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flightglobal.com 18-31 August 2015 | Flight International | 27
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Troubled waters for offshore industry
A longer than anticipated downturn in the oil and gas market is forcing helicopter operators to make deep cost savings
R
educed activity in the oil and
gas industry is continuing to
weigh on operators in the off-
shore transportation sector, with
those on the front line particular-
ly hard hit.
There had been hopes the price
of crude oil would recover as the
year wore on, but recent develop-
ments, particularly the rapproche-
ment with Iran, have dampened
that optimism. Brent crude is cur-
rently trading at around $50 per
barrel, down from a recent high of
over $58 per barrel in early July.
Those issues are highlighted
by the financial results of major
operator Bristow Group. During
the three months to 30 June it
swung to a net loss of $1.62 mil-
lion compared with a net profit of
$45 million for the same quarter a
year earlier.
WORSE TO COME
Oil and gas revenues were hardest
hit, falling by 8% year on year, as
producers reined in spending.
And, says chief financial officer
John Briscoe, that situation will
worsen, with full-year segment rev-
enues forecast to fall by 10-15%.
What has particularly hurt Bris-
tow has been its inability to shrink
its cost base fast enough to cope
with the declines in activity.
MANUFACTURING
Airframers feel the pinch as orders and deliveries drop
Helicopter manufacturers are also
seeing weakness in the sector
translate to lower orders and deliv-
eries, particularly at the larger end
of the market.
Airbus Group chief executive Tom
Enders warned on 31 July that the
state of the oil and gas market is
“not helping” sales of medium and
heavy segments at its Airbus
Helicopters division.
Similarly, AgustaWestland is
encountering an unfavourable mar-
ket which it partly blames on the
“performance of the oil and gas
sector”.
Figures from the operators them-
selves show several cancellations
and deferrals.
For example, PHI will take deliv-
ery of two heavy helicopters this
year, almost certainly Sikorsky
S-92s, dating from a 2014 commit-
ment for six. However, in July it axed
the remainder of the order.
And Era Group has trimmed
its overall requirement for
AgustaWestland AW189s from
10 helicopters to nine.
Bristow’s fleet plan for the year
remains broadly unchanged, but it
has allowed six options – for fourmedium-class helicopters and two
heavies – to expire.
However, chief executive
Johnathan Baliff insists that despite
the depressed market, its order for
17 Airbus Helicopters H175s,
placed in March this year, makes
sense, not least that it included an
airline-style uptime agreement offer-
ing significant “risk reduction”.
The new class of super-medium
helicopters, including the H175,
allows it to offer clients “aircraft
that are right-sized” to “maximise
load factors”, adds chief operating
officer Jeremy Akel. ■In fact, says Jeremy Akel, chief
operations officer, efficiencies
sought by the oil producers
through improving the load factor
on each flight, changed rotation
patterns of the offshore workforce
and “more resilient scheduling”
are all “driving the overall de-
mand [for flights] downwards”, he
told analysts on a 7 August confer-
ence call. “We believe there is a
new normal coming,” he predicts.
Bristow had originally planned
for a 12-24-months downturn, but
is now revising this to 36 months
with no recovery anticipated be-
fore the back end of 2017.
As a result, it is accelerating cost
savings across the business. It had
already committed to taking $95
million out of the operation in its
2016 fiscal year – including reduc-
ing its workforce by 10% – but will
look for additional economies of
$60 million over the next 12months, which will encompass
“further headcount reductions”.
The pain is likely to be most
keenly felt in Europe, as chief ex-
ecutive Jonathan Baliff points out:
“The downturn has been felt on a
global scale, but our North Sea op-
erations have been particularly
impacted in recent months.”
As a result, UK subsidiary Bris-
tow Helicopters in July began
consultations to make 130 staff
redundant – including 66 pilots- from its Scottish operations. It
is not alone – rival CHC Helicop-
ters is also cutting 50 pilots and
engineers at its Aberdeen base.
The third of the big North Sea
operators, which trades as Bond
Offshore Helicopters in the UK
and Norsk Helikopterservice in
Norway, also appears to be feel-
ing the pinch. During a trading
update on 30 July, parent compa-
ny Babcock International forecast
2015 revenues for its oil and gas
operations will see a “double
digit” decline in 2015.REGIONAL VARIATION
The financial pain felt by operators
is not confined to the North Sea. In
its quarterly results for the period
to 30 June, Louisiana-based PHI,
which serves oil producers in the
Gulf of Mexico, reported oil and
gas revenues down to $113 million
from $128 million a year earlier.
But not every operator is feel-
ing so negative. Despite underly-
ing revenue and profit slipping in
the quarter to 30 June on “lower
utilisation” of its medium heli-
copters, US-based Era Group is
staying upbeat.
“To paraphrase Mark Twain, re-
ports on the death of the Gulf of
Mexico offshore market have been
greatly exaggerated, at least as it
relates to helicopter services,”
says Chris Bradshaw, Era’s chief
executive and chief financial of-
ficer, calling it “one of the best, if
not the best offshore helicopter
market in the world”. ■Staff reductions are planned at Bristow’s Aberdeen operationDonald Douglas/Flickr user retro11“The downturn has
been felt globally,
but our North Sea
operations have been
particularly impacted”
JONATHAN BALIFF
Chief executive, Bristow