Bristow Group (NYSE: BRS) operates the largest fleet of commercial helicopters in the world. As of 2008, 99% of Bristow’s business came from the offshore oil and gas industry.  Higher oil prices encourage greater investments in offshore wells, and raises utilization rates of existing rigs; these rigs in turn need helicopter transportation to move crews and gear to and from offshore locations. This same trend, however, is also working against Bristow. Most new wells are in deepwater reserves, up to 200 miles from land. To travel that distance, medium and large helicopters are needed; they have greater fuel capacity than small helicopters. Consequently, Bristow’s large fleet of small helicopters is losing value. As such, Bristow is in the process of an expensive plan to shrink its small helicopter fleet while expanding its medium and large fleets. That said, there is still uncertainty as to future demand for large helicopters in some of Bristow’s key operating areas. In Nigeria, for example, militant groups have attacked a deepwater oil platform. The attack didn’t drastically affect the area's oil production, but it has stifled future investment in an area chock full of potential helicopter transportation contracts.
Although Bristow's revenues increased slightly in 2010 (Bristow's fiscal year ends March 31 of each year) from $1.13 billion to $1.17 billion, it did not have an increase in its net income. The company attributed the increase in revenues to it acquiring Bristow Norway in 2009, which increased revenues in 2010. Despite the increase in revenues, Bristow's net income declined from $123 million in 2009 to $112 million in 2010.
Bristow operates five main geographic units: i) North America (beginning in 2009, Central and South America were included in North America segment), ii) Europe, iii) West Africa, and iv) Autralia (beginning in 2010, Australia became its own segment, and the rest of Asia is now in the "Other International Segment"), and v) Other International.
Bristow is one of the two largest suppliers of helicopter services in the Gulf of Mexico. Well over 100 small helicopters are used there to provide services for shallow water platforms, and 30 for deepwater platforms. As part of its growth strategy focusing on deepwater facility transportation contracts, the unit plans to sell 50 more small helicopters, and slowly transition to medium and large helicopters. Total revenues for this segment in 2010 were $189.7 million.
This unit is the second largest provider of helicopter services in the North Sea. The gross revenues of this unit in 2010 was $453 million. With demand for helicopters outpacing supply growth, contracts for these new aircraft were made at higher margins.
This unit is the largest helicopter provider in Nigeria. Growth prospects in this region are high, with large reserves of untapped deepwater oil. Unfortunately, this area is also full of political instability and militants determined to attack foreign oil and gas companies. In 2010, this segment posted total revenues of $219 million.
This unit is the largest helicopter provider to the oil and gas industry in Australia. This unit also operates 4 medium helicopters in Malaysia, which were purchased in 2008. In 2010, this segment posted total revenues of $131 million.
Bristow also has operations in small markets like Egypt and Ireland. This segment also includes operations in China, Vietnam, and other relatively smaller markets. Furthermore, through the Academy Bristow provides continuing education to its own pilots and maintenance personal. In 2010, this segment posted total revenues of $135 million.
As oil prices continue to rise and shallow water production dries up, deepwater drilling is becoming more common. Deepwater oil production in Africa has more than doubled during that same time period. Deepwater facilities can be up to 200 miles offshore, requiring helicopters with greater fuel capacities. In anticipation of greater demand, Bristow has been expanding its fleet, with orders for 9 medium and 16 large helicopters, and options to buy another 50 aircraft.
As an oil and gas services support company with international operations, political instability affects Bristow’s business. Bristow's contracts are two-tiered. So, for example, customers in Nigeria pay Bristow a flat fee for the right to use a certain number of its helicopters for a certain period of time. Then, each time one of these customers requires the use of one of its contracted helicopters, it must pay Bristow a usage fee. If one this customer's offshore well's is attacked, usage of Bristow’s services will go up in order to transport repair crews and new equipment. This happened when Hurricanes Katrina and Rita struck over struck 75% of the oil and gas platforms in the Gulf Coast, although they weren’t the result of a human attack.
However, the situation has not been so favorable in Nigeria. A militant rebel group has been targeting the oil and gas industry, intent on the expulsion of foreign oil and gas companies. Key customer Shell experienced an attack on a far offshore rig in June 2008. Shell has shut down production at that rig, bringing down oil production by 200,000 barrels per day. Although usage of Bristow's helicopters has increased in order to transport repair supplies, that isn't what's important. 1.25 million barrels of new offshore production has been planned for by Nigeria over the next 6 years. This attack has put that number into question. If the militants succeed, Bristow will lose more than just potential contracts, it will lose all of its current business in Nigeria.
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