Sevan Marine ASA signed an agreement today to sell the semi-completed Sevan hulls number 4 and 5 to Singapore-based Logitel Offshore, a newly formed company established for the purpose of promoting Sevan-designed floating accommodation facilities.
Once fully-built, these new floating facilities will be North Sea compliant and equipped with DP3 and mooring systems.
Specialists within the FPSO/FSO segment, Sevan has seen quite a bit of success since its inception in 2001 and in the past few years has developed a close relationship with Teekay, which is now its largest shareholder. In the past few years however, Sevan has suffered significant financial losses and has restructured its business with an added focus now on developing new markets for its proprietary cylindrical hull design.
With the pursuit of new markets in mind, Arne Smedal, co-founder of Sevan and vice chairperson of its Board of Directors, has recently established CeFront Technology AS, and its 100% owned subsidiary Logitel Offshore in cooperation with Sevan.
CeFront has been established to focus on developing technology, design and projects for Sevan and other customers. The cooperation agreement between Sevan and CeFront provides an avenue develop opportunities for the Sevan technology outside of Sevan’s core business of FPSOs and FSOs.
According to an emailed statement by Sevan, the purchase price of the unfinished hulls is USD $41 million, which is to be rendered as a sellers credit. An additional loan of USD $10 million will be provided by Sevan and applied by Logitel Offshore towards its first milestone payment regarding hull number 4 to the yard which will complete the Hulls as high-end accommodation units. The total USD 51 million credit is structured as a bullet loan, with a 3 percent coupon, repayable within 24 – 36 months. The loan can be converted by Sevan into shares in Logitel Offshore. Upon sale of the Hulls, Sevan will be released from substantially all accrued, contingent and future liabilities related to the Hulls.
As a result of these two transactions, Sevan estimates that the operating expenses will be reduced with approximately USD 4.5 million per year. In connection with the organizational changes, a restructuring charge (including relevant severance benefits as per existing contracts) of approximately USD 3 million will be incurred in 2013.
Carl Lieungh, Sevan’s CEO, stated: “We are pleased with these transactions, which will provide Sevan with a new line of license business going forward, while at the same time removing liabilities associated with the hulls. This helps strengthening our balance sheet. Also, the convertible loan gives us an attractive option to participate in a tightening accommodation market, with an increasing demand side illustrated by recent contracts. We have actively marketed the hulls for FPSO projects in recent years, but for various reasons it has proven difficult to convert keen customer interest into firm contracts. The Logitel transaction reduces down side risk in Sevan while increasing the upside potential and free cash flow, and brings with it the option to become a Logitel shareholder. We look forward to working with CeFront, while at the same time focusing our resources on the opportunities in the FPSO/FSO segment.”
Arne Smedal, CEO of CeFront and Logitel Offshore, stated: “The new structure will release resources to focus on developing new opportunities in both Sevan and CeFront. CeFront gives us the opportunity to work on miscellaneous projects for a wider group of customers, while at the same time maintaining the best of relations with Sevan. Through Logitel Offshore, we look forward to building a company with a new fleet within the accommodation and offshore logistics market based on Sevan’s design. We are also already looking at other potential applications and markets for the Sevan design, which is a commercially and technically competitive solution to semi-submersible platforms in various offshore markets.”
For more information on this deal, please follow this link to Sevan’s press release