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Seacor - hedging through a diversified business strategy

Seacor - hedging through a diversified business strategy
Oivind Lorentzen III, ceo of Seacor Holdings, and the speaker at the Connecticut Maritime Association’s monthly lunch, drew a much larger than normal crowd as he spoke about topics ranging from Seacor’s business mix, serving industrial transportation, to views on US oil exports, which the company “would be betting against” at this point.

Lorentzen, the scion of a Norwegian shipping family who recognised shipping’s role as a financial asset before most others, joined Seacor in 2010. He was the recipient of the CMA’s Commodore award in 2011. In recent years, Seacor has ordered three US-flagged (Jones Act) tankers being built at NASSCO, and has invested heavily in the offshore service sector.  Investments having included helicopters, which ferry workers and some supplies to offshore installations, and in February, 2013 the ERA helicopter was spun off to shareholders. Seacor is still a major player in dry cargo barging, an outgrowth of the old SCF Leasing business- with “F” being Charles Fabrikant, the company’s founder.

He offered a view that North America’s great cargo moving infrastructure is important reason for the rapid growth in oil produced from new sources in the continent. Waxing philosophically, he said that shipping is part of this infrastructure, rather than at being on the wrong end of a cultural disconnect.

In response to a question from a fuel broker in the audience, ostensibly about bunker hedging strategies, the speaker turned the tables, describing a corporate mantra of developing niche businesses, each with their own life-cycles, noting that “…the diversity of our business is our hedge.”

Referring to the “Cruiser class” crewboats, which serve oil platforms and rigs far offshore, he said “Having the first mover advantage means a lot” In questions after the lunchtime speech, it emerged that the selection of Seacor businesses has been very purposeful, built around an industrial tradition where the customers are carefully served ,as opposed to a pure commodity business.  

But much of the talk at the luncheon was about the energy revolution. After comparing the current “energy revolution” with the gold rush of the late 1850’s, which led to American shipping superiority, albeit briefly, with clipper ships, he said that energy intensive industries have a favorable place in North America, including refineries that will be served by Seacor’s existing fleet, to be augmented with the three NASSCO newbuilds. These three vessels will be capable of conversion to LNG power at a later date.  

Lorentzen explained that Seacor were big believers in another aspect cheap natural gas- the price arbitrages possible in customers’ trades. The abundant and cheap supply of by-products, most notably LPG (propane and butane), are worth a great deal more in Asian markets than in the US Gulf. He acknowledged that this type of economics was a major driver behind Seacor'’s investment in Dorian LPG, a company listed in Oslo and recently increasing its Connecticut presence, a prelude to its US listing- with an IPO filing, for up to $288m of shares (with symbol "LPG"), now announced. Dorian more recently attracted considerable attention with its shares for ships swap with Scorpio Tankers.

On the subject of US oil exports Lorentzen expressed skepticism but acknowledged that it really comes down to the price of gasoline, and how perceptions of it are communicated to legislators.