its principal associates and its aggregated assets and liabilities are as follows:

Other net asset movements substantially arose from the increased net assets in Lansdowne Oil and Gas plc following its placing of new shares in August 2012, which also reduced the Company's percentage holding as it did not participate in the placing.

The closing mid-market price for Lansdowne at 31 December 2012 was 56.75p per share (2011: 36.5p per share)

* Mesopotamia Petroleum Company Limited had net liabilities at 31 December 2012. The investment has been written down to nil during 2009.

The unrecognised share of loss for the year relating to MPC was £56,000 (2011: £20,000).

7. Share Capital and Premium

On 26 July 2012 the Company purchased and then cancelled 19,197,442 ordinary shares in a Tender Offer which returned £6.9 million of capital to ordinary shareholders.

The LTIP shares issued on 27 July 2012 have been paid up as to 10 pence each (being their nominal value) and 30 pence remains unpaid with the liability for the unpaid amount being becoming payable under certain conditions pertaining to the Company's Long Term Incentive Plan.

The principal trading market for the shares in the UK is the London Stock Exchange's Alternative Investment Market ("AIM") on which the shares have been traded since 14 November 1996.

The following table sets forth, for the calendar quarters indicated, the reported highest and lowest price for the shares on AIM, as reported by the London Stock Exchange.

8. Retained Earnings and Special Reserve

The Special Reserve represents the balance held by the Company pursuant to an Undertaking which it was

required to give the Court in respect of creditor protection. The Undertaking required the transfer of £78.075 million from the Share Premium account to a Special Reserve upon the grant of the Court Order. In accordance with the terms of the Undertaking the Special Reserve has been reduced to £1.404 million at the year end and will be further reduced, and become distributable, as and when the related obligations at the date of the Court Order are satisfied.

9. Discontinued Operations

(a) SeaEnergy Renewables Limited

On 29 June 2011, the Company sold its 80.13% interest in SeaEnergy Renewables Limited ("SERL") in return for a cash consideration of £38.6 million. After transaction costs the Group recorded a gain of £33.4 million. As a result of the gain the Group reported a substantial profit for 2011. Contractual bonuses, including employer's national insurance, payable to the then Executive Directors, on the after tax results of the Group were provided for totalling £3.3 million. Of the total cash consideration £3.0 million was retained by the purchaser. £2.2 million received in June 2012. The balance of £0.8 million was withheld pending the resolution of a warranty claim which was notified at that time. The Directors expect the claim to be resolved in the Company's favour and the balance of the retention to be received during the first half of 2013.

Components of the gain on disposal were as follows:

In addition to the payments for SERL shares above totalling £30.5 million the amount owed to parent of £8.1 million was settled giving total cash proceeds of £38.6 million.

The net cash flows attributable to SERL were as follows:

(b) Schlumberger

Also included in discontinued operations in 2011 was a credit to operating expenses of £0.4 million relating to the final settlement of the Schlumberger debt deferral agreement.

10. Reconciliation of (Loss) / Profit before Income Tax to Cash used in Operations

11. Related Party Transactions

(a) Directors of the Company

In addition to his remuneration as a Director, J Aldersey-Williams undertook consultancy. The fees for the consultancy, which ceased when Mr Aldersey-Williams was appointed as Chief Executive, totalled £35,000 (2011: £149,000). The Company sold a surplus vehicle to J Aldersey-Williams at a third party valuation of £15,000 resulting in a book gain of £4,000.

In addition to his role as a Non-Executive Director, D Laing is a partner in Ledingham Chalmers, legal advisers to the Company. The Company incurred legal fees of £16,000 (2011: £193,000) for services provided by Ledingham Chalmers.

(b) Directors of Return to Scene Limited

In addition to her role as a Director of wholly owned subsidiary R2S, S Khan is a partner in Nathan Maknight, Chartered Accountants. R2S incurred accountancy fees of £11,000 in the four month period to 31 December 2012 (2011: £nil) for services provided by Nathan Maknight.

At the date of acquisition, the following Directors of R2S were owed sums in relation to operational expenditure not reimbursed by R2S. The Directors were repaid these sums in full on 22 January 2013.

 (c) Associates

The Group has 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 31 December 2011 is

£398,000 (2011: £331,000). It is unsecured. 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.

The Group made payments for administrative expenses on behalf of its associate company Lansdowne Oil & Gas plc ("Lansdowne"). The balance owed by Lansdowne to the Group as at 31 December 2012 is £1,000 (2011: £2,000). No provision was made at 31 December 2012 (2011: £nil).

(d) Compensation of Key Management Personnel

12. Business Combination

(a) 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.

Assets acquired and liabilities assumed

The fair values of the identifiable assets and liabilities of R2S as at the date of acquisition were:

Fair value adjustment relates to the identification and recognition of separately identifiable intangible assets, namely customer relationships.

From the date of acquisition, R2S has contributed £0.8 million of revenue and £0.2 million to the profit before tax from continuing operations of the Group. If the combination had taken place at the beginning of the year, revenue from continuing operations would have been £2.2 million and the profit before tax from continuing operations for the Group would have been £0.5 million.

Transaction costs of £134,000 have been expensed and are included in administrative expenses.

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 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 31 December 2012, the Directors believe that it is probable that the profit targets will be achieved due to a significant expansion of the business.

(b) Eagle HC Limited

On 14 May 2008 the Group acquired Eagle HC Limited ("Eagle"). Eagle owns a portfolio of North Sea royalty

interests that were accumulated by Exploration Geosciences Limited ("EGL").

The initial consideration was £1.25 million. Of this amount £250,000 was satisfied on 14 May 2008 by the issue

of 943,396 ordinary shares in the Company.

Further consideration of £500,000 became payable in June 2008 and consequently a further 1,317,292 ordinary

shares in the Company were issued on 24 June 2008.

The balance of the initial consideration, £1.0 million, was satisfied on 14 July 2008 by the issue of 1,912,960

ordinary shares in the Company.

A further £500,000 becomes payable when cash flow from the royalty portfolio commences. All such contingent

consideration can be settled at the Company's option, either in cash or through the issue of new shares.

Eagle was non-trading during the financial year and had no effect on the Group profit and loss account for the year.

While there is no evidence of impairment to the assets since their purchase, the projects remain at an early stage,

as appraisal drilling has not commenced. Consequently the Board believes it is too early for it to determine

that the final sum of £500,000 will be payable or to develop a reliable estimate of when any cash flows from

production might arise. It therefore has not recognised a liability (and additional goodwill) for this contingent

deferred consideration.

13. Post Balance Sheet Events

R2S Deferred consideration

In February 2013 agreed revenue targets were met and £500,000 of deferred consideration was paid in March 2013 (note 12)

14. 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 Court in Baghdad

claiming payment of the penalty sum. A Power of Attorney has been provided to local counsel to allow them to manage Court proceedings as appropriate. A series of postponements followed while certain documents were translated into Arabic as required by the Court. On 28 August 2012 the Court ruling decided against MPC and upheld the first decision that it is liable to pay the penalty. MPC has appealed against this decision and its Directors are reviewing the Court's latest decision and the options available to it.

15. Annual Report, Financial Statements and Annual General Meeting

The Annual Report and Financial Statements, including the Notice of the Annual General Meeting, will be posted to shareholders shortly and will be available from the Company's website www.seaenergy-plc.com and from Britannia House, Endeavour Drive, Arnhall Business Park, Westhill, Aberdeenshire AB32 6UF.