Seascape Energy Asia PLC (FRA:8YG) (Q2 2024) Earnings Call Transcript Highlights: Strategic ...
Revenue: Minimal income from recharged services from the Norwegian joint venture.
Admin Expenses: Increased slightly due to a write-off of costs related to a failed new venture.
Cash at Period End: GBP 1.3 million, with an additional GBP 1.9 million received post period end, totaling over GBP 3 million.
G&A Reduction: General and administrative expenses reduced by around 40%, with full effects expected in 2025.
Release Date: September 30, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
Successful strategic pivot to focus on Southeast Asia, with a streamlined executive team and Board.
Completed the sale of the Norwegian entity to JAPEX, allowing for rebranding and refocusing on Asia.
Significant cost reductions, with G&A expenses reduced by around 40%, expected to fully reflect in 2025.
Strong competitive edge in Malaysia due to high barriers to entry, positioning Seascape Energy Asia PLC uniquely.
Pending award of a new PSC in Sarawak, containing multiple gas fields, which promises quick, low-cost development.
Negative Points
Full effects of cost reductions will not be seen until 2025, delaying immediate financial benefits.
Transitional set of accounts due to the Norwegian joint venture sale, resulting in a messy financial summary.
Challenges in securing the new PSC award due to complex negotiations involving multiple state entities.
Limited immediate cash flow, with cash at the period end being GBP1.3 million, though post-period end adjustments bring it to over GBP3 million.
Dependence on securing a farm-out partner for the 2A block, which is crucial for drilling the well in deepwater Sarawak.
Q & A Highlights
Q: What are the key reasons for the strategic shift to Southeast Asia, and will Seascape Energy expand beyond Malaysia? A: The strategic shift to Southeast Asia is driven by a more welcoming environment for small businesses, shorter lead times, and better alignment of returns with the cost of capital. Expansion beyond Malaysia is possible, with interest in Thailand, Vietnam, and Indonesia, though each has its own set of challenges and opportunities. (James Menzies, Executive Chairman; Nick Ingrassia, CEO)
Q: Can you provide an update on the farm-out process for Block 2A? A: The farm-out process for Block 2A is highly competitive, with significant industry interest. The goal is to execute a transaction in the second half of the year, focusing on bringing in a large operating partner to drill the well. (Nick Ingrassia, CEO)
Q: Why has there been a delay in signing the new PSC in Sarawak? A: The delay is due to the involvement of multiple parties, including the federal state of Sarawak and Petronas, which has added complexity to the negotiations. Despite the delays, all parties are committed to finalizing the agreement. (James Menzies, Executive Chairman)
Q: How does Seascape Energy plan to fund the new PSC and other ventures? A: Funding options include banking, trader financing, and potentially farming down equity stakes. The high-quality assets and favorable market conditions in Southeast Asia make financing solutions relatively straightforward. (Nick Ingrassia, CEO)
Q: Are there plans for Seascape Energy to become an operator in the future? A: Yes, there are aspirations to become an operator, especially given the scarcity of small and mid-cap operators in Asia. The focus will be on manageable projects with straightforward operations. (James Menzies, Executive Chairman)
Q: What are the largest shareholders of Seascape Energy today? A: The largest shareholders are listed on the company's website, as required by AIM regulations. (Nick Ingrassia, CEO)
Q: How are the costs for PSC negotiations and the farm-out being managed? A: Most of the work is being handled in-house to minimize costs, leveraging the expertise of the executive team and board members. (James Menzies, Executive Chairman)
Q: What are the near-term catalysts for Seascape Energy? A: Near-term catalysts include the pending PSC award in Sarawak, the farm-out of Block 2A, and ongoing efforts to acquire additional assets in Southeast Asia. (Nick Ingrassia, CEO)
Q: How does Seascape Energy view the investment climate in Southeast Asia compared to Northwest Europe? A: Southeast Asia offers a more favorable investment climate with supportive host governments, better fiscal terms, and significant opportunities for gas-fired power generation, contrasting with the challenging environment in Northwest Europe. (Nick Ingrassia, CEO)
Q: What is the company's approach to acquisitions and production assets? A: Seascape Energy is actively looking at opportunities across the lifecycle, focusing on value-accretive acquisitions that align with the company's strategic goals. (Nick Ingrassia, CEO)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.