Surviving the oil slump

[malabo]

Is everyone going to make it, or will there be a "thinning of the herd". Oil companies on the cheap, cancelling contracts, subbing cheaper airframes and operators. Helicopter operators taking a beating, stuck with crew, spares, overhead, and helicopters. All publicly traded companies in the industry losing share value. Will we all be around for the rebound?

Any bookies taking odds: Bond, Bristow, CHC, PHI, NHV, WESTAR.....Darwin favours the adapters, who will they be?

[Fareastdriver]

The pinch will be felt by those having a high proportion of exploration support contracts. Established platforms are at their minimum manning already and they still have to be changed over as normal. The ones who are going to really be hurt are those coming to the end of their self-financed helicopter training.

[helimutt]

interestingly, companies such as Bristow and PHI have had 'relatively' stable share prices over the last 12 months albeit slightly downward trend. Take a look at CHC though. Something seems off. In the last 12 months theyve dropped from the $10 isssue price to a low today of $1.87
Surely if a company stock plummets like this, it has to be looked at closely for another reason if other similar companies arent suffering the same? I know the company was going to sell more shares at the end of last year but is it possible that the share price can be pulle down and then the buyer can purchase a lot of shares at a much lower price?
They csnt just say the oil price is causing this???

I'd have thought there may be a suspension of stock trading when share value falls so fast? What about management? Shouldnt they be replaced if they are in control (or not) of a drop in company value like this. Doesnt exactly instill confidence.

[malabo]

Take a look at CHC though. Something seems off

Zombie company - Wikipedia, the free encyclopedia (http://en.wikipedia.org/wiki/Zombie_company)

[twisted wrench]

Helimutt:
The Bristow stock is down $20 from its high of last year you don´t think that is significant? Even at $60 today is still a big drop since last year.


You are correct that CHC stock is quite low and wonder where it will bottom out, one CHC stock is cheaper then a cup of coffee. Maybe is a good time to start buying in?

[helimutt]

Maybe is a good time to start buying in?


I was thinking that very thought an hour ago. If the price is bottomed out, the only way is up. :) Maybe buy a few thousand shares and see what happens :ok:

[roundwego]

if the price is bottomed out, the only way is up

Not if the creditors pull the plug and want all the assets liquidised or else some comes in and does a predatory buy out but probably worth a punt.

[Fareastdriver]

It's not an oil slump, it's just reverting to the price that it normally is disregarding short term diplomatic emergencies. You look at the historical price and you will find that it has kept pretty stable with inflation apart from hiccups in the Middle East.

They don't call the shots so much now so it will stay at a consistent and stable price from now on. It will go up to fracking costs or fracking costs will come down to drilling.

[heliduck]

They don't call the shots so much now so it will stay at a consistent and stable price from now on. It will go up to fracking costs or fracking costs will come down to drilling.

I'm not sure if you're talking about OPEC here, because they have just shown that they ARE calling the shots. The US were well on the way to oil & gas independence by using the Canadian fracking method, the last thing OPEC wants is a US market which doesn't need it's oil so it engineers a price drop by not cutting output & the price goes down. BHP has announced that it will reduce it's drill rig count in the US by 40% by the end of the year, once the US is no longer on the path to independence I'll bet that OPEC will reduce production & the price will go up again.
I hate the feeling when I realise that I am merely a pawn in the game.

[Fareastdriver]

You forget the rest of the world. China, now the largest importer of oil is on a determined path to reduce its dependence on oil imports. I know, because I worked there and I know the latest policies. Should you go to China you would be staggered by the number of electric m/cycles and cars. Shanghai alone will have 26,000 car charging points within the next decade, all powered by nuclear electricity. When the territorial disputes in the South China Sea are sorted then an incredible amount of gas and oil will be available. It doesn't matter whether it's Chinese, Vietnamese or Phillipino oil, it's not Saudi.

[nowherespecial]

Important to understand that CD&R own 75% of CHC and it is unlikely they are changing their investment (ie selling shares).

The drop in stock price could well be the other investors who got duped by UBS and Barclays (acting for First Reserve, the previous owners) into buying crappy stock and finally calling it quits.

Also worth noting that while CHC and BRS do the same job, CHC are relatively stronger in exploration contracts and BRS are much happier with long term production ones. Thus if OilCO decides to stop/ delay exploration, CHC are more likely to be hit. That said, if Oil CO decides to pick up again in 6 months when oil is $80 bbl then CHC is more likely to see the benefits.

CHC is royally screwed though. I think they (CD&R) will sell off the bits of the business which are hard work and keep the bits that are working.

Getting the stock now at 10c on the $ from 12 months ago is an interesting investment option for sure.

[jimf671]

Has the price ever gone down before? :ugh:


It amazes me that neither the oil industry nor most governments ever behave as though the oil price can go down. Then they don't behave as though it can ever go back up. Staggering stupidity.

[terminus mos]

CHC recently sold 30+ aircraft (EC225s and S-92s) to Waypoint Leasing and then leased them back. That is not a company re balancing its fleet, it's a company which needs cash. These are operating leases. If you can't finance lease cheaper than you can buy an operating lease, your credit rating must be in the dirt. But CHC stock can only really go up, can't it?

[nowherespecial]

Hey TM, we cross paths again on the same topic! :)

I agree, CHC is a cashflow business and at the moment is cashflow negative. Selling those assets represents 2 things:

1. When CD&R bought CHC a big deal was made that a good chunk of their $600m investment would be to buy out some leases to make it easier for CHC to work in 'complex' jurisdictions where the traditional leasing firms and banks do not like to let their ac go. This plan appears to have gone up in smoke.

2. CD&R have seen their stock investment they made to First Reserve get basically set on fire (bought in at $8 a share ish) so they throw 1. above out of the window to start making their money back any way they can. Fire sale is fine with them.

Surely it's only a matter of time before they sell Heli One? That's a business worth something to someone.

Edited to add - I wouldn't bet on stock price can only go up... Funny that 2x PE firms have tried to work CHC and failed in last few years. I thought these people were best and brightest?! It's a who's who of the best universities on earth and I would trust not one of them to be any good running CHC... http://www.cdr-inc.com/professionals/partners.php

[twisted wrench]

What is interesting about the Leasing even Bristow now is leasing there new aircraft mostly through Waypoint Leasing. Same company that just bought 31 of the CHC aircraft.


Seems a lot of companies are getting away from tying up there cash in airframes.

[nowherespecial]

TW, that is absolutely true but CHC have run that model and are at about 90% leased now with that Waypoint transaction.

Bristow (according to the presentation from 12 Dec in the link below, p22) are at 34%. While they are moving towards the same model, they are still poles apart. It also goes back to my earlier point that if you are strong in Production contracts, leasing makes sense, they are long term, they are capital efficient, known quantities (reduced risk) and putting a leased asset on it makes absolute sense.

Bristow Investors ? Overview ? BRS ? bristowgroup.com (http://ir.bristowgroup.com/phoenix.zhtml?c=91226&p=irol-irhome)

It's when you want to go to many parts of Africa the leased model doesn't work that well.

[minigundiplomat]

It's when you want to go to many parts of Africa the leased model doesn't work that well.

CHC have operated in South Africa, Tanzania, Mozambique, Namibia, Nigeria, Morocco and quite a few other countries in Africa quite successfully with the dreaded leased fleet model.

Titan lease from Gulf, Everett lease from BRS (not sure about Heli-Union)- and all operate succesfully in Africa.

Outside of Nigeria, BRS, with a high ownership level, don't operate widely in Africa due to the short term nature of the exploration contracts.

Perhaps you need to rethink your statement above?

[terminus mos]

Minigun

You are talking about Titan and Everett who lease aircraft already owned by Gulf and Bristow. Operators don't sub lease a leased aircraft.

Its not the same as leasing a new helicopter from Waypoint, Milestone or LCI.

It's actually you who needs to rethink your statement since it is you who clearly doesn't understand the cash down, payment structure, TAP / PBH requirements and risk premium in a lease for a new aircraft.

[minigundiplomat]

It's actually you who needs to rethink your statement since it is you who clearly doesn't understand the cash down, payment structure, TAP / PBH requirements and risk premium in a lease for a new aircraft. No I think I'm good.

CHC have operated in South Africa, Tanzania, Mozambique, Namibia, Nigeria, Morocco and quite a few other countries in Africa quite successfully with the dreaded leased fleet modelOutside of Nigeria, BRS, with a high ownership level, don't operate widely in Africa due to the short term nature of the exploration contracts.Any reference to the 2 statements above were omitted from your response, which is a pity, as your previous posts have been the most sensibly formulated of the thread.

[terminus mos]

CHC have operated in South Africa, Tanzania, Mozambique, Namibia, Nigeria, Morocco and quite a few other countries in Africa quite successfully with the dreaded leased fleet model.

Titan lease from Gulf, Everett lease from BRS (not sure about Heli-Union)- and all operate succesfully in Africa.

Outside of Nigeria, BRS, with a high ownership level, don't operate widely in Africa due to the short term nature of the exploration contracts.

Reference your two statements above, you are confusing being a lessor with being a lessee.

"Successfully" is in the eye of the beholder it seems, just look at their respective share prices and financial performance. Operating a Bristow or CHC painted aircraft with someone else's name stuck on the side on a 6 month drilling contract in Africa is not actually what this discussion was about.

[minigundiplomat]

TM,

Many thanks, but Im perfectly comfortable with the lessor/lessee relationship.

This thread is about surviving the oil slump; I'm not sure you aren't a little confused by the fundamentals of economics.

Oil companies are acutely focussed on reduced CAPEX and strict OPEX control; and employment of aircraft and associated revenue production will contribute towards thei survival of the aircraft operators, regardless of who's name is painted on the aircraft, or whether it is leased, owned, sub-leased or on loan from a mate called Gordon.

I think that's pretty relevant to the thread, even if you have taken moral ownership of it.

I am not sure how CHC, or Titan, BRS or Everett's ability to successfully put aircraft in the sky in aircraft in Africa (which was my original point in response to nowhere's post) can be judged by the current share price during a key market slump.

[terminus mos]

Many thanks, but Im perfectly comfortable with the lessor/lessee relationship

Glad that you are comfortable with your interpretation and thanks for your opinions.

However, you don't seem to understand the financial terms and conditions of a long term operating lease.

Surviving the oil price slump will be about keeping aircraft employed, you can park owned aircraft (albeit with some pain) but parking a leased aircaft will send an operator under very quickly.

I hope that doesn't happen because as an oil company we like a healthy competitive market.

[Helilog56]

Surviving the oil price slump will be about keeping aircraft employed, you can park owned aircraft (albeit with some pain) but parking a leased aircaft will send an operator under very quickly.

Hmmm.....I have seen many leases over the years that are strictly power by the hour.

[tottigol]

HeliHub Oil price not affecting Era and PHi at Houma (http://helihub.com/2015/01/28/oil-price-not-affecting-era-and-phi-at-houma/)

What it does not mention is that ERA furloughed about 35 of their most experienced IFR captains with no warning right before the holidays.

[terminus mos]

Helilog

No such thing as an hourly lease with EC225s, S-92s and AW139s in the offshore related helicopter industry.

[212man]

What it does not mention is that ERA furloughed about 35 of their most experienced IFR captains with no warning right before the holidays

Strange to hear, then, they've just been recruiting for the S92....

[nowherespecial]

I love watching mgd go blasting about (pun intended).

I articulated my position on leases poorly. CHC has operated leased ac in Africa for some time now, of that i have no doubt. The issue comes with short term exploration contracts and the nature of the leasing companies. Some are happy for their ac to go to darkest Africa, many are not. Whether they are or are not is reflected in owners consent costs, additional insurance costs, jurisdictional reviews and ultimately on the bottom line.

They charge handsomely for this pleasure as well which means that the bids you submit with leased ac are often not as competitive as those with owned ac.

Sad but true.

[Ian Corrigible]

So the offshore energy market isn't "red-hot (http://bjtonline.com/business-jet-news/new-aircraft-preview-bell-525-relentless)"? :ugh:

Interesting also to see Sikorsky state during the recent opening of its new GOM office (http://www.pprune.org/rotorheads/249352-s-76d-11.html#post8840115) that it "doesn't expect the drop in crude oil prices to hurt its business (http://www.houstonchronicle.com/business/article/Helicopter-company-hovers-closer-to-oil-industry-6036934.php)." UTC itself was one of the first to warn of a weakening O&G market last October (http://www.pprune.org/rotorheads/522970-offshore-news-2.html#post8717599).

I/C

[minigundiplomat]

Nowhere,

I don't disagree with you, my friend; not as competitive as owned aircraft, but not impossible either.

Agree owners consent, JR's and all the other aspects mentioned do add cost, but the process also ensures the operators have ticked all the regulatory boxes and fully costed the bid - and wont end up with their hand out a few months into the contract when reality strikes and unforseen costs arise.

Ive seen smaller operators win on a cutthroat price, and then hit snags later on.........

Indeed, sad but true.

Safety's on, no blasting today.

[Ian Corrigible]

A slightly more upbeat perspective from Helivalue$ (http://www.helivalues.com) (reproduced here in full since I can't locate the article on-line).

World oil prices & helicopter demand
Benjamin Moore, Senior Appraiser -- HeliValue$, Inc., February 2015

The reaction to the price of oil dropping below $50 a barrel has been amazing in the helicopter industry. Financiers have had coronaries. Some are jumping out of first-story windows.

There have been several articles printed that suggest that since the “hysteric lows”, oops, I mean, “historic lows” of the price per barrel of oil, helicopter demand will sink lower than pond scum since no one will want to look for oil until these prices for oil increase. Just a few years ago, around 2002, a barrel of oil was $20! Since that time, it’s gone as high as $110 a barrel. Goldman Sachs, a company that everyone quotes, projected in 2008 that oil could reach $200 a barrel! That might be true yet- in thirty years? But, sanity and fracking has returned the price of oil to, shall we say, more realistic numbers.

A few articles in places such as Reuters and other news sources seem to suggest that the helicopter offshore market is DOOMED. Yet, every manufacturer of helicopters that fly offshore has said that, though the short term may have some reduction in orders, the long term Oil & Gas Industry market will continue to need helicopters. We have seen plummeting stock prices in the publicly traded offshore helicopter fleet operators. Some have posited that it is another indication that the offshore market will be in trouble because of cutbacks to oil exploration. Yet the mood at the Helicopter Investor conference in London last week was cautiously optimistic: Clark McGinn of CHC repeatedly called the O&G helicopter industry a “rational market,” and John Mannion of Bristow consistently reminded the audience that flights to production platforms outnumber those to drill rigs by a sizeable percentage. It is the public’s misperception that the present market will remain the same for the next two or three years. The fleet operators do have some short-term problems facing them, but lack of contracts in the future is not one of them, yet. Their reasoning is solid. Most of the contracts being worked today are for production oil platforms. Those production wells require fewer people to operate than the exploration and drilling rigs. There may come a slowing of production. However, even if there is slowing, people have to be on those drill platforms to maintain them. And shutting down a well is expensive, time-consuming, and requires people to do the work…which requires helicopters to get them there.

There are two reasons that exploration is going to go ahead, economics and politics. Let’s talk about politics first. Some years back Germany made the decision to shut down their nuclear-fired electric power generating plants and replace them with natural gas fired plants. Great, except the major source for natural gas, is Russia. Otto Von Bismark is hyperventilating in his grave. Most of Europe is in the same predicament. France is much less dependent since they are the largest user of nuclear energy to generate electric power per capita in the world. Regardless, all of Europe needs petroleum products, and the major source of oil today is, you probably guessed, Russia.

Russia decides to do a little meddling in the Ukraine. The World reacts by trying to impose economic sanctions. Saudi Arabia does its bit by increasing production and lowering prices that force OPEC to do the same. The political decision to lower the price per barrel of oil is one of the reasons that oil is relatively cheap today. I do notice that the price of oil is starting to creep up again. However, this price per barrel level is creating economic havoc in Russia, Venezuela, and some other governments that depend on high prices per barrel to balance their books, complete infrastructure repair & improvements, and pay off debts. Europe’s major source has been Russia, but the lower cost oil prices help Europe to buy from other places such as Saudi Arabia. They know that they must have a larger ready-access reserve of oil/gas in the future. This will blunt the amount of power that Russia might be able to exert when the present crisis is over. Those larger ready-access reserves are in the North Sea deposits off the coasts of Nova Scotia, Ireland, Scotland, and Norway. I believe Europe will encourage exploration in those areas.

Now, let’s talk a bit about economics. Two of the largest emerging markets and growing future use of petroleum products are China and India. They have little oil and gas reserves on the land they own. China, in particular, has been trying to get dependable sources of petroleum products. For example, it has led to China pouring billions into Sudan for pipeline and infrastructure from South Sudan to North Sudanese ports. Those plans were spoiled when a civil war erupted between the north and south. Now China is investing more money and Army personnel to try to stabilize that supply of oil in North and South Sudan. As a result, their future growth will depend on offshore reserves in the South China Sea, the Indonesian archipelago and the East China Sea. Most of the offshore reserves are well off the coast and will demand helicopters to service both the production and exploration rigs. They need that exploration to go ahead now. Yes, politics enters into their reasoning also. Therefore, these growing economy governments do not want to rely on someone else to supply them with needed fuel.

North America has the largest reserves of shale oil in the world. The development of economical fracking has been industry-changing. The natural gas in both shale oil reserves and the Bakken Formation makes the US a powerhouse in both. Just two years ago, the US imported 65% of the petroleum it consumed. Now, it’s only 26%. Fracking is also allowing us to revisit old oil deposits such as the Permian, Eagle Ford, Barnett and Haynesville Bossier basins (AKA Tea Pot Dome). Good heavens, the stuff is flowing like rain.

Fracking has had a negative effect on the single light turbine market. You can pretty much drill anywhere in the Eastern United States and get a producing oil or natural gas well. Everywhere else, it’s a crap shoot. In the West and Canada traditionally, you first covered the area with seismic operations to look for oil, then spotlighted areas that might have gas/oil reserves (overthrust), then drilled exploration holes to confirm presence of oil/gas and then moved on when that didn’t produce. In the Eastern US, just drill, and you have a 90% chance of having a commercially producing well. Everywhere else, with traditional seismic methods, there is a 30% chance. Yes, fracking costs more to get that petroleum product out of the ground, but the producer will not have spent money looking for a producing hole in the ground and the petroleum product they get out of the ground using the fracking method will need less refining. Smart money goes to the sure thing. Shut down those seismic methods.

The seismic operations are what produced the most contracts for light single-turbine helicopters in the Western US and Canada. With the exception of right after 9/11, we have the largest inventory of light single-turbine helicopters ever seen on the world market. We know there are over 500 on the market today, the number is growing, and values are dropping every day. The seismic industry is unlikely to come back for a while. Contracts for light drilling both for O&G and minerals have gone to the Bell 212s and Bell 205A-1s. We will closely watch what happens to the B212s and 205A-1s this season.

I/C

[Fareastdriver]

The South East Asian Continental Shelf has enormous potential for the oil industry being at the doorstep of India and China. The territorial disputes over insignificent lumps of rock sticking out of the water bear witness to this bonanza. When this is sorted then China wil be going full tilt to reduce its dependency on foreign oil. This will continue to depress the price of oil as China is at the moment the world's biggest importer.

Good news for the helicopter industry, joint ventures with the Chinese if neccessary; not good news for Western helicopter drivers because, as I know, they have first class pilots of their own.

[terminus mos]

Regardless of what the big companies may say to their shareholders, the first pilot number trimming is imminent.

[tottigol]

TM, you are behind the power curve with regards to those trimmings.
A certain large ooerator in the GoM has opened the furlough season before last Holidays.
Over 30 were lrt go at last count.:(

[terminus mos]

Hi Tot

Maybe in the GOM but I am talking about the two biggest players in other locations who until recently were recruiting. I hope it's only a very light trim or better still, a bit of a bluff.

[Fareastdriver]

I hope for those, as has happened before, that have made the recent jump from miltary to civil that the 'last in first out' doesn't materialise.

[helimutt]

chc have just let 16 pilots go, add that and a couple of others who would have stayed if they'd been allowed, but weren't, and you have the start of pilot number reduction in CHC. Not UK sector by the way.

[Bravo73]

I hope for those, as has happened before, that have made the recent jump from miltary to civil that the 'last in first out' doesn't materialise.

Why, do you think that 'last in last out' would be fairer?

[Tango123]

Au contraire Bravo 73....

Fareastdriver was thinking more in the direction of: first in - first out :}

[Fareastdriver]

No. I was thinking about the shakout in the early eighties. There we had people who had made life changing decisions to move up to Aberdeen with their new job flying the North Sea. They then found that they were the first to be made redundant. In retrospect most of them were lucky enough to recover their jobs a few months later but for some it was a very expensive shuttle.

[TripleC]

Yeah, like 20 months later!

[terminus mos]

CHC and Bond are both offering brand new helicopters now not needed by some oil companies at bargain rates, short or long term contracts. Milestone Leasing (now GE) LCI and Waypoint all stuck with soon to be delivered new helicopter inventory looking for customers.

This oil and gas companies that are smart will be taking advantage of the lower rates and drilling for the long term future using lower cost assets and lower cost daily rates. Now is the time to lock in a long term contract deal with providers.

[212_Nightdipper]

Hello folks, I heard from the grapevine that NHS is not doing so well and it is about to shut down all business before the end of the month if they dont find some investors...Shame:(

[Fareastdriver]

I hope not. I've got an eye appointment next month.

[Same again]

That's just a rumour Fareastdriver. I have it on good authority that NHS will continue to operate until at least after the general election.

[cyclic]

This oil and gas companies that are smart will be taking advantage of the lower rates and drilling for the long term future using lower cost assets and lower cost daily rates. Now is the time to lock in a long term contract deal with providers.

Thanks for the top tip. You mean when there is over supply the price goes down. Hardly Swiss banking is it, or even HSBC for that matter :ugh:

[Variable Load]

Cyclic, please don't feed the troll :E

[terminus mos]

Thanks for the top tip. You mean when there is over supply the price goes down. Hardly Swiss banking is it, or even HSBC for that matter

But Cylic you see, some companies look to expand in a down cycle. All around there are lowering rates, spare aircraft and the talk of redundancy. My company has just taken on 2 additional rigs and 3 aircraft which is surely good news.

[Fareastdriver]

As helicopters are a minor part of the transport costs which are a minor part of a drilling project I don't think there is going to be rush for the over supply.
Even in Klondyke periods helicopter contracts are just a beancounter's exercise.

[Ian Corrigible]

More on the majors taking the opportunity to secure good deals in a weak market: Bristow weighs up substantial fleet order (http://www.flightglobal.com/news/articles/bristow-weighs-up-substantial-fleet-order-408850)

I/C

[nowherespecial]

They (BRS) can have some of CHC's... They have plenty of spare!

[Ian Corrigible]

Despite the earlier optimism (http://www.pprune.org/rotorheads/555100-surviving-oil-slump-2.html#post8845067) from UTC, Sikorsky is now feeling the pinch from the lower oil prices, which are predicted to persist through the end of the decade (http://www.cnbc.com/id/102606851).

Sikorsky's first-quarter operating profit dropped 11 percent on a 7 percent fall in sales, according to results released on Tuesday. Commercial sales tumbled 26 percent.

The prime culprit? The decline in oil prices. A huge chunk of Sikorsky's nonmilitary business is for oil industry customers shuttling workers and equipment to offshore rigs. Moves by oil companies to cut back on expenses are affecting the helicopter industry.

"We are seeing pressure from the oil and gas segment," Paul Lundstrom, United Tech's vice president of investor relations, told analysts on a conference call.

Lundstrom called the quarter a "slow start" for Sikorsky, but added it was too early in the year for the company to cut financial forecasts. (http://www.reuters.com/article/2015/04/21/united-tech-sikorsky-idUSL1N0XI1BG20150421)
I/C

[muermel]

Now that I've got the money together for the IR the offshore-industry has tanked, great :ugh:

I'm looking at doing the FI(H) instead. I'm German, willing to work wherever it takes me.

I've shortlisted 2 schools in Germany (HeliTransair, Heli Aviation), also Helicentre (UK) and Sloane (both were recommended to me) and HeliCentre (NL).

Any hints, recommendations, advice about these schools? Which one is most likely hiring after all the training? Have I forgotten another school?


Thanks in advance for any help :ok:

[Hughes500]

well i think it is great at the moment, jet fuel down 20 p per litre so far this year

[EESDL]

Now all I need to do is find a chopper!

[GoodGrief]

Plenty of choppers for sale in Yorkshire.

http://git.me/photo/2015/08/05/2195669935453165824/887444289390093440/SUZUKI-BANDIT-600-HARDTAIL-CHOPPER-SWAP-PX-WHY.jpg

[terminus mos]

A friend of mine in Australia just sent a text that he and others have been made redundant by Bond Australia. He says Bond Australia has made 20+ Pilots redundant from the S-92 and 225.

Shame for those guys as many left more secure employment to join Bond as a new start up in Australia only 18 months ago so their accumulated redundancy payments will be almost nothing.

[ersa]

Terminus mos,

I have 2 friends working there, have all the pilots been laid off , they come across from CHC, have Bond Lost the contract or just slowed ?

[Evil Twin]

Those 92's have never turned a blade on revenue work. As far as I recall they had an order for another two for delivery 2nd half of 2015.

Tough times as they're a good bunch of guys.

[lowfat]

Bond Aus sounds like the other financial bond disaster.... NHS what a waste that was

[Ian Corrigible]

Helicopter operator Era Group in oil-field squeeze (http://www.wsj.com/articles/helicopter-operator-era-group-in-oil-field-squeeze-1446693974)

[Era Helicopters] to cancel or defer almost three-quarters of its existing order book...$127 million of $175 million in capital commitments...including deals with Sikorsky and AgustaWestland.

I/C

[Ian Corrigible]

Pessimistic outlook from Bell:

Bell sees delayed recovery in commercial helicopter market (http://www.reuters.com/article/2015/11/08/dubai-airshow-bell-helicopter-idUSL8N1330P020151108)
Patrick Moulay, VP Global Sales and Marketing for [Bell] helicopter, said the outlook was worse than expected six months ago, given that key customers now believed that oil and gas prices would remain lower for a longer period. "We're actually in a tougher spot now than we were six months ago," [said] Moulay. "The entire industry has given up on a recovery in 2016. We don't see (it) now before the first quarter or the second quarter (of 2017)."

And the latest delivery stats for the third quarter from the General Aviation Manufacturers Association (http://www.gama.aero/media-center/press-releases/content/gama-publishes-2015-third-quarter-aircraft-shipment-data) show a 25% year-on-year slump in turbine helicopter deliveries.

I/C

[minigundiplomat]

I/C,

I broadly agree with the general 'lower for longer' outlook. However, that is predicated on today's events; tomorrow's events can lift that price in a heartbeat. I think a geo-political change with negative impact on the global oil supply is more likely than a huge advance in alternatives to hydrocarbons in the next 2 years.

[nowherespecial]

I/C and MGD locked in a close battle to see who breaks 1600 posts first....

[Fareastdriver]

Everybody seems to think that the FAIR price for oil is in the US$100+ level; it isn't. The price today is the same as 2004 adjusted for inflation and before that IT WAS LOWER, at times a lot lower. I don't seem to remember offshore pilots crying over their futures then.

http://inflationdata.com/Inflation/Inflation_Rate/Historical_Oil_Prices_Table.asp

I certainly wasn't, I was raking it in.

[Ian Corrigible]

minigundiplomat,

Very true. Which makes a farce of the high-priced, mass-produced 10-year forecasts which fill my spam folder most months (even Honeywell (https://honeywell.com/News/Pages/Honeywell-Forecasts-Steady-Global-Helicopter-Demand-For-Next-Five-Years.aspx) now only projects within a 5-year forecast horizon).

nowherespecial,

Woo-hoo! It's been a while since I looked at my post c...

http://i.imgur.com/2dbnEFn.jpg

:E

I/C

[minigundiplomat]

Completely Agree

[minigundiplomat]

NWS,

You're so banal - like I'd post just to reach a number......

[nowherespecial]

Rotor & Wing Magazine :: Bristow Says Offshore Sector Faces Unmatched Headwinds (http://www.aviationtoday.com/rw/topstories/Bristow-Says-Offshore-Sector-Faces-Unmatched-Headwinds_86494.html#.VkMAl7erSM9)

Not just CHC facing problems. If BRS are struggling to make any money with their pretty sensible capital structure, other operators will have more pain to bear first in a lower for longer environment.

'And it's MGD at the line by 3 posts'... Well done guys. A pleasure to watch 2 heavyweights duke it out.

[Ian Corrigible]

Not just CHC facing problems

Helicopter services firm HNZ Group shares sink on dividend suspension (http://www.theprovince.com/business/helicopter+services+firm+group+suspend+dividend+starting+nex t/11520437/story.html)
HNZ Group shares hit a nearly six-year low Monday after the helicopter services firm announced it will suspend its monthly dividend starting next year as it deals with a slowdown in the resource sector, a key market segment. Shares of the firm sank to $10 in early trading on the TSX, representing a 28% decline from Friday's close — the lowest level since February 2010.
I/C

[zalt]

That is not stopping NHV opening a base in Aberdeen (http://aerossurance.com/news/new-heliport-abz/)in the faces of CHC, Bond and Bristow.

[nowherespecial]

They have to have somewhere to park all the idle 175s they bought....

ABZ is a declining market at the moment; still big but shrinking. The fields are mature and the oil companies there are more open minded than ever to share cost on helicopters. Why NHV think now is a good time to get in is anyone's guess. They've had a year almost to delay this, maybe contracts mean that they had to 'take delivery' of it but there are so many other places their money could be spent.

Surely that capital would have been better spent on the Ghana work they already are on or tendering for?

[EESDL]

That, unlike in the not too distance past, a terrorist event such as t'other day would have caused oil to rise......strange how we've all been taken for mugs for so long.
I guess it will rise when the Saudis say it will.
Bad news for those who produce meaningless forecasts.

[DOUBLE BOGEY]

Nowherspecial with such crystal clear insight and business strategy why are you not the MD of a multi national........?

[gasax]

Nowherespecial is certainly correct regarding Aberdeen. The 'consultations' with the offshore workforce regarding rota changes are now working towards their end points. The number of flights required for a 2 on, 3 off rota versus 3 on, 3 off will see a pretty dramatic reduction in flying - and those changes are only going to really kick in over the next couple of months. The reductions to date have been driven by the cuts in drilling and project support.

Most operators have already been through two phases of 'cost/headcount reduction'. The helicopter operators are further down the grapevine and that is coming their way.

It will be a considerable time before offshore rotas go back to 2 and 3.

[nowherespecial]

DB, working on it. Although I detect sarcasm.

[Never Fretter]

As the NS is such a high cost environment its difficult to see rosters reverting even if/when the oil price goes back to $100+.

[Shell Management]

Good to see competition coming to replace those aged AS332Ls.:)

[Hot_LZ]

Where have you seen any Ls recently!?

[Shell Management]

Obviously with the lesser clients who hopefully now will finally be moving to Shell's 7/7=1 strategy.

One could opine that the OEMS have missed a trick. H771 or B771 have a nice ring about them;)

[cyclic]

Don't feed him please.

[bellsux]

from another source:

Goldman Sachs has stood by its ultra-bearish forecast in the wake of Opec's latest meeting
Oil companies and countries dependent on revenues from 'black gold' might be forgiven for thinking that things cannot get much worse. Goldman Sachs, however, believes that they can.
Analysts at the US investment banking giant issued a note on Thursday in which they stood by the ultra-bearish forecast for global oil prices to slump to $20 a barrel next year, before recovering in any meaningful way, says CNBC. Here are four arguments supporting the case for another major drop:
Stockpiles just keep rising
Yesterday another report revealed that oil reserves were rising in the US – a bearish indicator for the ongoing global supply glut. The Wall Street Journal cites an estimate from data provider Genscape that stockpiles at the Cushing, Oklahoma depository, which acts as the delivery point for US benchmark West Texas Intermediate futures contracts, rose by 1.4 million barrels last week.
The rise mostly took place in the second half of the week and followed the US energy watchdog's report of a surprise surge of 4.8 million barrels in overall domestic crude oil reserves last week. In response, WTI fell to a six-year low of below $35 a barrel and international counterpart Brent crude fell close to one per cent to a new seven-year low of a fraction above $37.
Production is not falling enough
It is one of the enigmas that has confounded analysts: why production has remained resilient despite the painful fall in the oil price. US shale in particular, which is thought to be more expensive than much of the rest of global production, has fallen from its peak output of 9.6 million barrels a day but is still above nine millions barrels and has been edging higher of late.
Goldman Sachs says that with Opec already pumping 1.5 million barrels a day above a 30 million barrel production 'ceiling' – and having now abandoned any targets for production after its latest meeting ended in acrimony – there is simply not enough of a decline being signalled elsewhere to rebalance the market.
Fed rates rise will hit demand
Demand is also a key factor in the supply equation and, again, it has been disappointing. Efficiencies in fuel use, warmer weather caused by the El Nino phenomenon and a new drive to reduce fossil fuel burning to protect against climate change are all preventing drawdowns surging to meet or exceed supply.
The decision by the Federal Reserve this week could exacerbate this issue, traders fear. Lower oil prices were starting to filter through into greater fuel purchases, but if the dollar rises strongly on the back of the rates increase this will hold prices higher for overseas buyers and could undermine that trend.
Budget deal is bad news for Brent
For the international benchmark, Brent, there was further bad news this week in the form of a new budget deal in the US congress that controversially saw the Democrats cave in to Republican demands to remove a ban on domestic oil exports. The protectionist measure has meant that international oil is bought at a premium to the US benchmark and could see more oil flood onto the global market.
The net result of this could be that the 'spread' between the two prices shrinks – most likely through a fall in the relative premium paid for Brent. At some point this week the spread fell to less than $2 and some industry analysts reckon that over time the two prices may even reach parity.
Any rises being predictee
Plenty, in fact the consensus view probably still remains for oil to enjoy higher average prices in 2016 than this year. But these forecasts are falling every time they are republished and many experts are now predicting a near-time fall lower – perhaps to around $30 a barrel – before a volatile recovery pushes prices to within a wide $40-$60

[Impress to inflate]

OPEC made a statement the other day saying they "expect to see $70 per barrel by 2020". Another 4 years of sh!t ahead of us.

[nowherespecial]

Saudi budget is being blown apart by this desperation to burn the US shale producers. Not sure how long they can maintain it internally politically. They are having to raise/ levy TAXES (!) in the KSA to try and recover some of the deficit. They are running out of cash reserves. I think the KSA needs to make peace that shale exists and the USA is now a net exporter end close the taps a bit. Their strategy isn't working for them, let alone the rest of us!

[minigundiplomat]

The Saudi's are trying to do two things at once; undercut the US shale gas industry and maintain regional dominance to counter Iran as it moves back in from the cold. As usual, they are doing both badly........

They have huge reserves, but taxation won't go down well in a country where it is unheard of and everything is subsidised; added to which the regime is already unpopular. Unfortunately, as the Saudi's reach the point where they realise the main victims of this strategy are themselves, Iran's surplus will have entered the market and they will be pushing to boost output.

No relief just yet - I have seen those figures from Goldmans et al; all seem to predict $20-30 a barrel in the short-medium term, but for a limited period and as a precursor to a much needed price hike.

[Fareastdriver]

Then when that happens they will have sorted the political differences in the South China Sea so millions of square kilometres of hydrocarbons will come on stream.

[Tango123]

Have Blueway lost the Shell contract in Kristianssund to CHC?

Is it another termination "due to convenience"?

It is the only contract Blueway has....

[bleuciel]

Have Blueway lost the Shell contract in Kristianssund to CHC?

Is it another termination "due to convenience"?

It is the only contract Blueway has....

Shell would appear to treat Blueway the same way they treated CHC and Bristow. Given the fact that though that Blueway were low cost, there must have been other reasons.

Anyway, that wouldn't surprise me if Blueway were operating the way I was told. Even Airbus Helicopters were concerned with that and the lack of experience on the 225.

[ersa]

Don't worry the latest forecast for oil is $16-$20 , still plenty to drop

[JulieAndrews]

So anyone sat wondering when their steed of choice will be put into 'care and maintenance'?
What affect will $20/barrel have on the long/medium-range logistics?
Accept that the speculative, longer-range, exploration flights were first to be affected but can't see many companies surviving on $20/barrel - then it does not really matter how diverse their portfolio.
Does it matter more if you are a 92/225 pilot or a 175/139/189 jockey?
Will the SNS be less affected than NS, CNS?
Not interested in opinions from the O&G consultants who have published 'forecasts' woefully off the mark to date, and make a living from publishing such, but the pilots/engineers who will be directly affected and any snippets they have picked-up. It is a rumour network!
Will be keen to know if the industry is prepared for what will happen at 20/barrel and what plans are in process or have already been actioned.
From one who didn't see it coming!

[SFIM]

all I know is that it is for all practical purposes its impossible to get a job right now flying for O&G, it doesn't matter whether you have 20,000 hours and a bunch of current types, feels like there are 10 unemployed oil and gas pilots on every street corner, so if you have a job right now for the love of god don't resign!!!

[nowherespecial]

And yet, in the middle of all of this, unionized labour means costs for operators are increasing. Unionized Pilot and AME costs in Northern Europe and the USA are the primary reason why lower cost operators like Inaer, NHV etc (and others from outside of Europe completely) are wiping the floor with CHC and BRS at the moment.

A pay rise when oil price is down 70%?!

Why an operator would ever voluntarily unionize the workforce I have no idea.

[Phone Wind]

BP has just announced about 600 job cuts in the North Sea and up to 4,000 globally, with Morgan Stanley forecasting an oil price drop to $20 a barrel and RBS forecasting it could fall as low as $10. Not good news for the offshore oil industry and those employed in support companies I'm afraid

[DonQuixote23]

And the Swedish government is fully funding the training of 30 CPL(h) per year in order to counter the lack of helicopter pilots, that is so severe that it is of national concern (apparently)...

[Tango123]

Great Slave Helicopters reduces N.W.T. employees' work hours - North - CBC News (http://www.cbc.ca/news/canada/north/great-slave-helicopters-reduces-hours-1.3399327)

[tistisnot]

So the question is ..... was the last 20 years of oil company aviation units demanding standardisation, globalisation, safety target zeros worth the heavy investment by the major operators or not?

Would we not have been able to input changes under the guise of SMS demands from the authorities with less priority and cost? Has your safety department taken a hit yet? Where will the oil company aviation savings be made besides the obvious line engineers and pilots?

And in two or three years, whenever, will those with the cheaper costs, higher wages, newer aircraft types be better able to man the chaotic rush to support new ventures!!! Will it be those that meekly bowed to their earlier whims?!!

Strength thru gloom chaps and chappesses!

[haihio]

My question is, how low can the price of oil go before north sea operations are no longer economical??
Coal mining recently stopped in the UK even tho coal reserves are still available because it is simply cheaper to import than mine in the UK.

[Tango123]

Production costs are around 7-9$ in NS, depending also on how old the installations are. The older the cheaper. More expensive in Norway, due to "the norwegian model". But production will NOT stop, even though the production is no longer economical, then taxation will just be lowered, to keep the installations running. It is a national security Q, for the UK, Netherlands, Denmark and Norway, etc. They will not leave energy supply in the hands of the Sauds :=

[nowherespecial]

Found in my LI flow just this morning. Snappy little graph which shows production costs. I think some of the numbers being quoted here on the forum are not accurate. NS is a VERY expensive place to produce energy. There is a marked difference between on and offshore as well. offshore is always hugely expensive even if the fields are bigger.

Sale of the century? | The Economist (http://www.economist.com/news/briefing/21685475-possible-ipo-saudi-aramco-could-mark-end-post-war-oil-order-sale)

The key is that anyone in theory could close the taps a bit but it's the impact of that country. The UK closing the taps (for economic or political reasons) will not make the blindest bit of difference to the oil price as we are not big enough. Saudi/ Russia/ Iran/ a.n. other will just open the taps a bit more and take our market share. That's why OPEC is still so important, when 40% of the market make a decision together, that is a significant impact.

[2papabravo]

Production costs are around 7-9$ in NS

Pahahahahahaha good one

What utter drivel :yuk:

[212man]

Quote:

Production costs are around 7-9$ in NS
Pahahahahahaha good one

What utter drivel

Yes, it's like "the worst paid occupants of the helicopter are the pilots" comments - sounds good in the bar (or on pprune) but total bollocks!

[helimutt]

I was chatting to a crane operator one day before flying him offshore to work. He was asking about salaries. Turns out he was on £20k a year exactly more than I was, I was a chc co-pilot. :eek:

[Tango123]

Claimed by The Economist that break even for a barrel in the UK is 60$ is pure nonsense, and Nigeria 65-68 is rediculous unless it icludes several other factors like eg. tax.

Back in 98-99 the price was around 10-14$/barrel still everybody working in the branch were earning well.

Could be slightly higher than 7-9 but we are not even close to 20$ in the NS.

[Phone Wind]

Where on earth does Tango 123 get his figures from? Maybe he's listening to the voices in his head? :}

According to the FT, oil production costs per barrel in the North Sea have risen by 300% in the last 15 years and it now costs around $18 per barrel to lift.

To quote from the McKinsey report of 2014
North Sea oil and gas costs have risen faster than any other industrial sector in the region, causing projects to be shelved and activity postponed, and challenging the long-term viability of existing fields and infrastructure.
Decommissioning costs are increasing in a time of decreasing profits:
Low Oil Prices Throw Nort Sea into a Period of Crisis (http://oilprice.com/Energy/Crude-Oil/Low-Oil-Prices-Throw-North-Sea-Oil-Into-A-State-Of-Crisis.html)
If Iranian oil comes onto the market in the next 6 months as widely predicted, this will probably lead to an oil war between them and the Saudis, which will drive oil down to around $20 a barrel or even lower.

[nowherespecial]

Got it in one Phone.

Plus, quoting figures which don't have tax is pointless unless the lack of tax is acknowledged. Taxes and royalties are the rewards to the government (and the people they serve) for letting companies drill and extract oil. It is utterly pointless just to quote the extraction cost without taxes as without the taxes you cannot extract.

Below a 2015 report containing data from the egg heads at Morgan Stanley quoting UK costs in 2014 for a barrel excluding any taxes at $30.

http://www.petroleumworld.com/pdf/Morgan2015.pdf

Some of the opinions on future price direction are laughably wrong of course, but their data source is the same as the one I quoted above, also used by the Economist. I think it's fairly safe.

[Tango123]

nowhere, I personally believe that tax can go as low as 0, if the oilprice keeps dropping. Simply to keep the production going. Again, it is a national security Q, too important to let in the hands of the Sauds and other 3. world countries.

The oil companys have an interest in stating that the production pr. barrel is high, when (re)negotiating with the state, to put a pressure on for a low tax. That is why it is not possible to get an excact figure. The only thing for sure is, when there is no money in it, then the operators are out - which is the fact for most US fracking companies.

Enough said on this subject....

[Phone Wind]

Tango 123 is obviously sadly deluded. Why on earth would NS oil be a national security question? This is something more akin to the response to the GMB union. Our coal industry has been allowed to go into decline because cheaper sources are available. Amongst non Third-world countries which are in the top-ten oil exporters are Norway, USA and Canada as well as our former colony of Nigeria with which we have a close commercial relationship. As for reducing the rate of tax to 10% that's laughable. Oil and gas exploration already attracts research and development allowances which allow for 100% write off of the expenditure for tax purposes.

Many NS oil fields are already reaching the end of their viability and the oil companies only keep them operating on a "use it or lose it" basis because of the huge costs of decommissioning them.

The Government is already making a loss from North Sea oil and gas because revenues are presently more than cancelled out by repayments to producers, leaving the Government's North Sea accounts £39million in the red between April and September of 2015, according to HMRC figures, which is thought to be the first time the UK has recorded a loss over a six month period since the North Sea oil industry became established 40 years ago.

[Variable Load]

Phone Wind, please don't tell the SNP

link (http://www.heraldscotland.com/news/14183367._Crisis__What_crisis___SNP_MSP_claims_North_Sea_oil _industry_is__booming_/)

[nowherespecial]

Qn for the pilots - with NHV/ Inaer et al now offering salaries at 5500 EUR a month for month on work only, have we entered an era where the former CHC/ BRS people making 10000 EUR a month ish are over? What implications for their pilot unions when collective bargaining is one of the drivers for them being expensive on cost?

Do we think the race to the bottom on pilot salaries (and AMEs too of course) is now on? Someone wafted an offshore pilot job paying 6-8000 EUR a month past me recently and I can't help but feel that's a lot less than 12 months ago. Is realism creeping in? I think in the current market people would rather be making 5k Euros a month in take home than unemployed. Is that true or is it just me?

[212man]

I think in the current market people would rather be making 5k Euros a month in take home than unemployed. Is that true or is it just me?

I can't imagine many would disagree with you on that. Just heard GHC are making more redundancies.......

[NorthSeaTiger]

Is that GHC or CHC ?

[212man]

GHC as in Qatar

[SFIM]

last I heard GHC were trying to pay new people 400 USD per day for time on only 🤔

[vfr440]

I think it may be marginally better than that. I heard this morning that GHC will/may migrate their touring staff to 6 & ^ so as to retain staff wherever possible - VFR

[NorthSeaTiger]

Ok , thanks.

[gulliBell]

$400/day sounds good, I'd like a piece of that!

[bolkow]

I was chatting to a crane operator one day before flying him offshore to work. He was asking about salaries. Turns out he was on £20k a year exactly more than I was, I was a chc co-pilot. :eek:
To be fair them there cranes require skilled operators!

[diginagain]

To be fair them there cranes require skilled operators!Not wrong.
https://www.facebook.com/SigmaOilServices/photos/a.125131970990478.1073741838.112876992215976/365156253654714/?type=3

[Self loading bear]

To survive the oil slump:
Find alternatieve Business
http://www.az.nl/nieuws/az-supporters-per-helikopter-op-middenstip/1?catid=


Although not completely new as CHC has done this also for Feyenoord in Rotterdam some years ago. But already lost that contract to HeliHolland and later HeliJet Charter DE.

SLB

[Tango123]

Huge difference between 24$ in UK per barrel, and only 7$ in Norway:

Grafen som viser hvor billig norsk oljeproduksjon er ? (http://offshore.no/sak/264058_grafen-som-viser-hvor-billig-norsk-oljeproduksjon-er)

[Nescafe]

The way forward for Bristow is to "rearrange" the senior management team.

From Jonathan Bailiff:-
As we embark on these changes today, I am announcing the following changes to senior management, effective immediately:

· Chet Akiri has been named Acting Senior Vice President of Operations and Chief Commercial Officer, and will oversee operations while a search is underway for a new Senior Vice President of Global Operations.

· Jeremy Akel, Senior Vice President and Chief Operating Officer (COO) has left the company and we have eliminated the COO position.

· Vice President of Global Operations Mike Imlach and Vice President of Business Development Mike Sim have also departed the organization.

I'm sure Mike Imlach won't be missed by most.

[industry insider]

That's quite a clear out at the top. Nigeria fall out probably, it will help to take some cost out of the business as well. Dangerous axe in Bristow.

[Nescafe]

Yes, he was quite adept at wielding the axe, now he has felt it's chop!

[Staticdroop]

Is this a clear-out or are the rats leaving the sinking ship? Also who's running the Nigerian unit now that Mike has "left to follow other opportunities".
Looks like all the companies, apart from Bond/Babcock, are struggling in this climate. How many will be left standing when the oil price finally recovers and the market becomes more bullish.

[nowherespecial]

Static, I'm not disagreeing with you but I would say we don't really know how Babcock MCS and their subdivision are getting on really as their reporting of $ is all internal. The commentary with their last investor report is all text and new bid win values with a comment of 'broadly maintaining MCS margins'. Nothing about MCS made (or lost!) $XX in the last 6 months which I think is really what we'd all like to see!

Not in any way a dig, I wish CHC employed similar rigour to their operations sometimes but without doubt, having access to a huge bank account and diversified model have helped Babcock weather the storm significantly better than CHC or BRS.

[Staticdroop]

Babcock are a huge global company of which their offshore helicopter group is a small part. I'm guessing that means that when they go to bid for a contract the can put a lower bid in as their overheads are not as big as perhaps CHC/BRS have. So while they have to make money of course they don't have to pay for all of the overheads in the way the other companies do. Gives them an edge in this difficult climate I suspect.
This is purely guesswork as I don't have access to their boardroom and their paperwork.
We'll find out soon enough I guess, good luck to those that are involved in this squeeze.