Well, that makes sense as I have been wondering why CHC stock price has been dropping in the last few days. I have not seen that report, luckily I sold some of my CHC shares recently before the stock price slide.
I think some interesting things will be going on in the helicopter offshore market as vendors position themselves for upcoming contract renewals. CHC has reported in it’s annual report for fiscal year ending April 30, 2002 that 48% of its International contracts are up for renewal in fiscal 2004 and 47% of its European contracts are up for renewal in fiscal 2005.
Having about half of your business up for renewal in a two year time period can be risky business. As a matter of fact if you tally up CHC’s renewal percentages from now until the end of fiscal 2005, 88% of the European and 81% of the International contracts are up for renewal. If the oil market is good they will get good rates, if not then rates will surely suffer. They need to smooth out the contract renewal schedule to reduce the “bulge” in contracts. If the market goes against you this can be very deadly.
Maybe CHC has a super-computer at the hangar in Newfoundland and has determined the crude oil price cycle and is eagerly awaiting those contract renewals! Yet many oil companies have super-computers so whoever has the bigger super-computer wins the game.
I was actually surprised that CHC published its contract renewal schedule, in an Offshore Logistics annual report this information was nowhere to be found, and I have read both reports cover to cover. This type of information is inside business knowledge, distributing it can put one at a competitive disadvantage. The field of competitive intelligence covers the uncovering of business information, the say 80% of what you are looking for is in public records.
The two year contract renewal period window represents an opportunity for new entrants to enter the market. They will start making their moves now because after the window of opportunity closes the renewal percentages are less than 10% per year. Perhaps will see small “low-cost” operators emerge (as in the airlines) or air taxi firms obtaining offshore machines and entering into the bidding process. The U.K. laws also invite foreign investment into flight operations (up to 49% ownership), they are less restrictive the U.S. laws (up to 30%).