Launch services provider Sea Launch Co. is in advanced negotiations with two potential strategic investors and expects to emerge fromChapter 11 bankruptcy proceedings by midyear and to return to operations in 2011, Sea Launch President Kjell Karlsen said.

Karlsen declined to name one of the investors. The other is Space Launch Services, created by Excalibur Almaz, a company founded to launch astronauts into orbit to stay at a space station based on existing Russian hardware. The company also has been looking at making the Russian-Ukrainian Zenit launch system capable of launching astronauts. Sea Launch uses the Zenit rocket to launch satellites.

“It’s a tough market, that’s for certain, and there aren’t a lot of Elon Musks around,” Karlsen said, referring to the Internet entrepreneur who has devoted much of his fortune to starting the rocket-launch company Space Exploration Technologies.

Space Launch Services has been providing Sea Launch with sufficient cash to carry it through Chapter 11 but has not yet confirmed whether it has the will or the resources to operate Sea Launch as a business.

Space Launch Services officials, attending the March 3 World Space Risk Forum in Dubai, said one option they are considering is whether to relocate the Sea Launch ocean-launch platform closer to U.S. territory. A launch from U.S. territorial waters would have the dual advantage of reducing the time and expense of positioning the floating launch platform in the Pacific Ocean on the equator, and increasing the possibility that Sea Launch could qualify as a U.S. launch system and thereby compete for U.S. civil government launch contracts.

In an interview, Karlsen said that post-Chapter 11, a Sea Launch operation freed from its debt service could be operated for about $50 million per year. The biggest cost is the Sea Launch Commander control ship, which accompanies the Odyssey launch platform to and from the launch site.

Long Beach, Calif.-based Sea Launch lost money every year since its first flight in 1999 and accumulated some $1.4 billion in losses before filing for protection under Chapter 11 of the U.S. bankruptcy code in mid-2009.

Karlsen said Sea Launch has three contracts — one from Intelsat of Washington and Luxembourg, and two from Paris-based Eutelsat — on its books.

Refurbishing the launch platform and the command ship after months of inactivity would not be expensive, he said, and the commercial launch market — in the form of satellite fleet operator support for Sea Launch — appears to want Sea Launch back in business.

Sea Launch’s investors, led by Boeing, which had a 40 percent equity stake in the company, are now involved in the Chapter 11 bankruptcy court proceedings in Delaware, their lawyers hoping to salvage at least part of these companies’ investment. Boeing also is seeking reimbursement from Sea Launch’s Russian and Ukrainian partners for Boeing loans made on behalf of the company.

Karlsen said that when it comes to a decision point, Boeing, Aker of Norway, and RSC Energia of Russia and Yuzhnoye of Ukraine will agree it is in their interests to have Sea Launch return to flight, even if it means abandoning hope of recouping their investment.

The alternative — a Chapter 7 liquidation of Sea Launch’s assets — would fetch between $100 million and $130 million, Karlsen said.