In February, oil and gas producer (OGP) operator Bristow Group (Booth 7151) released its latest results for the quarter ending December 31, with a loss of $21.9 million on revenues of $324.35 million as opposed to a $3.2 million profit on revenues of $395 million from the year-ago period. For the nine months ended December 31, Bristow's net loss was $92.5 million on revenues of $1.024 billion compared to a loss of $47.18 million on revenues of $1.254 billion from the year- ago period. Bristow CEO Jonathan Baliff said the results "exceeded our internal expectations" but conceded that the company's OGP business "continues to operate along the economic bottom" in a "dynamic and prolonged downturn."
He added, "Over the past year we have cut hundreds of millions of dollars in costs, but we recognize that we have done a lot…but we need to do more."
Baliff said the company was minimizing the downturn's impact through a combination of reduced capital expenditures–deferring $95 million in the current fiscal year–and aggressive cost cutting and had secured or was in the process of securing $630 million in new financing commitments to maintain the company's liquidity and financial flexibility from a group of lenders including Lombard North Central ($200 million), Australia's Macquarie Bank Limited ($230 million) and GE Capital Aviation Services/Milestone Aviation Group ($200 million). Baliff said the new financing allows Bristow to address much of its capital commitments through 2019 and was part of an overall strategy to harness cost efficiencies, defer capital spending and amend bank loan covenants to improve liquidity and performance.
Baliff said he was encouraged by recent developments and thinks things could be headed up. "Like our peers in the offshore oilfields services sector, we see continued declines in our clients' offshore capex [capital expenditures] in calendar year 2017. But interestingly, we are seeing overall increased contract tendering in certain regions right now; especially in Europe.”
Bristow is also seeing “real success” in oil-and-gas crew change and search-and-rescue contract awards, he said. “We think fiscal year 2018 will be an inflection point for the industry as we move from survival to some level of normalcy, and maybe even growth.”
Bristow had $281 million of liquidity at year end. Baliff said liquidity, once the Macquarie and GE deals close, will be more than $800 million, enabling the company to retire bank debt and stop capital spending deferrals and succeed "in whatever commercial environment in which we find ourselves."
Baliff said fleet flexibility is the key going forward. "This is a very dynamic time for our markets and fleet management must be dynamic too. Demand today we see shifting toward those providers, like Bristow, who can quickly shift assets safely, globally, and efficiently. Our leased aircraft fleet is meant to roll off and the associated rent with it.” This gives Bristow flexibility to return some types when needed to reduce costs, allows for a diversified fleet to satisfy customer demand and allows Bristow to “take advantage of market conditions, work with our partners, and obtain liquidity and aircraft financing costs at lower costs than previously anticipated."
Bristow intends to "return more leased aircraft in the future," he added. Bristow currently leases 117 of its 345 aircraft, including 56 large helicopters and 22 mediums. Of the large leased helicopters, 39 are assigned to the Europe/Caspian region. Bristow's owned fleet has a fair market value of $2 billion. Forty owned helicopters were pledged as collateral for the new rounds of financing announced in February.
With regard to Bristow's grounded H225 fleet, which numbered 27 aircraft at year end, Baliff said, "We also will continue to actively support efforts with our regulators, clients and other stakeholders to achieve a safe return to service for the Airbus H225 fleet. But we are doing more, as we actively monitor the outstanding litigation against Airbus related to the H225 and also are examining all options to protect our stakeholders." After a fatal North Sea crash by an H225 being operated by OGP operator CHC in in April, the fleet was subsequently grounded by EASA in June until October 2016. It remains grounded by aviation authorities in the UK and Norway.
Baliff said Bristow's contract to provide search-and-rescue services to the UK government will not yield full benefits to the company until fiscal year 2019 when it "is fully online both operationally and financially."
He said, "Historically, Bristow has been late to enter a downturn and late to leave a downturn like the rest or our industry, and our performance has reflected this in fiscal year 2017. Although there is a recent uptick in tender activity, there is a need for caution, as a significant headwind still exists in the near future. There is still a lot of uncertainty in the near term before a market recovery becomes more evident" and very dependent on clients' energy exploration activities. "The consensus among the offshore industry is that offshore E&P [exploration and production] spending will be down for the third consecutive year in calendar year 2017, but begin to return in 2018 and 2019." Meanwhile, Baliff said Bristow was committed to "staying ahead of what is a very uncertain environment."