Surviving the oil slump
 

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?

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.

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.

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?

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:

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.

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.

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.

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.

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.

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.

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?

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

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.

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

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?

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.

No I think I'm good.

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.

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.