The deepwater offshore drilling moratorium imposed by United States President Barack Obama in response to the undersea blowout of the BP Macondo well on April 20, 2010, was lifted on Oct. 12, 2010, marking another milestone in the return to normal in the Gulf of Mexico. For the Gulf’s offshore helicopter industry, however, the resumption of crew-change flights to deepwater drilling platforms is closely tied to the ability of oil companies to obtain new drilling permits in a timely fashion, pass new rig and safety inspections, and demonstrate they have adequate undersea blowout containment resources available to ensure a runaway spill never occurs again.
“We’re hearing a lot of optimism from the oil companies,” said one offshore helicopter company executive. “They are all focused on getting through the permitting process so they can start drilling again. There is widespread recognition that changes were necessary because of the oil spill, and it is taking a little time to work through the new regulations and paperwork.”
When the moratorium was imposed, 33 of the world’s most expensive and sophisticated deepwater drilling platforms were active in the Gulf, supported by a similar number of medium and heavy helicopters. About 23 rigs ceased drilling and moved off location, with the majority remaining on contract with oil companies. Another 10 rigs remained on location throughout the summer, engaged in development activities still permitted under the moratorium.
The immediate effect of the moratorium was the cancellation of long-term crew-change helicopter contracts with the big three operators – PHI Inc., Bristow Group and Era Helicopters — and reduced flying to support the idle rigs, which were anchored closer to shore and lightly crewed. Flying times, frequencies and passenger loads all declined, leaving many Sikorsky S-92s and S-76C++s and AgustaWestland AW139s on the ground, with some pilots and mechanics out of work.
The permitting process for new drilling is expected to move slowly. Shallow-water drillers were already complaining throughout the summer that the lengthy permitting process in the aftermath of the BP spill had amounted to a de facto moratorium on all drilling.
While the deepwater moratorium was lifted six weeks prior to its original Nov. 30 expiration date, it is likely to be well into 2011 before drilling fully recovers from the fallout of the Deepwater Horizon incident. However, given the growing importance of deepwater oil reserves and production, a lot of work is already being discussed.
“Things usually slow down for the winter in the Gulf, but this year there is an unusual amount of activity being planned,” said the helicopter industry executive. “Things are definitely looking up. A number of request-for-proposals are circulating to provide helicopter support to new drilling projects scheduled to commence between January 2011 and January 2013.”
Chevron Corp. was one of the first oil companies to apply for new drilling permits and made a separate announcement on Oct. 21 that it will devote US$7.5 billion toward development of the Jack and St. Malo fields, which are in about 7,000 feet of water some 280 miles south of New Orleans, Louisiana.
As of Oct. 22, three deepwater rigs were drilling, nine deepwater rigs were engaged in work-over activity and 23 deepwater rigs were under contract but waiting on-location for new drilling permits to come through. While rig counts continually fluctuate as new rigs enter the market, and others move in and out of the Gulf, it seems the feared mass exodus of rigs never occurred, although a few did relocate to West Africa and Brazil.
Fortunately for the major offshore helicopter operators, new work flying in support of the spill clean-up more than offset the loss of crew-change contracts through most of the summer. At one point, PHI had 24 helicopters supporting the spill response and crews working at the incident site, and Bristow had 18 engaged in spill response flying.
Going Back to Business
Even with all the previous potential worry expressed, the Gulf of Mexico has continued to generate a lot of helicopter activity, with new milestones taking place every month.
PHI ordered 10 new AgustaWestland AW139s in August to supplement two used AW139s acquired from Copterline of Finland in early 2010; the two from Copterline will be refurbished for offshore use by early 2011. In September, PHI completed a private offering of $300 million in senior notes to fund its tender offer for senior notes coming due in 2013, with the balance of the funds (over $100 million) to be used to exercise purchase options for aircraft currently leased, and the purchase of certain aircraft required for new customer contracts.
PHI also recently increased its Gulf footprint with the opening of a new passenger terminal at Houma-Terrebonne Airport on Nov. 5. It will serve workers flying to BP’s deepwater exploration and production rigs. (PHI’s other terminal at the north end of the airport will still serve other customers with its fleet of about 20 helicopters, including Bell 407s, Eurocopter EC 135s, and Sikorsky S-76C++s and S-92s.) This new terminal, similar to those used by regional airlines, has five check-in counters, new baggage scanners and metal detectors. Passengers drop their bags for loading aboard their flight and then proceed to a larger baggage drop. Prior to departure, passengers receive a safety briefing on the S-76C++ or S-92 in a dedicated briefing room, and then proceed to the flight line to board their aircraft, on which their bags already will have been loaded. The Houma BP terminal is expected to handle more than 3,500 outbound passengers a month.
PHI’s latest financial numbers showed that its oil and gas segment revenues were $89.8 million US for the three months ending Sept. 30, 2010, compared to $79.2 million for the three months ending Sept. 30, 2009, related primarily to increased activity by BP utilizing medium and heavy helicopters in response to the Deepwater Horizon incident. According to PHI: “This partially offset decreased flight hours resulting from the suspension of deepwater drilling activities in the Gulf of Mexico.”
Bristow, meanwhile, reported gross revenues for its North American unit of $52.8 million for the second quarter, compared to $49.8 million for the same period in 2009. And, for the quarter ending Sept. 30, 2010, the unit earned $55.3 million, which is up from $48.7 million for the same period a year earlier. This latest quarter saw continued benefits from contracts with BP in the Gulf, where nine of its aircraft were still supporting the well control and spill clean-up efforts at the end of September (and a few helicopters were still on contract even in early November). The new flying for BP helped contribute to a large increase in operating margins in the Gulf.
In further good news, Bristow (and to a smaller degree PHI) also has seen a rebound in its single-engine helicopter flying, after a major production management company recently shifted its business back after two years contracting with Rotorcraft Leasing Co. In August 2008, Bristow had sold 53 Bell JetRangers and LongRangers to RLC for $65 million as it narrowed its focus on the deepwater sector. At the time, a number of operating contracts with production management companies were wrapped up with the single-engine aircraft sale.
Era, meanwhile, has been busy, too. Working with Priority 1 Air Rescue, it established a search and rescue/emergency medical services (SAR/EMS) operation at its base in Fourchon, La., in June, dedicating an AW139 to launch customer Anadarko Petroleum Corp. A new AW139 with additional SAR equipment is scheduled to enter service at the base before the end of the year.
Financially, Era parent Seacor Holdings reported aviation revenues of $67.1 million for the quarter ending Sept. 30, 2010, up from $64.3 million from the same period in 2009, although Gulf revenues were down two percent to $30.2 million. Still, Era reported that reduced revenues resulting from the moratorium were more than offset by an additional $6.2 million in revenues on spill response flying for the U.S. Coast Guard in the quarter, or $8.9 million since the blowout began. Era still had three helicopters working on the spill response as of Oct 25. Era flew 8,946 hours in the Gulf during the quarter, down about eight percent from the same period last year.
In terms of new developments, Era recently introduced its first Eurocopter EC 145 for use over U.S. waters in the Gulf (an earlier EC 145 was leased to a Mexican offshore operator). And, international business is expected to grow due to the October announcement that Seacor had acquired 33 percent of the common equity of Hawker Pacific Airservices Ltd. Hawker Pacific is a Bell Helicopter dealer, a fixed-wing contractor to the Australian military, and has a major aircraft sales, maintenance and parts footprint in Australasia, the Pacific and the Middle East.
Among the other leading offshore Gulf operators, VIH Cougar Helicopters Inc. added both the S-92 and AW139 to its operating certificate during the summer, joining the S-61N, which has been approved for offshore Gulf crew change flights for some time. The primary activity at its Galliano, La., base remains offshore EMS and passenger contract work, with some “specialty air service” missions being flown by Cougar Helicopters, a sister company. In addition to its strong offshore base in Newfoundland, Cougar Helicopters recently broke new ground when it had three S-92s operating offshore from Greenland, supporting two drilling rigs on contract to Cairn Energy this past summer. The prospect of new crew-change contracts for both companies (and other operators) will only increase as the deepwater industry recovers.