* Barclays says oil and gas sector needs 300 helicopters in
next five years
* Shares of Bristow, Era have room to grow - StarMine data,
* Big Oil spending cuts have depressed shares of helicopter
* Oil companies spending more on search-and-rescue
By Swetha Gopinath
June 3 A pickup in offshore drilling is swelling
the orderbooks of the handful of helicopter operators that
shuttle oil workers to and from remote rigs. Their stock prices,
depressed after Big Oil's recent spending cuts, could also be
readying for take-off.
Bristow Group Inc plans to invest $1 billion this
year to procure just some of the 300 new helicopters that
Barclays estimates will be needed by the oil and gas industry
over the next five years.
"We will invest more in this one year than in the last
two-and-a-half years combined," said Jonathan Baliff, the chief
financial officer of Bristow who will take over as CEO on July
"To invest a third of our market capitalization in one year
is one way of saying we are optimistic of the future."
With a market value of $2.7 billion, Houston-based Bristow
is the largest of the niche group of companies that supply
helicopters to the oil and gas industry and, increasingly, for
As oil majors such as Exxon Mobil Corp and Royal
Dutch Shell have announced spending cuts after years of
double-digit percentage growth, investor appetite for auxiliary
services has waned.
Bristow's stock has fallen 6 percent in the last six months.
Shares of Era Group Inc, a competitor, have fallen 11
percent, while CHC Group Ltd has lost over a quarter of
its value since its shares were floated in New York in January.
But these dips could make the stocks a shrewd buy, Thomson
Reuters data shows. Analysts point to renewed appetite for
drilling in the Gulf of Mexico, West Africa and the North Sea
after a lull that followed the Gulf of Mexico oil spill in 2010.
Bristow should be trading at $94.77, a 25 percent premium to
Monday's close of $75.54, according to StarMine's Intrinsic
Valuation model, which takes analysts' five-year estimates and
models the growth trajectory over a longer period of time.
Anthony Walker, a vice-president at Ariel Investments, said
Bristow's geographic reach and focus on deepwater drilling made
the company "disproportionately" poised to benefit from the
delivery of offshore rigs in the next three to five years.
Ariel, a Chicago-based investment firm, owns 9 percent of
Bristow, making it one of the company's largest shareholders.
Technological advances are making offshore drilling more
cost-efficient, reversing a decline in production and
potentially rivaling shale hot spots such as Texas's Eagle Ford
formation in terms of growth.
Gulf of Mexico oil production, which has fallen for four
consecutive years, is expected to increase by 150,000 barrels
per day (bpd) in 2014 and by an additional 240,000 bpd in 2015,
according to the U.S. Energy Information Administration.
"A lot of the expected growth in global oil production over
the next 10 to 20 years is expected to come from deepwater,"
said James West, oil services and drilling analyst at Barclays.
Barclays forecasts a 6 percent rise in global oil and gas
exploration and production spending this year. By 2016, it
expects about 300 deepwater rigs to be in operation worldwide,
25 percent more than today.
Bristow's $1 billion investment this year, about triple its
usual budget, will go toward the procurement of 47 helicopters,
enough to boost the size of its fleet by 17 percent.
Derek Maupin, analyst at investment advisory Hodges Capital
Management, which holds Bristow shares, said higher demand for
helicopters was not contingent on more exploration. Existing
production rigs would supply most of the revenue for Bristow, he
Helicopter operators are also winning business in the
search-and-rescue field, picking up contracts as governments cut
their coastguard budgets. Bristow, for example, last year won a
1.6 billion-pound ($2.7 billion) contract to run Britain's
search-and-rescue helicopter services for a decade from 2015.
"We are seeing more and more interest, with oil and gas
operators actually putting search-and-rescue portions into crew
shuttling contracts," CHC Group CEO William Amelio told Reuters.
CHC has ordered 33 new helicopters and Era 20 from companies
such as United Technologies Corp unit Sikorsky Aircraft,
UK's AgustaWestland NV and Eurocopter. The orders will increase
their fleets by 14 percent and 12 percent respectively.
Of nine analysts that cover both Bristow and CHC, most have
a "buy" rating on both stocks and none recommend selling either,
according to Thomson Reuters. All three analysts covering Era
have a "buy" or higher rating on the stock.
Era should be trading at $33.09, a 14 percent premium to the
stock's Monday close, according to StarMine's Intrinsic
($1 = 0.5962 British Pounds)
(Writing by Sayantani Ghosh in Bangalore; Editing by Robin