CHC Reports Loss as Oil Prices Weigh on Offshore Ops

The bleeding in the helicopter oil and gas (OGP) market continues, driven by the contraction of the offshore energy sector in response to depressed oil prices. CHC Group, parent of CHC Helicopter, is the latest OGP company to post disappointing financials. The company operates 230 aircraft in 20-plus countries.

CHC reported a net loss of $119 million on revenue of $374 million for its FY 2015 fourth quarter ended April 30. The loss included $77 million worth of restructuring charges related to employee severance costs and lease and “other contractual costs on certain older-technology leased helicopters,” the company said, adding, “Oil and gas customers continue to focus on reducing their capital and operating expenses amid significantly lower crude oil prices, which affects demand for both offshore flying services and helicopter maintenance, repair and overhaul services. Oil prices remain at historically low levels, which primarily impacts exploration business, which is approximately 20 percent of CHC’s flying revenue.”

However, CHC CEO Karl Fessenden noted that the company’s long-term prospects remain positive. “We continue to benefit from having a significant portion of our flying revenue weighted toward oil and gas production, which is more stable than exploration, and we remain confident that the long-term demand for transportation to deep-water and ultra-deep-water locations remains strong.”

For the fiscal year CHC posted a loss of $123 million on revenue of $1.7 billion, a decline of 3 percent year-over-year. CHC blamed two-thirds of that revenue reduction on adverse foreign exchange rates triggered by the comparatively strong U.S. dollar.

Both of the company’s business segments–flying (Helicopter Services) and maintenance (Heli-One MRO)–lost money. Helicopter Services posted fourth-quarter revenue of $341 million, a 16-percent decline from the year-ago period. The company attributed the loss to currency exchange, fewer flying hours and lower reimbursable revenue. Annual revenue for FY 2015 declined by 4 percent, to $1.6 billion. Third-party revenue in the fourth quarter for the Heli-One MRO declined 32 percent, to $33 million, from the same period a year ago. However, for the full 2015 fiscal year, Heli-One’s external revenue was up $3 million, to $150 million, a gain of 2 percent. Despite posting an overall annual loss, CHC continued its aggressive measures to reduce corporate debt, retiring $320 million worth of bonds in the fiscal year, thereby reducing annual interest expense by $30 million; cutting other costs; and working with customers to reduce their costs. CHC also put in place a new asset-backed loan facility that will increase liquidity by an additional $145 million.