Good times (and results) for Bristow, CHC and Era Group
Summer in the Northern Hemisphere is usually a much less hazardous time to operate helicopters and it was also a pleasant time for the latest week’s investor conference calls for the three largest oil and gas helicopter operators: Bristow, CHC and Era Group. Business is good for all three, problems with the EC225 are fixed, and they are extremely optimistic about the next few years.
After Bristow had a record first quarter it was not surprising that Jonathan Baliff, the operator’s new CEO, was perhaps most bullish: “Bottom line, we continue to see strong short-term and long-term fundamentals for our sector, for us and our competitors. The softness in day rates for offshore drillers has not impacted our global consolidated logistics business. And we have a stable production underpinning that makes that possible.”
Baliff says that more than 160 new offshore exploration rigs will be delivered in the next two years. “This trend is mirrored by the increasing amount of FPSO [floating production, storage and offloading] and LNG activity giving us a compelling view that demand will continue to remain strong and will increase. At this same time, large helicopter supply continues to be tight, with production line sold out at our major partner suppliers until calendar year 2016.”
He added: “We are hearing about a lot of our client concerns over their rising costs and renewed emphasis on capital spending discipline, however what Bristow and our competitors see is continued growth in tenders in global helicopter demand. In fact, in certain markets at record pace.”
William Amelio, CEO of CHC, was just as bullish: “[In] every one of the regions whether it’s the North Sea or whether it’s in Africa, Australia or Brazil, we’re seeing improvement.”
Deepwater drilling is increasing in the Gulf of Mexico and Sten Gustafson, CEO of Era – which also had a record second quarter – stressed the importance of this: “It is important to point out the dynamics that the new rigs coming on have a meaningful higher POB, or persons on board, counts than the older smaller rigs that they are displacing,” said Gustafson. “Anecdotally one of the large players in the Gulf of Mexico has reduced its rig count in the Gulf from 13 to 10 rigs but because they added newer larger rigs while letting go of some older smaller rigs. They did not reduce their heavy aircraft counts by a single aircraft.”
Petrobras, which has been quiet for the last few years, has issued a tender for helicopter services starting in 2015 and 2016 for 31 aircraft (although CHC said that it and others are still waiting for EC225 payments that the Brazilian energy company withheld last year).
CHC is also opportunistic about Nigeria and East Canada – two markets it has returned to (although its plans in Nigeria have been slightly delayed by regulators). “East Canada looks a lot like the North Sea did 20 years ago,” said CHC’s Amelio. “There’s plenty of opportunities there. The reserves are massive and you just got to be able to cap things along. I always said that market will grow pretty dramatically. So we’re glad to be there.”
Bristow and CHC both remain committed to operating leases and are benefiting from low lease rates. “There is an unprecedented amount of capacity in the helicopter leasing market,” said Joan Hooper, CFO of CHC. She estimates that helicopter lease rates have fallen by one percent in the last year.
As a lessor/operator, Era continues to like owning its aircraft. And you cannot blame it. In the second quarter of last year it sold two helicopters for $18 million, netting $4.5 million. In June this year, it sold a 1979 Bell 212 medium helicopter that it had bought for $900,000. After several years of ownership it had a net book value of $300,000. This quarter Era sold it for $3.4 million.
Highlights from Bristow, CHC and ERA investor calls
“We continue to see strong short-term and long-term fundamentals for our sector, for us and our competitors.”
Jonathan Baliff, CEO, Bristow
- Revenue split: Europe 46%, Nigeria 18%, North America 13%, Australia 11%, Other international 8%, Training 4%
- Won contracts in Australia and won new long-range Gulf of Mexico contracts
- UK SAR on track – will complete lease financing of 11 UK SAR S-92s in next three months and first AW189s early in 2015
- Bidding for new contracts in Brazil, Ghana, Malta, Mozambique, Russia
- 23% of fleet now leased, aiming for 30% to 35%
“Major indicators about expected growth in oil-and-gas exploration and production remain positive, especially in deepwater and ultra-deepwater locations. We believe we are positioning CHC well to capture this growth.”
William Amelio, CEO, CHC
- Plans to take deliveries of 13-15 new aircraft while selling 20-25 of its own helicopters.
- Won five year Statoil contract for new Mariner field, 250 km of the north-east coast of Scotland starting in mid-2016. The largest oil and gas development on the UK Continental Shelf for more than 10 years. Also won Statoil exploration contract off the coast of Newfoundland, Canada
- Returned to Nigeria but contracts delayed by regulatory issues.
“The Gulf is an excellent place to be. We’re very positive about what we see going forward for the foreseeable future in the Gulf. That said, from a diversification standpoint, obviously we think there is also opportunities, different places around the world. Because of our unique hybrid model of being a lessor of assets as well as an operator of assets we have a couple of different avenues by which we can access the international markets. Based on really what makes the most sense.”
Sten Gustafson, CEO, Era Group
- 10 AW189s on order with options for another 10 (US launch customer). Confident first four will be used in Gulf of Mexico as soon as delivered and certified
- Managed to move delivery date of one of its S92s to late 2015, with next two due in 2016 (placed order for four with five options)
- Sold its 51% stake in Lake Palma to joint venture partner FAASA, a Spanish fire-fighting operator, for $9.2 million ($2.9 million in debt and $6.3 million in cash). Will still have 10 aircraft leased in Spain.