Bristow Group's CEO Hosts Analyst Day Conference (Transcript)

Apr.10.13 | About: Bristow Group (BRS)

Bristow Group Inc. (NYSE:BRS)

Analyst Day Conference Call

April 10, 2013 8:30 am ET


Linda McNeill – Director Investor Relations

William E. Chiles – President and Chief Executive Officer

Jeremy Akel – Senior Vice President – Operations

Mike Imlach – Managing Director Bristow Helicopters Limited

Jonathan E. Baliff – Senior Vice President and Chief Financial Officer

George Bruce – Global Operations Finance Director

Mark B. Duncan – Senior Vice President - Commercial


James West – Barclays Capital

J. David Anderson – JPMorgan

Linda McNeill

All right, welcome everybody to our Analyst Day. Thank you very much for coming. It’s a very exciting time at Bristow, and we have a fully packed agenda. So the first thing we always like to start out with is our Safety Moment. So we have the Director of Safety, [Rich Montiya] who will give our first Safety Moment, please.

Unidentified Company Representative

Good morning everyone. I’m here today to just briefly give you a brief description of I’ll tell the hotel evacuation policy and procedures and fire safety plan. In the event of alarm activation what we do is we have the Fire Safety Director who is in the lobby at all times adding the fire command station. He makes announcements, dispatches the fire brigade, once the fire brigade determines if this needs to evacuate or not, we will make another announcement on the PA system and we will then evacuate the property. A few months ago, we had Hurricane Sandy. We’re forced to evacuate 900 guests because of the crane. So we have some experience in that stuff.

The newest exit on this floor is the A staircase which is located right outside these doors to the right in between the men’s room and the ladies’ room. We just had our semi annual inspection, so we passed it with flying colors, its safe building. If you have any questions please feel free to ask. Okay, thank you.

Linda McNeill

Thank you very much.

Unidentified Company Representative

My pleasure; thank you.

Linda McNeill

Thank you very much. And Mark Duncan, our Senior Vice President of Commercial will also have a brief Safety Moment for us.

Mark B. Duncan

Good morning. We always start our meetings internally and externally with our customers talking about safety and making sure it’s at the forefront of everything we do. So we’re not going to talk about safety in terms of aviation and flight. We’re going to bring a real Home Truth Safety moment for you and some of you may know this and some of you may not, but if you don’t know it, I’m going to talk about safety in the car, okay.

So how many people here have got cell phones or iPods or okay and how many of you plug it into the light or socket in the car to charge it up, okay? And when you leave the car, do you switch the engine off, unplug it and leave the car and leave the line there, okay? So there are two models of car. Where if you do that, the socket remains live and this two pictures on the screen is the result of someone who did just that; they left the car, pulled the phone out, left the car and the car went on fire.

Now, I’m not going to tell you what the two types are, because the point is, doesn’t matter what type it is don’t take the risk, you need to unplug the whole thing, not just to pulling itself, and as you can see it’s a pretty horrific mess there. I was in the meeting with the customer, and he actually told me this and I have done exactly that my car was in the garage. Fortunately, he told me the two types and I didn’t have one of those, so anyway safety first, this is really serious stuff, you can see what’s happened here and never mind the cost of the damage if someone have been inside the car, they left the dog in the car or whatever it’s all over, so we don’t mind the next time you’re driving. Thanks.

Unidentified Company Representative

And then the agendas were all e-mailed out yesterday, are you sure you received your agenda? Just to give you an idea, for each section there will be a question-and-answers, there will be question-and-answers after each section, so for instance Bill will start off and at the end of his section if anyone has questions, we have three people in the room that have hand-held mic, so just raise your hand and they’ll come to you with the questions.

Our team, our speaking team Bill Chiles, Jeremy Akel, Mike Imlach, Jonathan Baliff, Mark Duncan, George Bruce is in the front row, and if the rest of our team would stand up just to everyone are get to know who our team members are if you have specific questions to ask team members and we’ll spread out at lunch. Our lunch speaker is Hank Williams from Cougar Helicopters, the lunch, we will take a break and we have to move to another elevator bank to the [pet] house of the other side of the building.

So with that, we’ll get started. Bill?

William E. Chiles

Okay, thanks. That was good. I was trying to, still working. So Linda, you could help me. Okay, everybody hear me, okay. We’re going to start off with the short topic and figure in this was, let me start off with a short video and then they will get start at the end.

[Video Presentation]

And it’s about refinement valley, it’s that burning desire to win and be the best of what we do. That’s really what people were people at Bristow. It is a foreign company and it’s still we do a lot of things, but we’ve not always, if we are always been on top of the mountains. It’s great to be here today as we won a big contract, stock price is doing well. So, we know very well what it’s like to be in the bottom of the list is somebody in this room have been there with us and this lot of times you all say and it’s appropriate either sometimes you need to bear with sometimes, the better you achieve them.

But I was telling James West, a minute ago, the highest are not quite as high as the lows are low, I mean, this is really tough when the stocks are not doing well. So what we have to do is keep going from here, right stock performance over the last year and when we got to look back a year from now and say we did it again. So what we cover today is the language alone here talk about certain search and rescue contract in the UK that we won a few weeks ago, outside of the contract.

I’ll give you a lot more information you’ve seen before on the financial impact of that contract, it is also possible on that. To give you some idea of what it means for our business model going forward. I know that’s one thing I want from you guys, one thing I want okay, well how are you, what are you going to take this business from this point? And then, Mark Duncan is going to spend some time talking about our future of oil and gas, potential out there, and how robust that those opportunities are.

So we’re not getting out of the oil and gas business, that’s going to be our main line of business. We’re going to continue to flow up our plants and customers around the world. It just happens come to time when we won this big contract, but if the oil and gas business was extremely robust, you’ve seen lot of in here already seen the numbers from our past analyst presentation.

Now most of you here who know the company well, you’ve followed us for a long time, but just bare with me if you know all this already, there are some people here who don’t know the company, we are the two global providers of helicopter services to the oil and gas business, Bristow and CHC, CHC is a private company outer Vancouver, they’re owned by First Reserve, so there are only two companies that actually have a global footprint.

Lot of times we’ve talked to people they said well PHR they are your largest competitor, aren’t they? Well PHR is very well known in the United States, very well known in the Gulf of Mexico, but they only generally fly in the Gulf of Mexico. So as I said there are only two global providers, we do have regional competition in most markets around the world for example in West Africa, we are competing the local people in Nigeria, local companies in Nigeria, but one of the things is the scale of the company gives us the ability to offer our shareholders a lot of flexibility in a much broader portfolio, for example when we, after Macondo, we were able to move aircraft out of Gulf of Mexico to other markets.

Some of our competitors don’t have that [availability]. So problem happens to the market are you have the very soft market somewhere in the world better variability to move aircraft around to mitigate these new effects that has a new business. We are flying 556 aircraft including the aircraft owned by one consolidated affiliate, we mentioned them people (inaudible) it is a little bit mind boggling when you think about that many aircraft, most of them are flying every single day, 3,400 employees and you know what the stock price is, they’ve done extremely well, the total shareholder return for our Fiscal 2013 which just added March 31 40.5%, so great performance, now we have to continue this.

Lot of you guys have seen this since we started this major team started in nine years ago, and people starting to think well what’s the big deal. If you don’t have a vision and a mission and the core value which are coming to rules the road then anywhere we will do, right, if you don’t know what you are doing and anywhere we will do, so it’s important that we have a vision it’s clear and our employees understand, we have a mission that how we are going to achieve that vision and we have core values that basically tell us these are the rules that we just don’t violet.

This is extremely important when we are out here nine years ago, the company had none of this, so we spent these words were written in 2004 October 2004 where we had a (inaudible) management conference, we got everybody from around the world together in one place and spent four days hammering out our vision, mission and core values, which is still with us today. So these are important they give us the direction, everybody can join our website find this and get kind of the essence of what we are all about.

And then our strategy, the strategy is also very important. The strategy does change from time-to-time some time we will emphasize certain parts of our business that need attention. We basically, look at our strengths, weaknesses, opportunities and threats and we develop strategy to deal with those. One of the important things here now is we’re putting clients at the center of our business and like you might think, well, how would you always done that? Well, not really, the company for a long, long part of its history was really focused internally on operations. We don’t need to worry about the clients, we need to do a great job of flying the helicopters and they can come to us, when they need us, we have to be very client focused now and make sure we are delivering the value that they expects us to deliver. An example of that is we need to know the impact that we have on their planning and development cost and their lifting cost. If we don’t know that, there is no way we can make a case that Bristow can do a better job of delivering the service that will reduce your planning and development and lifting cost.

So we work with our clients very closely and develop ways to make their business more efficient. If we don’t do that, we are just coming at the door asking for how our pricing (inaudible) we are just like everybody else. We’re trying to say helicopters as our competitors. So this is a very important part of our business now and they really focused on finding ways to improve our delivery, the uptime of our helicopters, the on-time delivery just like the airlines you fly.

If we don’t do that and differentiate ourselves from, always competitors out there, they are generally pretty safe companies and doing pretty good job, delivery and service, we are just going to be customers then our clients then making decisions based on price alone. We have to be focused on the growth, (inaudible) we anxiously had over the last few years on the growth which includes our financing performance in general through BVA and delivering to giving you the returns, the balanced returns. Obviously, we don’t focused on developing our people, we are not going to delivery in any service, there is a lot of interest now on making sure we have a culture of accountability and people are going out everyday and doing a great job and they generally are.

Over the last nine years, we’ve had periods where the companies, the time when based on they are doing very well around the globe, people went out every single day where the (inaudible) released the road, flying the helicopters and they are working on helicopters and doing it safely. We are also spending a lot of time now particularly Germany on streamlining the operations because we are generally a fragmented business in lot of ways. We have an operation in Australia that those things definitely in the way we do things in Alberta. So we are spending a lot of time now developing our software, lot of money on achieving and developing software and the hardware will be able to share best practices, do face generally consistently around the world the same way.

What we mean by operational excellence, because that’s kind of a concern of it, and that’s what I was talking about earlier, it’s an interest on things to safe this company out there as you could possibly be, lot of people thought it’s a long – many years helicopters are dangerous and (inaudible). Safety is our number one core value and we believe we can fly helicopters safely and achieve Target Zero every single day. In most days we do that, most areas where we all have gone started years about any kind of incident. And you can imagine if we’re not safe where our business? People are not going to fly Bristow helicopters. So we have to take that care performance, safety performance and dedication to safety which we have achieved, great performance as spread it out and actually make sure we are achieving operational excellence in everything we do.

It’s also operational excellence to something at our clients and customers know very well. They use that phrase that term a lot in the early business. So it has a lot – we’ve talked about already aligning Bristow with our clients and making sure we are in a standard business, and sometimes we might found ways to fly in your helicopters more efficiently to improve their business. We also have to do with, what I’ve talked about earlier about the Germany point of view, our best practices around the world, they face is discipline. What I hear when I talked to a lot of our crews is, well, we want you to do things the same way where around the world, and we’re not doing that yet. So, we’ve got to get a lot of consistency in our operations. We believe we’re better competition by a long shot, but that’s not good enough. And we go to our plans they say, well we really don’t compare you to your competitors anymore. We compared you to what you say you want to be.

I’ll talk about safety. Our Target Zero program, which is people saying what is Target Zero? It’s not just your safety management system. It is a culture of safety that will top everything else. Even if you don’t have the safety management system, and even if you don’t have all the software and hardware and the tools you need in the safety business, that culture will bridge the gap. The culture in Navy is the Holy Grail of achieving break through safety performance and actually achieving Target Zero.

We now for money, we’re obvious, for example in October, unfortunately we have family. We have a family in Bristow. Whatever reason, whether it’s deploy or passenger of our standard, the senior management team gets zero around the safety bonus. So, 25% of our bonus alone will not get paid. They better and bring life back. But it does (inaudible).

Again for those of you that don’t know the Company, we about 60% of our revenue comes from foreign production. These kinds of things you need to think of our business, we’re the yellow cap company of the offshore E&P business, whereas the both companies are the long-haul partners. That’s the kind of way to distinguish; they are carrying mainly heavy cargo, casing mud, cement to support drilling operations, we have most of what we are doing is passengers, and very like cargo out of production platforms. So we’re working at a much more stable end of the business, $100 a barrel or $50 a barrel production continues to go on, most people have to be moved offshore.

We also worked in every aspect of the business from getting the end (inaudible) so it’s a much more stable business model than a growing contractor of both company. Also most of our revenue comes from our monthly standing charge. So whether we fly or not, generally we are going to make the same return on the aircraft even if it sits on the ground most of the time.

For example, Search and Rescue helicopter sits on the ground most of the time with the crew, only crew few work rig ago, it doesn’t generate any fly hours to speak off, we get paid. So our margin or return on capital is embedded in the monthly standing charge. We didn’t get some small margin on the flight hour rate, but if we don’t fly we’re going to make the return that we expect to make on that on the aircraft, and also for those of you who don’t know we don’t take field risks, every contract we have has a field cost embedded in it, wastage of fuel, we charge them back plus field down, we credit back to the customers.

And again we talked about the total shareholder return. But we’re very happy about that, we are proud of this. But again, we got did take this year in Europe. We are seeing a lot more consistency and sustainability in our financial performance, Jonathan talk about that. This is one of the biggest funds we had in the past before we update and focused on video and really started doing a better job of internal luxury and now giving a guidance that you could generally accountable before our quarterly performance or annual performance was all over the place. (Inaudible) was getting better and better every year into the 2009 same cycle but that consistency was leading to a lot of the stock price performance and obviously we are in a good market right now. So I’ve done and turn it over to Jeremy to leave us and turn the discussion about UK SAR. Jeremy?

Jeremy Akel

Thanks, Bill. Right. So slide 16, Mike, Imlach, and I, the Managing Director for Bristow Helicopters Limited, our European affiliate will partner today on this portion of the presentation in a sense to two things, one is to describe to you what is Search and Rescue and what are the similarities and differences between our traditional business; and number two, leave you with a sense of comfort on our ability to execute on the contract.

Before we start Bill, I think it’s important to point out that we do not take the trust and confidence that the governments of the United Kingdom have put on Bristow. This is an incredibly important contract; it’s an incredibly important service. And then in a way we are privileged to have the opportunity to serve the people of the Untied Kingdom. So we are not taking this likely. This is a huge, huge task and responsibility and we are committed to make sure we perform up to the standard that’s been set forth. In our discussion essentially today, this morning again specifically we want to point out how we can leverage our oil and gas operations in the execution of this contract, our buying power and in Jonathan’s section of the presentation you’ll see how our prudent balance sheet management actually in a sense positions us and makes sort of the best operator, I believe of choice to deliver on this contract.

So go on to slide 17. What we would do is give a little bit of context, why are we here, essentially. What are the events that led to Bristow being put in this position? Well, the UK, Government of the UK in a way had several issues starting to converge. One was the note that idea of the aging fleet that they had serving Search and Rescue. They also wanted to in the current economic conditions, look for a cost efficient solution, but maintain the ability to deliver Search and Rescue services for the whole of the United Kingdom. So in a sense that led them to this idea of tendering to a civilian operator, the work and ultimately the award to Bristow.

To slide 18. What why was it us? Bill really described really most of reasons why it is Bristow already, it sense this notion of operational excellence and our commitment to deliver world-class service, really, really was a major factor in creating a compelling argument to the UK government, why it should be Bristow. You may know they had various options of award, they could have split the contract, but they chose not to. And I think the large part that decision had to do with the confidence that our team instill in the government.

Certainly we were able to provide a very good local, national solution which was very important to the UK government, a de-risk transition plan remember this is a service that has to be continuous, we cannot interrupt the service between when we in a sense take over when the incumbents were essentially letting go the contract.

So it had to be compelling case of how do we actually enter stepping of the shoes of the existing service in such a way it appears seamless in the service and we are able to show that. And finally we came with new technology solution and those lie in the aircraft and in the configuration of those aircrafts. So those really were the compelling reasons why we believe we were awarded.

Slide 19 and I will talk slightly a little bit about the service continuity issue on and Mike will get into it a bit more but in a sense we’re really talking about new equipment, state-of-the-art technology, long-term ability to deliver service based on very strong heritage of Bristow of delivering side.

So we have the experience as well. So wasn’t we’re not stepping into a contract that’s entirely new to us, we’re not stepping into a situation that’s entirely new to us, we’ve been doing this, we’re just doing it now on a more modern technology platform.

Slide 20, this is a brief description of what is the service, and why the different from oil and gas services or what are the differences. Well, essentially Bill described this very well. He said we are the yellow cap company in the oil and gas services side. And what does that mean, essentially we pick up passengers at a shore base, we fly through a platform, we drop them off, we pick some up at the platform, we come back, repeat, and we do this over and over again.

SAR is going to be slightly different, but we will be able to leverage some of the existing skills we have in SAR and that’s what makes us such a nice fit with our existing business model. In SAR, in a sense you have to have the ability to launch very quickly. So we have to be ready at all times. And if you look at the last bullet point on Slide 20, it gives you sort of a sense of the standard upon which we have to launch and where we have to go recover, potentially casualties or people stranded.

So in a sense we fly up to the ocean, we look for survivors, we have someone on the end of the winch that drops down, picks up the survivors, brings them back up to the helicopter and give them medical treatment and we fly back to a base. That in a sense is a summary of how this works.

But we do this under the context of extremely well, outfitted helicopters with modern technology and we do it with our Target Zero mindset in place. One thing I would also like to add is, it’s not only offshore, we do this inland as well. So there is a mountain rescue component to this service. So right here, you will see on Slide 20 is what we call the footprint and/or the coverage area. And this coverage area, we did it with an arbitrary, it was modeled to using essentially where the SAR hotspots are and where they’re going to be in the future and based on that, we are able to determine the best basing locations, the best type of assets and understand really how we overlap to in a sense search if we have to, if there is a certain crisis that is being localized, and in a sense how do we do that? So there is a lot of modeling that went into where do we place our assets? What assets do we use and given what are the standards for launching to a star event.

So with that, I mean that’s the general overview, with that I will hand it over to Mike Imlach. He will get into more detail about how we will in a sense undertake the transition plan and execute the contracts. Thanks.

Mike Imlach

Thank you, John. Good morning everybody. I’m Mike Imlach, the Managing Director of Bristow Helicopters Limited in the United Kingdom. I’m responsible all the United Kingdom and also Europe. I mean any as of operation from EMEA, Aberdeen, on some our bases then in Humberside, Norwich, New England and also certain rescue in Den Helder in the Netherlands, and four b bases over in Norway where we do a lot of oil and gas, but where we also do certain rescues at the top of Norway in pretty hostile conditions.

Further breakdown, (inaudible) present on running the both 60 heavy helicopters, do quite a bit of work obviously in the oil and gas that really as what we mean that generation of revenue at the moment, obviously certain rescue will give us another revenue stream it’s not tied to that oil and gas market.

Slide 21, really going to give you a little flavor of what we’ve done historically in United Kingdom and the Austrian search and rescue. It’s nothing new, satellite do this, if any of you have following the press in the UK, several sections of our media have thought we will moving into something that was completely new to us, and that’s not the keys. We’ve been doing it for a long time. We started in 1971 on this particular contract and the way we have placed the RAF in an airfield called Manston, an older technology aircraft, we wouldn’t do that anymore, it’s too close to the SAR installation is hosting down to. For safety reasons, we get far higher than that, now just lessons to learn.

As Jeremy touched on, we’ll be seeing this as one of the cool emergency services in the UK. The Department for Transport found to that emergency service for search and rescue as a blue light service. Currently, we have three blue light services in the United Kingdom, one is the ambulance, one is the fire brigade, and one is obviously the police. This would be seen as the fourth unofficial blue light service where we are replacing in places the military through RAF and the Royal Navy, search and rescue helicopters, so yellow helicopter for civilian helicopter sales. As forward basis at present, our run civilian that model has already been done, so it’s not an absolutely new model in the UK. As you can see in the back, some figures there, we’re not completely new, we hope that a lot of missions here and we hope to see (inaudible) in the UK alone. So we’re moving into back into an area where we’ve operated very much in the past.

Slide 22, we have an affiliate company called FB Heliservices, based in UK do work and quiet few areas of the world, mainly in military, the vision military helicopter pilot crew training. We have crew members through FB Heliservices and we do training through them. So we have another arm here where we can ramp up a lot of these services relatively quickly.

And just the way we do search and rescue at the moment in various forms, this UK SAR contract is probably the highest level of search and rescue. We hope various levels down to just very basic search and rescue. In my part of the world, we have full search and rescue in Netherlands with the old Sikorsky 61 and then up in Hammerfest in Norway we do with a Eurocopter 225, it’s a true all weather search and rescue, pretty extricable environment: snow, ice. Next year, we commence in September next year full search and rescue for a multinational oil operator in Norway offshore as well. So we really stand a part in search and rescue in spite of our strategy we had in European business unit to expand out with our current portfolio of services.

Slide 23, this is basically just to give you a flavor of where we see the structure and we will continue to leave in a job of existing oil and gas infrastructure in the United Kingdom. You’ll see later on one of the types we have chosen this as a Sikorsky 92 and that’s one of our main aircraft in oil and gas market. So we see a lot of synergies when we pull resources together between oil and gas and search and rescue for that type of the aircraft. We will appointing and in this you’ll saw a director, reporting the Managing Director, that’s probably needed to be done in the next week or so. And then we’ll have various standard Heads of Department, Heads of Training, Engineering, Flight Ops, ground operations, feeding done to various bases.

We have 10 bases here, each base will be managed by the Chief Pilot, Managing Pilot, on that base and he will have full responsibility for launching that aircraft and then also full responsibility for deciding whether he will fatigue in that mission or otherwise. One of things we really do on each base and each new community that we’re going to be operating in, an officer in that community who’s going to work with the community pretty widely to get the message across and give up level of confront from them. This service is going to (inaudible) them. Overall program end with 350, 360 personnel, split very much 100 engineers, 100 or so pilots and 110 rear crew and then obviously support personnel on top of that.

With the current market at the movement in oil and gas, it’s extremely active. And we would not monetize to get 100 pilots at the current market to our acceptable standards. So we will have to take quite a few of the pilots and engineers and unrear crew from the existing military services. And we have what we call slide 24 a managed transition process with a Ministry of Defence through the RAF and Royal Air Force it well maybe to transition their personnel those who wish to move out of the military into civilian.

Next week we’re actually doing a road show around all the existing [Satanski] military bases with one of the 92s got so to do with this. We hope fly that new aircraft with the crews running all the bases and allow the existing military personnel been Dutch and feel that aircraft and the technology that’s going to be offer.

The one of the things that’s extremely important for the Ministry of Defence and also Department for Transport was we didn’t going to hire all the personnel overnight and leave them with new services and that existing (inaudible) division. So what is called the managed transition, we will accept personnel and train personnel from a military on a stage process, so as they come to the end of the like for the SeaKings and one of their military bases, we will then transition at that point into civilian aircraft.

The current military pilots are not satisfying to fly in civilian mode, so we will have to do additional training for them to get the much civilian license to be able to flying under civil aviation rules and regulations.

One of the areas as Jeremy pointed for the Department for Transport was to convince them that we had a managed plan that had variously as of contingency, if we were the first level of an action was unable to be carried out what was our second level of action. So a lot of it was to do with tying up through the military and getting that confidence with the military and they were confident on us that we could do this successfully. We obviously, we have to recognize as a huge experience in the military personnel. Tremendous heritage, we truly want to keep that heritage with the military and move that personnel and capture that experience. And we will do that I would say very successfully.

Slide 25, this is the minimum crewing we would going to have in each aircraft. We’re going to have SAR Captain, SAR Co-Pilot, and two Aircrewmen in the back. Once normally the wind shop in it and not the other guy (inaudible) the line and he is the real hero that means. One of those guys in the back will be fully qualified paramedic and we at times also we would have a civilian request to do so, civilian personnel and that might be a amount of risk last few crews deposited in the month and look for missing persons or casualties or we fully train medical doctor or whatever.

Slide 26, and all I’m going to do here is try and give you a flavor of the crews we’ve got at the moment, not just in the UK, but worldwide. Simon here, he was our UK SAR Project Lead. We started with this maybe like three years ago. We started fast bidding for what was called the GAP SAR in the UK, which was interim SAR for poor basis, Sumburgh, Stornoway, Portland, and Lee-On-The-Solent in England. We were successful in winning 50% of that work and we started in Sumburgh in the 1st of June and Stornoway in the 1 of July. Simon was involved with that. He was part of (inaudible) team from the very beginning to the very conclusion when I signed the contract just over a week ago, ex-chief pilot in the Netherlands, S-61 driver, highly experienced, now into management, and as I said, was a project lead for this contract.

Jonathan based in Trinidad, again, a Winch Operator, so he is a guy in the back that’s moving to the dropping line up and down. Most of these managerial (inaudible) have been nominated for an awards and medals. Jonathan’s Queen’s Gallantry Medal was awarded in 2010 for one of the rescues he did with a vessel in distress.

Slide 27, Tony down in Australia, much a same thing, he was in UK and now working down there, again, many missions, Commendation for Bravery. And I guess, last but not least, Chris Bond, (inaudible) the most experience guy in end of the way, Chris down and which he is late addressed on every mission.

He is almost 35 years with us, and over 10,000 hours SAR, and over 1,100 rescues. And you ever see some of his video footage in the environments he has operated in, and it’s quite humble to see what these guys do.

Chris was a technical lead, and on the rear crew design modification and equipments specification for the aircraft. So, Chris has spent a lot of time with Sikorsky in AgustaWestland with two-way across to fly us here, and again, he was part of the team from pretty close to three years ago until today.

Slide 28, one of the things I think we also sold to the Department for Transport and why we had the solution, the preferred solution, we give them what they call the banks a value for money solution. And it’s a value for money for the UK taxpayer. It leads to contracts for 10 years plus a couple of years of option.

We ran up to the longer term view in that and we decided we would build this bit upfront. A 25-year contract life even further term was not that. And we did that for various reasons but we wanted to show that the FD we were in here for a long-term. We were around in here for 10 years plus two years extensions; we were in here for the long-term. New aircraft and on seven on the basis, seven new bases, this is the design that we will put on to the seven new bases at one of the full engineering, the full accommodation for the crews, dayshift, nightshift and administration support.

One of the right things we had to focus on was how it’s environmental footprint not with the high consideration as well. This probably is as efficient as we can do it a moment for RAM, for heat loss and installation and being environmentally friendly. Because I see several of the bases on the new build like this and other free basis will be existing bases with two of them will be highly upgraded to the requirements we require.

Slide 29, this is the aircraft solution we came up with; we looked at quite a few aircraft. We would call the 92, a heavy aircraft because it’s heavier than the AgustaWestland, would normally be down the medium or the super-medium slightly lesser than the 92 and you’ll see the specifications in a moment.

We’ll have ten of each and one training or backup aircraft for contingency, contingency for such things if we take a lighting strike in one of the aircraft when we’re our in bad conditions, that normally means we go to set all the aircraft for full inspection and repair as require, if any damage done by that lightning strikes. So we’ve got one sphere that we can move in. Each base will have two aircrafts, one will be fully operational all times and the other is a backup in case the other one goes technical or whatever. So we’ve got greater contingency in there. But I think when the Jeremy slices, we said we could service up to seven aircrafts at any one time to a major incident. So if there is a catastrophic incident in the UK in any location, we could move the backup aircraft to that location very quickly using the backup crews and getting guys to buy extra Ds to go and do that. And again that was something that was well received by the Department for Transport.

I’m going to mark in a little moment in the locations where we will have two training bases, one is in Inverness in the North of Scotland and that’s far from where I live. That’s a new base, chosen because it’s very, very close to the mountains, flat land areas and also the sea areas as well, so we need to do a lot of training very easily in all sorts of environments. Stornoway, in the West Coast of Scotland, last land places before you hit the States, so spreading in this inhospitable horizontal, rain and wind well 90% of the year.

Full training will also be done in Aberdeen. We’ve got a big training simulator facility there. We do a lot of our oil and gas training and I can show that on the next slide here which is slide (inaudible). Slide 20, it just really to give you a flavor of the technology difference between the familiar SeaKing helicopter with this operation in UK at present and what we are providing. The SeaKing has got a huge amount of sentiment and tremendous goodwill from the bridge public and the various associations. It’s been there for 40 odd years. It’s an yellow color, so when you see the yellow rescue helicopter you know its going to go to save somebody and the tremendous serviceability’s its given.

However it’s an old aircraft, it’s like some of our old aircraft and it’s now getting difficult to maintain, reliability is much good on new aircraft. And the integral technological parts and equipment within that aircraft are pretty limited compared with what you can give now.

And as you can see there, the radius of action and the speed is significantly less than what we can do with 92 and 189. Crew is much the same for each different capacity for passengers. But apart from the 189 which is slightly smaller, we only get once to stretch us in the three and six seated, very much similar and we’ve chosen through the Department of Transport the serenity model, which they gave to us. We would place at 92 and 189, so there is quite all the work done into that.

On the 92s and the 189, they’re not going to be very, very highly specified, probably the highest specified Search and Rescue Helicopter that’s operating at the moment, and most of will have through icing capability, which means they can stay in subzero temperatures in an iced environment for a considerable length of time.

On seeking at the moment if it goes in for example (inaudible) in UK probably can remain on station thereafter about 30 minutes before it has to come down to a lower altitude than a higher temperature to be able to shed the ice. But with the ever new aircraft, we can stay on that location for a considerable length of time.

The fuel automatic cover, the pilot, the handling pilot is a lot less to worry about a lot less stress and being able to stay there in a stable situation with a cliff based meter is probably is root up depths, whereas and the older technology is available, a lot more manual handling in being able to stay on location.

By being auto holder allowed him to be able to focus its resources and assisting the other pilot. We have a full communications from the aircraft back to any medical center or hospital only condition of that, any casualties would pick up that’s real dimes who will come back and forth.

In the back, the (inaudible) pipe oxygen again for any casualties. We have aircraft makes screens to be able to allow the three or two members to be able to operate the aircraft back that they come into better position, because they have a better line of vision than the pilots in the front. So overall significantly increased capacity.

Slide 31, this is showing the existing basis that the militarily are using at the moment, running the UK coastal outline, two of those basis will close and that is bloom up here, which is Northern England and Portland and so. Three of us say this area down here and the channel between England and France is a highest hotspots of activity that it seen. There is quite a bit of media coverage at the moment that were the government is closing Portland and this area will only be serviced by Lee-on-Solent, which is an existing base and one of the basis that we were redeemed.

We are now, and this is showing you where we’re going to grow with the new basis, and as basically done through the vicinity model that the Department for Transport gave to us, and then we quite bit of an analysis on the amount of what we call the hotspots of activity, where we were actually has not only going to pickup instance, casualties, ship break and certain type of things. And we’ve then gone and secured new locations normally well in all cases in civilian airfields and for 25 year, 30 year lifetime on that airfield.

So I’m going to end in Stornoway, we start with something as I said earlier and some that on the 1st of June this year, Stornoway in 1st of July that’s for the GAP SAR contract. It’s an interim contract until this one gets initiated. We have good thing to do. Inverness 189 base that’s moving along from Lossiemouth, Aberdeen as we have my offices mean in the main headquarters for the European business unit. That’s the way we stimulate us. We’ve got three stimulate as there at movement, one is the 92. We will as part of this deal, Agusta, we did Agusta 189 stimuli there for full search and rescue as well as oil and gas.

And then we come down as the new base Humberside, got oil and gas there already. We will build a new search and rescue facility there, but – between or existing oil and gas where. Manston, we’re going back to the way we started in 1971 on search and rescue whereas it’s not in the military airfield, it’s now the civilian airfield. Lee-on-Solent, that’s owned by the Maritime and Coastguard Agency who will manage this contract, once the DfT handed to it, and we will step into where the present incumbent is operating at the moment.

In UK replacing calls, which will do all of this (inaudible) here which is new and Caernarfon is the base it’s going to replace volumes base (inaudible) you may have noticed is that current search and rescue pilot for the armed forces. We would quite like to get the CV, if he wishes to apply, we may consider. And then final base is Prestwick, the current Royal Navy bases, each in HMS Gannet. On the Prestwick airfield, we will continually fueled an existing hang-up facility there that we will upgrade. As I say, everything will be run under; we will try and run under our oil and gas structure. I firmly believe that’s one of the reasons why we’ve been successful here; we’ve used the lessons learned in oil and gas for this contract. We were run under existing operators’ certificate provided by the [UKCEE].

Slide 32 maybe those broad can see better than us slide back, and this is really just where we become operational in the timeframe for each base we will have approximately two aircraft will come in, we will use them as training aircraft. We are doing gap side in a moment; we’re doing lot of training on the UK out of England last year. And then we go live in Hallam, in Humberside and Inverness and 2015 is it yeah. That’s live; these are really my focus in next 12, 15 months is to get these pieces approved and commence the build and be a rig. That will then, all right.

William E. Chiles

Start Mike.

Mike Imlach

Let Jim open the box and then we yeah, for the new builds, we are going to get full planning approval process and an environmental approval process. However, all the new builds are going to go with gulf permitted development areas. Basically in short we have seen it, it means that there’s the various planning authorities and local government authorities in that area look very favorably to what we’re doing here.

We have external consultants working on that for us. And then, as we get through all the way through to 2018 the last three bases here are actually existing bases. Lee-on-Solent is where the current incumbents are working. And then Sumburgh and Stornoway is where we will commence this year. So, nothing to do there basically, we’ll just move – we’ve already been servicing that contract since this period, right, since this year. So, really it’s – we get these first couple of bases, is the real focus to get them under what Baliff get them operational and away we go.

On the timelines, really the main focus for us in the next I would say, 12 to 15 months is get the aircraft, the orders already in place, Sikorsky working on them. AgustaWestland the same thing, the 189 is not certified as yet for operations, it’s a new aircraft. We hope contingency in there. We believe the first oil and gas machine will be certified September, October of this year. We are the lead introductory client for the AgustaWestland 189.

And I’m speaking to oil and gas clients who are – to Italy to see the aircraft in a few weeks. And we are working very diligently to get that aircraft on contract I would say January, February next year in oil and gas mode. We will then use that aircraft it’s [wrecking] the oil and gas to cycle or search and rescue pilots through and build up [forever] before we get operational in search and rescue mode, so we’ve got contingency there, great confident that aircraft will be certified in time and we will get it in oil and gas.

It would be, I know you know everything about our current aircraft we’ve got an older technology in AS332 which was called the Bristow tie-up looks to be a very, very coolest fit to that aircraft. So I can see it’s been very, very useful in the Southern North Sea and the Central North Sea of the UK, they might be choose that’s basically stand up technology for us, it’s one of main heavies of the Eurocopter 225, we’ll start the training, the selection and recruitment processes with the Ministry of Defence very shortly, our HR departments have already been in contact with them and know that we’ve gone public and signed a contract we can move ahead with a little bit more speed than we could have previously.

See I think that’s maybe, here we go, conclusion on slide 34, the Department of Transport provided a very, very robust selection process for this, they did it very, very professionally, we spent pretty close to 15 months living in their offices, working on this we had a dedicated SAR team from the beginning of GAP SAR for the conclusion here. So I think we have built up a fair bit of trust and integrity with them. However one of the main drivers for the DFD was continuity of supply and that really was – we have to give them the confidence, we could continue with whatever circumstances was throwing at us but continue to see doing half if this goes wrong, what contingency do you have if that goes wrong. So we build that up quite successfully.

One of the big things they also wanted to try and push was the local content, how much you are going to spend in the local community. So we are going to try and we’ve already engaged men and local contractors will try and spend as much as we got in the local community. Most of the crews will be residential in that community rather than doing two weeks there and going home somewhere else.

Speaking to the Maritime Coastguard Agency who will be managing this from this point onwards, the aircraft that actually going to be in MCA color, which is white and red, I think there is a model somewhere, there was a model, yeah. So they are going to be in that color, so that’s a million yellow aircraft today where we use very comfortable with this, its going to go away and we’ll replace it with a white and read, pretty distinctive, they’ll know what it is. And since we’re saying this going back I would see we’ve had a quite a number of inquiries from elsewhere in Europe to look at doing similar and when I spoken to the MCA, they’ve said exactly the same from other countries.

So we can see, we firmly believe we are going to get lot more opportunity out of this contract than just UK SAR alone. Definitely feel it’s a big growth for us. When we take our (inaudible) aircraft in my business unit we’ll have the 22 here, 20 operational. Two in Norway, two down in Dunhill and in the Netherlands, which are 24 or 26 and we start in (inaudible) Search and Rescue offshore in Norway as well. Pretty soon we will be obviously having close to Search and Rescue aircraft in Europe and that could definitely increase from, we are pretty excited with this lot of hard work gone into it and I think it’s a great potential. So we’re really happy, I think that’s actually my last slide or so.

Unidentified Company Representative

Yeah good, thank you Mike and Jeremy.

Jeremy Akel

All right. We are going to take break in second before, let we are going to open up for Q&A, we have some formal lights in the back before we do that Mike mentioned the tremendous amount of work when you do this bid process and you can see a lot of that here, but what you can’t see is just a huge amount of work, Mike, you take the other major credit for that effort, lend the effort and his team as he says spend a lot of time in the office in London, basically spend half of year there.

Now we did give their results support from Houston, but the heavy lifting was actually done in the UK and you’re going to have the enjoy the words in minute now we get into the finance section in the areas and then the entire process, tremendous amount of work and lot of passion involved, people basically gave up their lives for better part of the last couple of years to when this contract. So Mike you can take a lot of credit for that, you have done a great job. Thank you all. So we’ll open it up for questions for about 10 minutes or so and we have that many Joe Baj is right here.

Joseph A. Baj

So during the transition period as you’ll be moving some of the military personnel into Bristow is their requirement for certain percentage of the current pilots, those are pilots that come into Bristow and how are you planning to kind of going to manage which ones you want to take, which ones you maybe don’t come to Bristow?

Unidentified Company Representative

Yeah. That’s not an actual percentage has been set with the Department for Transport. We have a pretty rigorous selection procedure and we will formalize that with the Ministry of Defense and we’ll basically invite everybody who wants to come to go through that selection procedure and we do quite a lot testing, we do quite a lot of in the stimuli of testing as well and in that way we can choose the best suited personnel for this.

We really need to be good in our selection where we feel the best combination is going to be one military and one civilian in the aircraft and in that way we get the benefits of both. We’ve had historically Bristow would have hired, what I started in the oil and gas and service in the late 1970s, I think you would have said most of the pilots then would have been ex-military. We still have a lot of military pilots. We tended to move away from that in the last number of years, the way we do our own initial training from a candidate on top of us. However for this we have to take in the military guys. So we hope (inaudible) process. I would say to give an answer, we probably going to 50-50, as 50% military and 50% civilian and it may go up to a little bit higher 60-40.

Just as a matter of interest, our current selection, we advertised for civilian pilots that more ago, we got something like 450 applications, on our word say so far, we’ve had, I think over an 800 applications from military pilots for this. So the selection process is we will run at something like with our jet nine out of 10 at the moment. And we will keep that higher level to continue as well. Most of the year through I would see will come into the military. We’ll put them through our tight training process for the 189 and 92.

Question-and-Answer Session

Unidentified Analyst

This is (inaudible) just a couple of things if we could. You’ve indicated there is 4,000 hours a year of flight, and I’m just point those out of the air, if there’s four hours of flight per unit that’s a thousand times of people are called 10 basis, 100 a year. This is somewhat meets basically called out once every three days, I mean is that how high the activity level is?

Mike Imlach

Yeah, I think we’ve planned at 10,000 hours of annually, so basically 1000 hours for the least. If you go down to sell thing and they probably called three or four times daily.

Unidentified Analyst


Mike Imlach

It’s pretty high.

Unidentified Analyst

And I hate to be the one to bring discussion of expenses into the noble aspect of safety and rescue. But you’ve indicated that the pilots are responsible as he is going to responding to a call, being pilots and wanting to fly, how do you measure, or how do you keep the stability as far as everybody wanting to go out and be part of it versus you know what, every time you go out, you burn your fuels and so that expects?

Mike Imlach

Okay. Well, we will be tasked to mobilize to a mission through the (inaudible) university. We will not be able to do that by our own cost. So we will get a phone call when the button is hit by the MCE, say, this is your call and you go into this mission.

Unidentified Analyst

Okay. S-92 price of $35 to $40, that seems up like a pretty big increase, pretty big premium to the standard S-92s, am I right on that? Is it, what $5 million to $10 million extra of equipment on these flights – on these crafts?

Unidentified Company Representative

Yeah, it’ll be pretty close to $8 million and $10 million additionally equipments, yeah.

Unidentified Analyst

Okay, the bases. You will be paying and building these bases, they will be Bristow assets, is that correct?

Unidentified Company Representative

Yeah we will build the bases. We still haven’t come to final terms in that, but we’ll probably get a 30-year lease term on those bases.

Unidentified Analyst

Okay. As was in, perhaps John can question. I presume these would be a sale leaseback candidate. I’ll wait for that the next part there.

And lastly, you indicated that you’ve done a lot of contact or inquiry from other areas about the Search and Rescue. Understanding you’ve done a great job here and that this is a very big picture item, what’s the driving force for other country jurisdictions to outsource this? Is this considered a money saver for them? I mean, is that the big thing or they just thinking they are inadequate of they’re doing, though no country would ever say that, but I mean, what’s the driver behind others making the inquiry and considering doing the same thing?

Unidentified Company Representative

I think, especially in Europe, quite a number of the governments have no money anymore. And really, they are trying to find any way they can to save spending money. I think that’s one of the big drivers. Potentially the other driver is we can do this with two aircraft per base instead of in excess of two aircraft that the military use at moment. Because they are using all their aircraft they need a lot more manpower. We were on each base with about 34 personnel. I don’t think the military at this time run; I can’t run these without personnel. Again because it’s probably all the aircraft that we have bottom-line, I think it’s – we have given a value for money solutions.

Unidentified Company Representative

Jerry, I’m going to talk about what’s beyond UK SAR at the end. Really this UK SAR is a breakthrough where the entire services being outsourced, okay. And we believe that that’s going to – other governments are going to watch this, see it happening, in fact they’re doing it already, and other governments will follow the model, because it will save the UK government money on their budget, et cetera and every government I know what was interested in that as all. It will rely on the success, so far is being, people are being sort of toying with it, the UK has decided to go full, Norway is coming behind it on the same basis and then there are several others – like I said I’ll talk about that with them.

Unidentified Company Representative

More questions? Okay...

Unidentified Analyst

John or Will, just one of you could talk a little bit about the certification process for the AW189 and kind of where the next steps for that, and then as the guess sort of how the oil and gas is that automatically make it certified for the SAR work as well and if just kind of tell us more details about the process?

Unidentified Company Representative

Yes, certainly. The 189 is a new aircraft, and I guess one of the areas of DfT look that was well, quite how much if it doesn’t get amplifying, that’s a good question. It’s going through the certification right now, I guess the waste land that shoot us that their own time for a September certification for oil and gas. That does not then automatically lead to search and rescue certification. And that’s probably going to be into I think its April next year, April, May next year certified.

However, the 189 was the new aircraft, it is part of that 139, 169 family. So a lot of the technology on the aircraft is existing of which a new type, so there’s a history and legacy there already with the certifying authorities. So I think that should pave the way a little bit easier when it was a completely new aircraft. However, we hope some contingency with Agusta, should the 189 saw field to be certified in time, we have the AgustaWestland 139 type of aircraft where we provided in full search and rescue mode to slop in, in case of 189 is not ready. We don’t think that’s going to happen. The 139 is currently used by the present incumbent known in Portland and Lee-on-Solent, so the MC knows about the aircraft very well and the DfT obviously ratified that contingency should be get there.

Then I think we could do so is, we could also the 92 is extremely reliable in oil and gas stands where we get a tremendous obtain. So we could move 192 aircraft down to 189Bs and have one and one. We need to do some additional training for the crews for that of course, but you can’t swap crews that easily, but with our own simulator as at least we can do that in [Israel] very quickly. So feeling pretty comfortable where we are and I’m feeling very comfortable where we are with oil and gas certification. And I think once that’s done, the search and rescue, the one thing it’s owners certification, is the deicing and they are doing some tasks something I think Northern Canada, Alaska at the moment on. Once that’s done, the aircraft will be leased specifically.

Unidentified Company Representative

Yeah, can I add to that, we ordered 189 couple of years ago and became once customer approved. We have six from aircraft in order for the oil and gas business with another six options through the period up to 2016. Our pilots have flown the aircraft already. Today aircraft is very close to be identified, we flown it we are very comfortable, it’s going to do what it is going to do. The other thing as far as UK SAR is concerned is as we said excellent committed to actually filled and assembled the aircraft in the UK. And they are going to create more than 120 jobs in Southern England and that became highly political part of the crew here and as a huge focus on it, we are still excellent, we will not let the government that much. So we are very confident that it’s going to come on time.

Unidentified Company Representative

Any more questions. For now we are going to have lot of time for questions later any way. So just hold on to that thought. We are going to take a 15 minutes break, so let’s get in back and hear why are we on it, 10.15 or little before that time. So about 15 minutes. Thank you.

William E. Chiles

With that I’ll introduce Jonathan Baliff, our Senior Vice President and CFO.

Jonathan E. Baliff

Thank you very much, Bill. Hopefully, the volume here is good. So, we’ll start up the presentation on page 35 for those on the webcast. We will be giving today a lot of new information to the marketplace. Specifically, we really had not spoken about GAP SAR. For example, GAP SAR is the interim contract that is a four plus one contract that we are about to start serving in less than months.

We’ve given the market no financial information on how to interpret that for obvious competitive reasons, and how that plays into UK SAR. We’ve given very little information, again by design on UK SAR, how it’s going to be financed, what is the accretion. So I’ll lead up. I think there is a lot of new financial information, but we and the finance groups and there is a quite a few number of people who are on our team and the fans group have that same passion that same passion that Mike and Jeremy and Mark and Bill and others have seen that same passion has been brought to the financial end of this UK SAR contract.

And I only wish, I would only say that you would be a lucky as the CFO in the oil field service space to have a day like this, to be able to have a day like this in the finance groups, but even a year like this to be able to do something, which is your day job which is accounting and finance and treasury functions and to be able to do it to save lives. And that’s why when I see the operational piece of this, we’re both honored, we’re both it’s a humbling fact to take on this. But I only hope that CFOs of my brother in (inaudible) had a day like this. So it’s an honoring. And what’s stated it’s very cool, but it’s cool because it is deadly and it’s a dangerous business and people and we take it seriously.

The seriousness on the finance side really turned on the couple of thing that allowed us to be creative, and that creativity is found in our number of things that I’m go through right now with you. First, we’re going to give you some information about the capital requirements on how we’re going to finance on page 36. We’re going to talk about our financing strategy and we’re going to show some of the guidance that we want to give on UK SAR, because it is a transformational contract from the standpoint of both financial risk from the size of the company, but also in terms of the profitability and that profitability is based really on a foundation of prudent balance sheet management and as much as we won because we’re operationally committed to excellence.

We’re also financially committed to prudent balance sheet management and it’s not often in the offered service states that you are able to use that prudency to then equal profitability and that’s what happened here. We were able to take but in essence they conservatively managed financial company and then convert that into a contract win and that’s how we’re going to manage this over the next, almost 20 years.

Going to page 37, in summary, again here is where the new information starts, you get ready. First of all, it’s a $1 billion of capital, $965 million to begin with and that’s all of the capital requirements that’s not all the CapEx but that’s all the capital requirements. Assuming today’s business growth and this is one of the big highlights, I’m going to get you ready for it, assuming today’s business growth that we talked about 10% to 15% EPS which we gave on our last earnings call, assuming that we do not have to issue equity, Don Wein common equity or convertible equity, we can finance this using our prudent balance sheet and the metrics that we have and we can do it and maintain the current credit rating as we think and that is the plan right now, not to issue equity.

The GAP SAR contract actually begins in less than two and a half months in fact we’re probably taking delivery of the third GAP SAR aircraft today. The Anton office landing in (inaudible) they will discourse the third aircraft and then the fourth one comes in about a month. So we will be able to start actually serving this contract and it is a slightly different contract than UK SAR and we’ll get into that.

The contract structure is very similar to oil and gas in the United Kingdom in Northern North Sea. It has a very high monthly standing charge and a variable payment that takes care of a lot of the fuel. So one of our investors, Jerry asked the right question, right if we fly more, we have to do more saves, by which we want to do, we want to save lot. This is the purpose of this contract. Do we lose money or does that even play into it. Well won’t, it doesn’t, because we’re committed to serving the contract operationally, and again for the people in United Kingdom.

We’ll do what it takes to service, but the contract structure allows us to do it, because in the end like our oil and gas, it passes a lot of [effort]. And again, we’ll talk a little bit about the EPS accretion, I know all of you are interested in and in fact, I’m sure you’ve already gone to the page that had that, but at least we’ll do get my commentary on it.

Turning to page 38, let’s talk about GAP SAR first. We’ve never really talked about GAP SAR, I think one and other most important things from a financial standpoint about GAP SAR is we won it last year, and because we won it last year, it has already been in our forecast. So when we talked about the 10% to 15% earnings growth that we see over the next three to five years, GAP SAR is already in that. Okay, so we don’t have to talk too much about earnings accretion or profitability per se, because you already have it is part of the overall company, and frankly we’re not going to give you what it is, because we don’t for that size of a contract, we’re not going to disclose this specifics other than what I have on this page on what we have on page 38.

So it’s included in the 10% to 15%, it provides a lot of stability to the cash flow streams. The contract starts again in the first quarter of FY14 soon. You can see from the chart itself. It extends into FY18, and then those two aircraft from an operational standpoint, there won’t be any difference. From a financial standpoint, what you’ll see is it they’re just going to be build differently, it’s going to be build onto the UK SAR contract. The other thing that is of note is that and we are going to stick today, it’s important you note, we are going to stick to our general way that we disclose things.

Even though this is a UK SAR contract, it’s a big contract, and we are going to give you probably a little extra disclosure. From the standpoint of profitability and capital, we are going to talk about it roughly the same as we talk about oil and gas, so there is LACE, large aircraft equivalent to LACE rate, how may millions of dollars do we earn per large aircraft equivalent. And so for this contract, 4 S-92s, we are treating these as large aircraft, they count as one, okay.

And as part of that, they are in LACE rates, really very similar to the current Northern North Sea IBU LACE rates; our last disclosure had that about $9.75 million. There is approximately $140 million being spent on these four aircraft and other ancillary costs. That has already been put into our budget; it’s already been, in fact, most of it has already been spent. And the plan is to own these aircraft right now and then put them on a sale leaseback very, very soon, in many ways in conjunction with the overall UK SAR financing.

And again, these aircraft will serve in conjunction with how the UK SAR from an operational standpoint, there is really no difference. We are going to serve at a somewhere on stone away that we will maintain including all the other things that Mike and Jeremy talked about as part of the overall fleet of S-92s in our European business unit. But just in FY 2018, they then transition to the UK SAR contract financially, which I will get into a few minutes.

Page 39 for those on the webcast. This is a sources and uses. And the reason we are doing a sources and uses for UK SAR as opposed to contract XY and Z in other parts of our oil and gas fleet, it’s quite simple. The way you can think about UK SAR, not GAP SAR, the way you can think about UK SAR is it slightly acquisition, financially other Search and Rescue business, right it’s an acquisition of the Search and Rescue business that roughly starts, you know on full servicing in FY17. You know, we talked about FY18, that’s when the contract the GAPs grows, but it’s like a, the late draw M&A deal. And so, we want to give you a source and use because that’s our tradition, we did that with Cougar on how we actually have to pay for it and how where is the money actually going.

On page 39, I will talk about specifically the uses. Where we do spending this money on? And then we’ll have other some pages to talk about how we’re going to finance it. But everything on page 39 is under the example of prudent balance sheet management which means that we stay well within the guidelines that the S&P and Moody’s of the world stay, we keep to a very strong liquidity profile to manage either in a downtime toward to take advantage of other operating and commercial opportunities. So all this within prudent balance sheet management.

The primarily $965 million is obvious to what it’s going forward; it’s going for the high technology aircraft that we talked about. Most of those aircraft will be leased, some will be owned, right. We still have an ownership model. Now, the reason why is the leased aircraft are going to comprise a much higher percentage than in our overall fleet, overall fleet right now barely has 15% of the aircraft lease is because we can lease more of these because then again, when we look at this as part of the overall Bristow fleet. This is what helps us get to that 30% late lease number, which we’ve already previously disclosed. So, these aircraft, these leased aircraft allow us to get to that even faster.

But in the end, the other reason we’re using leasing is because it’s a very, we get a very competitively low cost of capital from the less source. Many of them are in the room today and I’ll talk about that in second. A lot of the costs are capital requirements are not necessarily asset CapEx. As you can see on the page, if you look at the pre-op cost to be financed that $195 million or costs before aircraft and personnel get online.

So when you look at the $85 million and $90 million that’s going to be spend in December 14 and 15 that calendar year. That was our op-cost because we have to spend a lot of money upfront to be able to train the pilots, to be able to get them online, to get their certifications, all the things associated with that. The important thing to note for those pre-op costs are we would cover all of those costs and a return on those costs during the contract period for the respective aircraft to come online. So as part of the contract, we can actually capitalize those pre-op costs, there is an effect on it.

There is also ground infrastructure and equipment, that’s a significant cost to. Again Mike talked about that. One of the important things we want you to note is we right now are planning on currently owning that, and the modeling that we use for the accretion analysis and our prudent balance sheet management; we stay to a pretty conservative approach there in which we actually own it. We’re spending it right then and there and it’s on our balance sheet.

In the future, we might end up doing a lease, but in all of our liquidity analysis and all of our prudent balance sheet and management analysis, we assumed a much more conservative approach that we would actually paying for that out of current liquidity, so there is a little bit of upside and being able to take advantage of ground and other infrastructure leasing in the future.

Let’s go to page 40 for those on the webcast. This is a replication of the slide that might put together and the thing that we wanted to emphasize from the finance teams point of view is that this transition allows to manage the again, think it’s not an acquisition but think of it a little bit financially like an acquisition. The delay draw nature of having to be able to spend the money here reduces the overall risk from a financial point of view of transition.

Mike and Jeremy talked about how it reduces the overall risk from an operation standpoint, but because we’re able to transition over almost a three and a half year period of time. We are able to spend the money in a very measured way and use our own excellent operational cash flow to end up working through the big CapEx and another cost as part of this and then also continue to keep growing our oil and gas fleet. The risk here is much more measured, the return again you’ll see in a second.

If we go to Page 41, Page 41 takes Page 40 and translates that into capital that goes out the door over certain period of time during the contract period. I’m going to start being a little bit prescriptive on these numbers that everybody understands and first I mentioned the $965 million. That capital expenditure, capital requirement, but $405 million of that are leased helicopters and that includes the $140 million of leased helicopters that will be done in the GAP SAR contract and then just transition to the UK SAR contract.

Of that when you have $560 million left, that is CapEx or in the pre-operating costs that will be in the operating working capital under operating cash flow, we’re just saying this is cash out the door. And you can see that 85% of the cash out the door that $270 million, $210 million is really in FY15 and FY16. So in many ways we have a lot of time to be able to finance what is in essence the heavy capital requirements of this contract in those years and again that help to mitigate the financial risk of this contract.

The capital expenditures have broken up between $195 million of operating costs and $125 million of ground infrastructure and again the owned aircraft. We like the residual value, we like the asset value of these search and rescue helicopters. So we want to own some, that is our mode, we don’t want to lease everything, and so that part of our strategy here is to own number of these aircraft.

Let’s get to the financing strategy on page 43. As we talked about, the primary solution from a financial standpoint is operating leases. And these operating leases will be very similar in many ways to our oil and gas helicopters and how we lease them, okay.

We have a very particular way that we would like to do operating leases. And in general it has a feeling of being a big difference in the rest of our competitors and how they lease. One of the many requirements are – as we – we have an alternative, because of our liquidity to just own the helicopters, we do expect to have a lower lease rate than our competitors. Our credit rating on a secured basis is investment grade with S&P. And so there is an expectation that our capital costs through these operating leases, which is the primary solution is going to be significantly lower.

So when you talk or when you hear about this contract being priced lower than the competitors while it should be. Our major competitor has secured credit rating of single B. We have a credit rating of BBB-minus. Now, we want to enjoy that benefit for you guys, our shareholders. But we also wanted the UK government to enjoy some of that benefit and they did through lower pricing of the contract. But that doesn’t mean it’s any less profitable for us, it’s just the way that we run a prudent balance sheet, but then convert into a lower cost of capital, but then we enjoy for our shareholders and then UK government enjoys with lower cost for this service.

As you can see the operating leases themselves, let me just talk a little bit where we are today with them. We had 15 perspective lessors submitting propose, we had a lot more lessors that wanted, but just like Mike said there are pilots that we want to take on, it’s a very competitive process, this is a hallmark, landmark contract, this is some of the best leasing that you can do in the helicopter aviation space, because both the nature of the contract and also the Blue Light service, the asset value and also, we don’t, we’re very humble by that service, but we do think we’re the best in maintaining the helicopters and lessors want to be our partners.

We are at the endgame of that process right now of securing the permanent financing for these aircraft. And currently, I can announce today that we have leased the bulk of these helicopters we’ve signed, a letter of intent which is, it sounds like it’s a kind of a one-page, but it’s a very detailed under the financing, and the return of requirements and all the things that we do is part of our leases. And I can say we’ve already done the bulk of these have within LOI with Milestone Aviation who will be the lead lessor and be the lessor for the bulk of the larger helicopters. But very, very close behind our number of other lessors that are in the room today.

And so from our standpoint, once we get the LOIs put in place with them, we will be announcing them also. But we feel very confident that we are in the endgame, this is not measured in even weeks it’s measured in days that we can get to an agreement on these LOIs for these leases. What that means is we’ve been able to take advantage of a very strong market for less leasing which is somewhat derivative from the debt markets to be able to get these leases at very low, very competitive rates, even compared to our oil and gas rates.

The rest of the capital will be supplied by our liquidity over the next three years, which takes in the form of the cash that we currently have on our balance sheet, the cash that we will generate through the excellent commercial work that Mark and his team are doing and the efficiencies that Jeremy is bringing to the team and his team on operations.

So, if this basically is self demand seen internally with Bristow, what we usually do as in history, we use the cash that we have on the balance sheet, we also have an undrawn revolver. So, if I just get into the next page on page 44, you can see how we’re actually going to use the revolver combined with the cash. So, let me explain this page a little bit, especially the chart on the right.

It is anticipated because of the current contract structure in oil and gas fleet that we should be able to grow between 10% and 15% and we feel highly confident with the contract structure that we had in place in oil and gas that that is achievable. That generates a certain amount of cash between now and FY18 but we also had an undrawn revolver. In general, we don’t draw on it, but in time, we want to actually acquire aircraft in an efficient way.

We then use that undrawn revolver and then permanently finance usually with high yield debt. It would be no different here. This is a corporate finance solution. I did aircraft that come part of the overall Bristow family financially and so, we finance it that way, especially the owned aircraft, the pre-operating cost and that enjoys again the benefit of a very strong balance sheet and we think that the combination of the undrawn revolver, the cash that we’ll be able to generate, we can very comfortably and that is the red line, that’s the amount of CapEx that we have to spend on this, that’s the previous page that you saw, you can see there is generous amounts of cash available and also undrawn revolver to keep us comfortably within our liquidity requirements and also be able to keep growing the oil and gas fleet.

The one thing I want to emphasize on this page is this includes $800 million of CapEx to grow the oil and gas fleet. So we’re not sacrificing that, its just that the model is allowing to have a prudent balance sheet, keeps you to low-cost financing rate, keeps your capital rates low, and generates a lot of excess cash flow to keep growing and deliver a pretty value for money solutions to not just the UK government, but to our oil and gas clients.

The other thing of note is that during this period, we don’t give you guys all of our credit ratios through FY18, but we do it obviously. We’re able to comfortably stay within our prudent balance sheet metrics. Some of them include adjusted debt-to-equity of less than 80% and also an adjusted – what we usually look at is our EBITDAR to interest plus rent, and we can easily stay above the 2.75 during this process to – for us that matters and as you can see here we save along liquidity parameters also.

Page 45, just talking a little bit about the contract and how the financial performance works, we are going to transition from how we’re financing it to actually now what is this mean from the performance of the company and again we’re going to give disclosure very similar to what we give for oil and gas fleet. First, as we are talking about on this page, the contract structure is similar to the Northern North Sea where you have 70% mix for oil and gas monthly standing charge to 30% revenue mix for variable.

Here though because you don’t fly as much; the nature of the flying is mostly training. And just to give you a sense in our oil and gas fleet, we can fly helicopters upwards of 2,000 hours a year, this fleet per aircraft will fly probably not more than 500 hours a year. And so you don’t get as much flying time per aircraft and therefore you have to pay for the capital remember what Bill said.

We paid for the capital here return of and return on of capital with that monthly standing charge and that would be the case here, under the UK SAR contract also, the LACE rates. Each of these aircraft is considered one large helicopter, so the 189 even though we kind of call it as super medium and we kind of call it; it really is the large aircraft. And I will say today for the first time that we are reporting the 189 as a large helicopter count up one, whether it’s search and rescue oil and gas.

For the search and rescue helicopters and that includes both the 92s and the 189, we don’t discriminate here, we are not going to give you this level of disclosure between the 189 and the 92. We are saying that the LACE rates are approximately $12 million a year. And again, that is higher than what we are currently enjoying EBU in the oil and gas market.

And as you probably can tell, it should be, because these aircraft are more expensive. And then that leads again to what the EBITDAR margins are. The EBITDAR margins are higher and what we are disclosing today is a mid 40% EBITDAR margin rate. In the future, this is important in the future. We have not decided yet whether we are going to disclose the ongoing nature of this contract, but it’s a very stable contract. We are more likely to disclose it as part of the EBU, but that decision has not been made yet.

I’m just trying to give you anticipation that currently we think it’s a mid 40%. But I think in the future, and again it has not been decided we will just disclose what we disclose today which is our EBU margins for EBITDAR and this is part of it. Very similar to the way Cougar has improved the EBITDAR margins NABU or North American Business Unit. This improves the margins which were already pretty good of our EBU Business Unit.

Let’s talk about the risk of the contract and how a contract is structured. First of all, we will be disclosing the contract by SEC rules, we have to file this contract, and so you guys will be able to see a lot of the details. But in the end it is very similar to the oil and gas contract, okay, from the standpoint of terminations. This is not a take-or-pay contract, that’s one of the things we want to emphasize.

The UK government if it does put contracts in place keep similar to the service, but it is not take-or-pay. It has termination rights, really due to unsatisfactory performance or termination for even convenience. But we think the risk of that is very low. For the simple reason that we serve this contract for 36 years, and in fact the contract that we’ve served for 36 years was approximately a 10-year contract and kept getting extended, right extension, extension, extension. And so, I can’t tell you whether we’re going to extend this contract, but I can say that we believe the risk for convenience or termination is quite low.

And I will say this also, that if it that happens, if that happens, their determination for a partial or the whole contract for convenience. We have protections that have a breakage fees that will significantly minimize any costs of the company especially from a financing standpoint. And again this is blue line service, so somebody is going to serve it, and we have the bases and we’ll have the bases to serve that.

Okay, now we’re going to get into in many ways. The details of information that you have been waiting very patiently for the last at least in my long 30 minutes here, we’re going to give you the numbers and it starts with page 46. We have previously disclosed that the operating revenue is approximately $2.5 billion. An important note that that’s for the whole contract period even through a transition, right. So, even though we talk about this is a 10-year contract over the next, this contract actually comes into place over really the next 13 years to 18 years because of the nature of UK SAR and GAP SAR and then the nature of a transitions over three years. So, each contact is roughly 10 years, but these dollar amounts that I’m disclosing over that whole period of time.

And again, importantly it does not include GAP SAR, $2.5 billion with EBITDAR over the contract period of $1.1 billion, approximately. And our BVA, which is what we’ve disclosed ourselves, over the whole contract period, is $300 million, okay. Just to give you a sense of that amount of positive BVA creation, over the last five years, the company has generated approximately just now break-even BVA at zero, right. We’re going to be very positive this year as you can tell from our historic BVA that we disclosed.

So on a per year basis; this is very BVA accretive to us. And so we’re very excited to be able to do this, but the question is why? Why are we able to do that, it’s very simple. Again the prudent balance sheet management allows us to have a cost of capital significantly lower than our competitors and then we gave a part of that to the government and then we’re able to enjoy part of that for you guys, okay.

It’s not a ridiculously profitable contract but it’s a profitable contract based on our conservative prudent balance sheet management, which then we also are able to use with our partners in both the leasing groups that are out there in the market place, our bank providers and again our high yield debt providers. And we’re able to also obviously take advantage of a very, very strong debt market today for this contract.

I’ll just translate into earnings. The way we think about the earnings here is not to change the growth rate of the company, okay. The way we think about it is it improves from a plateau standpoint. So what do I mean by that? Today, the midpoint of our guidance in FY13 is 3.73 okay that doesn’t mean that we’re giving you any change behind FY’13 I have to emphasize that.

We’re just thinking the mathematics of the midpoint of our guidance range. We’ve also previously disclosed the 10% to 15% annual growth rate okay. So you can see that arrow on page 47, gives us that trajectory. Again, emphasis this does not give you any annual guidance per year, it’s just the, think about it the Avenue, the road that we think we can go under based on our current contract structure. And again the $800 million that we are preparing to spend for new aircraft.

That growth rate when you including the UK SAR, I think that nice, I think that’s in S-90 no, it’s AgustaWestland, that growth profile then gets splattered up. Okay, based on the profile of the new aircraft coming on until FY18 in which today we are disclosing it is a $1 accretive in FY18. So you basically still have the 10% to 15% growth rate, but in FY18 boom it goes up a $1, okay.

And then we expect the growth rate to continue, unless we disclose something different in the future, but right now this is our anticipation, without approximately a $1 accretive by EPS by FY18. And again the same growth profile which includes UK SAR between now and FY18. And when we say 10% to 15% it is important to note that all the costs during the transition have been taken into account during that 10% to 15%. We believe we can still fund because a lot of the cost are capitalized, we also have again a lot of cash that’s earnings nothing on our balance sheet that we will be able to use here. So believe that we can get between the 10% to 15% EPS growth pay for UK SAR, not have to issue equity and enjoy $1 accretion in FY18.

One thing I have note, if we can enjoy higher growth rates, if there is another merchant acquisition opportunity, if there is other use of capital for other SAR that might be out there, there might be any of issue equity, right. We’re just saying that. We are committed to the prudent balance sheet, we still think we can do more growth without having issue equity especially UK SAR. But just note this is based on that 10% to 15% growth rate, but we won’t issue that equity unless we – higher growth, and that should be a benefit to you guys.

Page 48, from now on the slide that Bill shows you is going to change, what I mean by that? Trying to give context on the previous slide that showed production 60% of our total revenue, which is not as sensitive to the oil and gas commodity price. Production doesn’t depend on oil being a $100 a barrel; we’ve always publicly disclosed that it has to get well below $50 barrel for it to start impacting production, where now our new chart will include UK SAR or Search and Rescue in general.

Because if you look at the pie on Page 48, you can see that production actually comes down as a percentage just given the pie is getting bigger. So then when you add back to UK SAR and then that other percentage we think in the future just we’re going to start disclosing that other had a significant portion of oil and gas SAR in it. When you add all that together, you don’t get quite 75% very stable revenue, but because UK SAR is a higher margin business than our oil and gas business taken as a whole, our cash flows now will be over 75%, very stable cash flows. And that in our mind it is what makes this transformative.

We’re going to stick to our prudent balance sheet metrics as we talked about, but you are going to have a much more business risk company. And on top of it you are going to have a much larger company. This adds $1 billion of capital to a company that is roughly $3.5 billion Asset Company if you include our affiliates. So it has a significant increase in the overall size of the company which also reduces the overall risk.

This is one of our last slides that gets to a chart that has received significant applaud and it gives you guys a sense. On Page 49, we have our traditional side of showing our fair market value of our helicopters or assets on a net basis, so it’s the assets minus the debt, and then we also show our stock price average per month, and then we show our book value, okay.

Now, we didn’t adjust the book value blue line for UK SAR, and we didn’t adjust the red line even though the $52.89 is really the stock price back in December. Today or yesterday we closed approximately $64.50. But what we are disclosing is that, today’s $53.62 of net fair market value of our assets which are mostly our helicopters, it’s significantly higher with UK SAR, and this is just UK SAR.

So, when you put UK SAR in and then subtract out the lease debt which we impute as we told people and at 6% NPV and then the other debt that we think we will have to issue, it’s part of this just to say within our prudent balance sheet management, we get a price of $71 a share. It’s just the same mathematics. We are not deviating from our previous disclosure. This is just the mathematics if you include UK SAR.

The one thing I will say it is not including Mark Duncan’s $800 million of capital, we generally don’t do that. We don’t include in the time period any of the future capital in that $53, that’s only the $53 and the difference between the $53 and the $71 is just UK SAR. And frankly, we look forward to seeing you guys calculate yourself. It’s not that hard, but it’s $71 a share, okay. That’s because significant asset value has been added to the company in FY 2018.

The really – the reason that I – we want to emphasize this is, we think our company is more valuable and look, most CFOs, CEOs, COOs and Commercial Officers think that a company is more valuable to what the company trades at today. But the most important part of this is that the historical average of the company is to trade on or about the net fair market value, and that’s because we earned for a long time. The last five years, we were earned below our cost of capital. From now we’re starting to earn positive BVA, positive BVA means you’re earning a better cost of capital, which again we have disclose this 10.5%. $71 assumes that we’re in zero BVA on UK SAR, and we’ve already told you we don’t.

The reason why we’re going through $53 today is because we’re starting to earn better returns. So the point I making is if $71 [assume] zero BVA, we think we’re going to earn better than that. We think the company should be work more than this with UK SAR, and we’re going to continue to try and get better returns even after the state business, next part of the same store business, and that’s part of our operational excellence man drop.

Finishing up on page 50, we’ve already given you a perspective it’s about a $1 billion of capital. We’ve told you importantly that we do not believe we need to issue what I would call third-party equity to finance UK SAR. The GAP SAR operations are starting in a matter of weeks in many ways, so in fact the training aircraft or the aircraft are here and training right now in preparation to serve that contract.

The EPS accretion is approximately a $1 of share in FY18 when everything ramps up. The GAP SAR aircraft are included in our 10% to 15% between now and FY18. And again UK SAR is transformative, because it allows us to maintain our prudent big balance sheet management, while lowering the overall business risk of the company. And again in significantly increasing the fair market value of our asset and the size of the company, which we believe is very important.

And again we’re humble by the announcement, I think you got in determine – we’re taking this very, very seriously, but we also in this presentation want to make you understand that we’re going to stick to the conservative financial structure of the company and give you guys a good value for money also including with the UK government.

With that, we’ll take a Q&A part of this please announce your name, when you ask the question for those on the Webcast.

Question-and-Answer Session

James West – Barclays Capital

Yeah James West. So Jon a quick question on the usage of finance your L14 buckets to the two parts of the aircraft infrastructure in the pre-op cost, of those four buckets what is on page 39, of those four buckets, what is currently contracted today or locked in today or what’s variable?

Jonathan E. Baliff

Well from the standpoint are you talking about the sources of the funding or the usage of the funding?

James West – Barclays Capital

Uses, uses.

Jonathan E. Baliff

Okay. That’s really a question for Mark, okay because we have the sources I can talk about but as far as the contracts for the aircraft and other things it will be best if Mark you can answer what we have mostly going on with Sikorsky and AgustaWestland. Yes the purchase contracts. Yes. So there is the purchase contract already in place with those and it is in the UK SAR aircraft in addition to all the orders that we already had mentioned in our queue. So the next disclosure that you see from us the classic table of what’s on order commitments and what we have on option still you will see plus 22. Right we have on commitment, on order is aircraft, technically Sikorsky and Agusta had this aircraft moving to their system for a while, they knew somebody was going to win this contract and it was fairly, we fairly assume that it would be the S-92 in the north.

James West – Barclays Capital

And then also the ground infrastructure and the pre-op cost has locked in as well?

Jonathan E. Baliff

Yes. We have been very conservative…

James West – Barclays Capital

It’s 965.

Jonathan E. Baliff


James West – Barclays Capital

It is not going to go up from here.

Jonathan E. Baliff

That’s right. It’s not going up from here. And again, as I talked about it, at least from a financing source standpoint, if you look at the net present value of the commitment for the capital on those ground infrastructure equipment, this assumes we own it. We can significantly lower that capital commitment by leasing it to people at very low rates. And I can’t be specific as we haven’t finalized that the way we finalized the bulk of the leases with milestone for example, but we think we can do as good as our cost of capital and may be even better.

Unidentified Analyst


Unidentified Company Representative

Yeah, that’s right. It plus 18, not plus 22, that’s a good point. We’ve already purchased and have the aircraft purchased prices done for the GAP SAR aircraft.

J. David Anderson – JPMorgan

David Anderson, J.P. Morgan. I’m curious as how the negotiations came out with this contract. You mentioned like the leasing model was an advantage. Where those who are competing with you in this contract, where they also proposing a similar structure versus your? Did you guys come up with this and kind of present this to the UK or did they, I’m just kind of curious how this all kind of came about in terms of structure?

Unidentified Company Representative

It’s a classic answer I’m going to give you. Unfortunately, I can’t comment on what our competitors were doing. We do know what their rating is compared to ours. We do know that our competitors use a much higher proportion of leasing than we do. But I think the one disclosure I will give you that I think is important is that most of the solutions for DfT privatizations whether it would be very important blue light service have all been done under what is called a PFI structure, Private Finance Initiative structure.

These are highly structured individual asset financings that depending on your credit rating and the nature of the contract they’re really meant for 30-year contracts (take-or-pay) type contracts. They were used a lot in the (privatization) of utility assets and toll roads and UK has done a great job and this DfT team does a great job of getting these assets into private hands.

One of the ways they did is much longer contracts. We did explore a PFI structure for this, but because the contract is not as long, and because the nature of the termination agreements are more similar to our oil and gas it gives a competitive advantage to those who want to use a corporate structure.

We really need to be closer to investment grade, so we think the key to winning this for good value for the government and good value for shareholders and debt holders was a corporate solution that allowed leases to be corporately guaranteed by us, backed by the assets and then also done within a fairly conservative overall corporate balance sheet. That was the key and there was a special stop that I do need to mention because there’s going to be disclosure on it.

We obviously very much enjoy the partnership with our lessors and our debt holders, mostly our high-yield bonds. One of the things that we decided to do is put in a backstop facility during the process. It was a lot of risk to give a price certain deal back in October to the government without knowing that we’d actually won the contract. We were taking a lot of reputational risk and market risk during that period of time much more so than management here was willing to take. And so, what we did is, we put a backstop facility in place for the $4 billion, and that backstop facility which we will and have paid for already in FY 2013 allowed us in literally financial meltdowns to have banks backstopping us in all cases, in case we actually won this, and we had to win it at a certain price.

Under PFI structure you actually wait until you win the contract to determine pricing. We didn’t feel that was appropriate for the type of company, we wanted to have more price uncertainty and that backs up facility in many ways we think it was like in better word a special sauce, I don’t know George, if you have a mic to talk about it. Wait for the mic for a second, because I think this is important.

George Bruce

One of the key decision current years for the DSP was financial robustness and price uncertainty, the backstop facility forward to the slab.

J. David Anderson – JPMorgan

(Inaudible) did the UK only have a higher percentage there?

Unidentified Company Representative

No, I don’t think the UK government had a view on it per se; this is really our decision as part of getting to that 30%.

J. David Anderson – JPMorgan


Unidentified Company Representative

So, as part of getting to the 30% late leased aircraft, the 60% kind of fits within that. If we believe by the way that we will get there slower than 30%, we actually end of the pricing of these in the future will be better, will lease more of these aircraft.

Unidentified Company Representative

There’s nothing prevent you from…

Unidentified Company Representative

Nothing prevents us from doing more leases, if it’s better from a capital cost advantage, but right now, it is anticipated and the modeling that we have here for you guys on financial performance, anticipate the 60%, approximately a 60% of the 22 aircraft in lease.

J. David Anderson – JPMorgan

Okay and you also says the LACE rates are going to be higher on these aircraft and the others. Does that come out, is that, I’m curious does that come out of the MSC side, or is it on the variable rate or is it a little bit above?

Unidentified Company Representative

It’s mostly on the MSC side.

J. David Anderson – JPMorgan

Mostly on the MSC side.

Unidentified Company Representative

Right, and just to be specific again for the transcript, we are saying that it is a $12 million LACE rate during the contract, UK SAR and that is higher than today’s EBU rate of roughly $9.75 million. It’s important to note that EBU has medium helicopters, and again these SAR contract is all large helicopters.

J. David Anderson – JPMorgan

Just last more general question is I mean it looks like a great contract or nice stable cash flows over next ten years, what can go long here? I mean you had mentioned again the termination that could happen, but what are some of the – when you look out over the next kind of ten years of obviously your primary job is to manage this risk here? What do you worried about and what could go wrong, they could maybe not – have you achieved these goals, these financial goals you put out there?

William E. Chiles

Sure, I mean I think most of that question probably goes towards the operational risk. I’ll just talk about what I call the degrees of political contract in government. There is a chance that almost infinitesimal that contract to be terminated to convenience.

But somebody is got to serve this. This is life or death of the United Kingdom. And so we had protections in the contract that if there is termination for convenience or even a termination for performance that we get a large bunk of that money especially the financings associated with these back. So we protect a good chunk of that downside risk in case of that does happen, have emphasized. We think its infinitesimal, but that’s really based on our belief and our confidence in our operational excellence model.

So I would let Mike or Jeremy to answer that.

Mike Imlach

Actually this – can everyone hear me? I’m not going to call by promise. This is a good question because I lend itself to something that thought in my mind is we’re having this discussion and I don’t want to lose side of the fact. We’re talking about very strong balance sheet management, but I don’t want to lose side of the fact with very strong P&L management. And that we have not lost side of it, and that’s fundamental obviously to the performance of this contract.

And the reason we’re able to we’ll have confidence in our ability to manage the P&L is really because of the know-how we built over the years in this kind of a contracting environment. And so what can go wrong to answer your question that things that can go wrong is our general categories, right. I mean you have inflationary issues, you need to manage, but we believe we can manage them. But those input costs on an operating basis would start to creep up and we have to keep a very close eye on it like we do everywhere else in our business. So that’s where I would point to, but not to sort of negate the importance of our focus on that P&L. Mike, if you want to add anything else.

William E. Chiles

I bet. I think that’s probably captured very well. There are obviously settlements placing the aspects to the contract term that we’d like to try and estimate the best as we could. I feel fairly pretty comfortable with that we’ve managed through a best case scenario across the piece of the contract for that. I think the biggest contingency I have it is a blue light service, we’re going to be there. We haven’t buying knowledge have been removed from our contract due to performance in recent times and I certainly don’t see that happening in the European business unit in the next ten years. That high level of confidence what can go wrong?

I guess if we do the service still well, the government decides it doesn’t need ten bases, it only needs nine bases or eight bases that we get removed through a good performance for those bases. Frankly, I can’t see that happening either because I think the public would be very, very considerable with and it seem to be reducing a level of service, pretty close in a lot of peoples hearts within the UK. So when overall high degree of confidence and that will not happen.

Mike Imlach

We had time for one more question. Great, so thank you very much. We are going to keep rolling here with some again, I’ll look at the new opportunities, which is not only are in Search and Rescue, but also in our oil and gas fleet.

With that I will turn it over to my partner Mark Duncan

Mark B. Duncan

Thanks Jonathan. I hope some of our loyal shareholders are – I’m a shareholder in Bristow myself, so I am almost ready to cheer. But the best is yet to come. We always save the best for loss.

BlueLine Service just we keep mentioned in our term, I just want to make sure that people understand the significance of the term. BlueLine Service basically is service that will not be subject to budget cuts, okay. So when the UK went to a strategic spending review in terms of how much they could cut public spending a little like the U.S. has with sequestration, et cetera. These services that were described in BlueLine where [carved out] and they were not going to be touched in terms of trying to save money, because they are such unique to the business.

For Bristow, it has an added value, we are in the oil and gas business a large part of our business oil and gas and for the oil and gas service analysts here, you know that that business cycles a little bit. Bristow is protected from that from being in production, the 60% of the business being in production, et cetera. And this SAR contract being a BlueLine Service is going to provide even more stability under the oil and gas service is going to provide even more stability under the oil and gas business.

So when the oil and gas business cycles, we’ve got even more confidence on going through those cycles in a very positive and accretive way because the SAR service will still be there in underpinning our cashable et cetera. So I just wanted to make that point, I thought of as I was sitting there, listening to the exciting stuff that Jonathan just told you about.

And so let’s talk about the future, what’s next after UK SAR. Though, we mentioned that a little bit earlier that we think this is a catalyst or other governments to start looking why did the UK do this? And what was the benefit in it? Because the traditional governments that have our services today of all the helicopters doing it, because the service is being in place.

Norway for example, operates a fleet if seeking the helicopter is just like the UK does. In fact since the award, we’ve actually being in cold in Norway to ask how we could respond to the relatively less reliable seekings, because they’re just so old, and so you can see that there is a catalyst starting already. We don’t actually know how exist market is today, because it will be subject to governmental decisions that we are sure that more people are going to look at it and outsource so other teaser for that this contract enables much more.

And on slide 52 and 53, you’ll see there, the evolving SAR market and then we talk about oil and gas SAR, though that are different levels of SAR. The UK SAR contract we’ve described is the highest level, the aircraft are very complex that able to they’ve got forward-looking radars, they’ve got all sorts of special equipment in the back, they’ve got night vision Goggle technology, they’ve got ice protection, all these things. When we talk about Search and Rescue you can also have a less capable service, so you have what you called limited SAR, it has winches, so you can rescue people from the water, it may not have the night vision capability or it may not have the forward looking Radar, but they can go and save people.

And the lowest level of what we would call SAR would be Medify capability which is basically Helicopter this on call whether you go and evacuate some one in the medical emergency if you get six offshore and onshore platforms et cetera. So the oil and gas SAR business is slightly different to the UK SAR market and the traditional coastguard activity, just as a point of clarification.

And if you on slide 53, we’re identifying here what in civilian SAR, the previous government SAR but it is no civilian; there are several examples of it. UK GAP SAR that we talked about today, Ireland actually outsources SAR today with five aircraft, the Dutch Antilles actually outsources its SAR to the private sector and our joint-venture company FB Heliservices that you heard they actually operate that contract today.

And then obviously UK SAR adds to that, so you’re going to have 36 to 40 Helicopters in this market today, what’s next? There is a bid being issued by the UK government to serve the Falkland Islands, that bid will be out in the next two months. Svalbard an island in a very north of Norway, they already went through the process and are going to outsource. The Netherlands is going to issue a bid in the next quarter. Through the Dutch government this is going to amalgamate with the oil and gas then held our contract they might talked about.

And Norway is already in the marketplace for renewing its entire fleet with new aircraft, slightly different model being contemplated there, although they are looking at it now to try and diversify that. In Norway, the moment they are planning to outsource the aircraft and maintenance and the ground operations but potentially keep the military pilots in the military and operate them through the military, that’s still in process. In Nigeria, we’ve heard the inquiries from the government as they are providing a SAR service, a lot of it for offshore relative to the oil and gas industry, that’s really a teaser, but there is much more to come here and the market will develop in a role, so we look forward to that.

On slide 54, we’ve got a picture here of what we know about at the moment in oil and gas SAR. Why there is oil and gas has separate SAR, when the coast guard can do it, that’s a very true statement in the U.K. There are platforms that are so far offshore, the coastguard response times are insufficient, so the oil companies base helicopter offshore on the platform for the purpose of rescue. Several examples of that in Norway, but you will see a picture here for two helicopters more or less in oil and gas that in search and rescue, so a large market opportunity there.

I think that’s above all I’m going to see on SAR. Hank Williams is going to do a discussion during the lunch, Hank’s with Cougar which is one of our partner entities in Canada. Cougar has very advanced search and rescue capability that they have actually got search and rescue contracts in place in the oil and gas sector in Canada. So it actually fits well, our acquisition fits well, our acquisition fits well in terms of enhancing the capabilities and sharing the synergies all that through Cougar.

So I’m now going to stop taking about SAR and we’re going to flip to the oil and gas business, so we thought we’d leave you with some more information in oil and gas and what’s happening in that market place. And I will start with the EC225, which is widely publicized as having a significant problems and are at the moment suspended from operations in most global markets. That our AT EC225 is effectively grounded today, not flying, that’s somewhere between 25% and 30% of the global fleets. It’s a huge issue ourselves and customers and our competitors are dealing with.

Bristow has 16 aircrafts that are affected, although we are still being paid for those machines by several customers. The aircraft itself being grounded through multitude of additional issues, finding alternative aircraft to substitute is the obvious one. There was no obvious is, the bigger issue is actually the availability of crews and pilots who are trained on the type, so all our 225 crews are trained to fly 225s and to maintain 225s. Unlike our rental car where if your forward breaks down, you can just call them up and they’ll give you a Chevy and you can drive that away, helicopter pilot can’t go and fly another type without being retrained in that type. So it creates a lots of logjam issues in terms of taking your existing crews and converting them to an alternative type to fly. And what we’ve been doing, we were affected mostly in Aberdeen.

And since October when this incident happened we had 81 pilots in Aberdeen, today we have 127 with more on training, because we are bringing new types in and we are going to be able to deploy those pilots to fly alternative types, including the additional S-92s that we announced in November, which I will talk about a little bit later. But the crewing issues becomes a real bottleneck that we’ve been able to solve. And we’ve recovered well in Aberdeen by redeploying aircraft a slide in a second that shows that. And we are serving our customers and the customers are very grateful for how we’ve been able to respond, because their operations are in jeopardy, their production their oil and gas production has been proved in jeopardy by this incident.

The good news is Eurocopter are claiming that they find the root cause of what caused the crack in the shaft this laid to the grounding. That is still under review by the regulators and the authorities and independent verification engineering consultants, so it’s positive news that it’s not confirmed yet, so it’s not, the problem still exists today, but it is under review.

On slide 57 you can see what we’ve done in Aberdeen in terms of operating 14 aircraft on the 22 of October and on the 23 of October, we had two aircraft to fly for our customers. We managed to redeploy through the strength and benefits of Bristow’s business model, we are able to redeploy aircraft from around the world and get back to serving our clients. This has led to a huge amount of loyalty from our clients and we’re held in very high regard because that we were able to respond to this incident. And our financial results haven’t suffered through this period, they’ve actually got back up, and the solution is if you recall to right, the solution is going to be final solution will be redesign of this shaft and a re-certification of the shaft and that will take somewhere around 18 months.

This problem is not going to be solved quickly, and there is an interim proposal, we have acquired new operating procedures including enhanced monitoring and early detection that is as accepted by the regulators and it is not clear it will be accepted at this point, we could find a solution where we could get back to flying to (inaudible) around the end of the year or in the last quarter of the calendar year. That is probably the most optimistic view of when we could get on to flight.

And this incident has actually demonstrated the criticality of the Helicopter either offshore oil and gas industry, we took helicopter drilling doesn’t go ahead, offshore, offshore drilling doesn’t go ahead, without the Helicopter the platform shuts down because they are not able to change the people who had maintained the platform, and keep the platform operating.

So this is actually highlighted in the industry the criticality of our service, the value of our service in terms of this cost spend is very small, we are probably less than 5% of the cost of operating an offshore platform or rig that we effect the other 95% the real value paradigm shift that would able to use in our discussions with our customers, we’d been doing that a long time, we have talked to you over the several months the Bristow client promise. Our client promises will be the safest, most reliable, most efficient, hostile free service. It was received that faster the market endemic. As you’ve seen from those presentation, we really mean it and when we can demonstrate that value and then the clients understand the value of that, because all of a sudden, the first that may have to show in production or the drill they can’t drill is can asked to be parted, ensure, because you can’t crew change.

It’s been able to reliably served our assets, so that there is no dime time is hugely valuable and it’s clean in a new value product dime that’s allowing us to offer our services to the customers and get paid the value of those services, okay. The purity of supply in the event of a third fleet not being there, security of supply has become a more important issue to our customers than the cost, the unit cost of the service.

And that’s why we went high last year in both 10 addition last 1992s, speculatively. We would have heard that what was happening, we saw the market. I’m going to share some details with you in a second on what the demand looks like. The reason we did is security of supply and value to our customers. The result was this is going to be increased LACE rates across our business.

Looking at the opportunities; this is slide on slide 59, it’s been in our IR deck, we updated regularly. This is a bottoms up (inaudible) Bristow’s markets from our drained, our sales force on the ground. These are real panders that we knew are coming in the next five years and then they have numbers of aircraft and we’re ordering dwell, 474 opportunities, yeah, that’s the entire market that we could go for obviously and we’re not going to win all of that that we have probabilities and different levels of probability and roughly one-third market share if we maintain our global market share at the moment. On slide 60, this is heavy or large helicopter demand worldwide on a model that’s been developed by PSG Energy who is a consultant that works for us. I need to explain this chart a little bit to you.

The bars on the chart are demand. This is demand for number of helicopters based on the number of platforms that will be offshore with Helidex that have people onboard and need to be serviced by helicopters. And most of this is all platforms that are beyond the 150 miles from land it is thus far, and it need significant personnel, crew change, it need a large helicopter to be efficient.

But the demand is real and you can see the demand is increasing greatly through this period, that makes sense, because deepwater is growing, deepwater tends to be further offshore, therefore there is more demand, and that’s why Bristow has helicopter acquisitions over the last several years have been in the large helicopter and the large medium helicopter class.

The lines on the chart are based on this current supply of oil and gas helicopters today. And the various age, the different lines are based on age, so the dark purple line is assuming all the helicopters are 25 years old, this is supply and the bars are demand. The blue line would be 10 years old. This line is very significant, because modern S-92s are 225s have only been here for about nine or 10 years. So if you are a customer and you want an S-92 fly for you, the supply is based on this line.

Every helicopter, it becomes a 11 years old in this model isn’t in the supply of the following year. So what you get is the difference between the bar of the back, and the line creates the additional helicopters that need to be put into the market manufactured by the OEMs et cetera. So you can see supply demand here gets tighter and tighter and we’ve been mentioning that in the last several quarterly calls.

This is really a sensitivity based on retirement and based on age. This line is a 10 year line. What this line doesn’t do is it doesn’t take a kind of operational limitations. Though if you imagine an S-61 is a very old type helicopter, you could refurbish one that’s 35 years old and refit it et cetera. The helicopter doesn’t have the capability to go 200 miles offshore with 20 passengers. Regardless if it is, so this chart does not take attain of that limitation. In this supply, there will be a peer-based on 30 years. There will be older technology helicopters that actually can’t do the machine even if the machine was there.

This is also a worldwide look, but it can’t be broken down by an individual markets. An individual markets are different in different places. You imagine Brazil, huge demand coming, not many heavy helicopters there. The balance is different in Brazil than it might be in the North Sea as an example. And the other thing to note is this line of supply assumes all the 225s are flying, okay. And the two OEMs that make large helicopters Sikorsky, and Eurocopter make roughly 36 per year, and somewhere between a half to three-quarters of those go in the offshore market. I will leave you to conclude the supply/demand situation isn’t going to soften mutually in the period.

Okay. I’ll finish off with slide 61. We moved last year in November and bought 10 additional S-92s. They have not yet been delivered. The first one is coming in I believe June this year. We have 18 S-92s available, be delivered between June, 2013 and December, 2014 to go into the oil and gas business. That’s represented by the blue bars on the chart. The green bars on the chart are the opportunities for new large helicopters that we know are bidding or tendering, or were in discussion with clients at the moment. You see there are roughly between 60 and 70 opportunities there, but it’s additional to the 80 225s that require to be replaced.

Okay, so this assumes 225s are flying. There are 60 to 70 opportunities in the next two years with our 18 helicopters, that the red shows that we’ve already contracted some of these. We are very confident that we will be able to put these aircraft to work even though the order of it been speculatively.

There are new helicopter types coming into play, the AW189, where we were once customer, the EC175, similarly a launch customer. Though the aircraft will not be in significant numbers in the marketplace until beyond 2014, so the supply again supply demand being paid is an issue. UK SAR aircraft come out of Sikorsky is currently six per year that won’t go into oil and gas. So we feel confident and we can go to our customers with this client promise and provide value to them by giving them security and supply on assets that are not freely available that Bristow has positioned itself to respond to our clients.

And with that, I think I will finish off the conclusion of my presentation. UK SAR is a catalyst for more SAR work. Bristow is managing through this 225 issue very successfully and market demand looks to be fairly well on our favor for the coming two to five years and our value proposition or operational excellence that we started at the presentation with today is playing to that value and hopefully it’s a very positive future for us.

With that, I will open up to questions before we go for lunch.

Question-and-Answer Session

Unidentified Analyst

When you show the disconnect of supply and demand over the next few years, the first thing that comes to mind is that some one should have pricing power and its either the helicopter manufacturer or you, how do you foresee prices on both over the next few years?

Unidentified Company Representative

We have a multiple – a firm order of the aircraft are fixed price and our optional aircraft are already exceed fixed pricing. So we’ve got options or auction book if you look in the queue or you’ll see options laid out through 2017. I think all of those are at fixed pricing. We know the price today. So the pricing power and leverage that might exist is going to be with us, not with our vendors.

Unidentified Company Representative

We have a 37 larger aircrafts on option and 27 large aircrafts committed, so it’s actually one of the large order books out there, especially for large. We have an agreed escalate or per prior year that’s a very low single digit percentage and you put that on top of our buying power where we potentially procure the helicopters lower our price than our competitors anyway.

Unidentified Analyst

Hi. (Inaudible) can you elaborate on your pricing opportunities out there?

Unidentified Company Representative

We’re focusing on value with our customers and trying to serve the customers who we think obviously every customer is important. We worked for all the major companies and our market forecast (inaudible) who the major customers that are important to us in the future are. So our effects are focused on them and we are interested in the long term relationships in value for our service. So we’re not interested in going into the market. And if we would only sure in time we can charge who ever we like. We’re interested in the longevity with our customers on a value added basis. We are certainly confident that the existing lease rates can be improved fairly significantly because of the supply demand situation, but that’s all about security of supply to these customers and gaining a loyalty with them for the long-term

Unidentified Analyst

Is there a target margin, you go after, so I guess did you guys made that point that over the last five years the BVA has been relatively flat, so I was trying to understand how much of margin uplift you need there, how much of a pricing uplift you need to get meet your hurdles?

Unidentified Company Representative

I think when you look at over five years, it’s flat, if you look at it over the last two years, the BVA is improving, so we’ve already got significant pricing increases and we are guaranteed for the value we are delivering, the value creation is even moved upon now and we can push it up further, so obviously comparatively, we are not going to tell you, what we are pricing out, but some of our tenders in some countries are actually open public tendering, so you see pricing, but in Brazil for example rates have gone, have increased between 2010 and 2013, probably the order of 30% to 40% and that wouldn’t be that is not unique, I’m not going to say anymore than that.

Unidentified Analyst

It’s the new pricing, how much of new pricing is reflected in the income statement that we see and like how do the contracts roll over the next five years, that we see this pricing?

Unidentified Company Representative

I think, if you look over the last, since October to what’s happening today, the lack of 225s has allowed the re-pricing of any aircraft is available to replace the 225, and if you look at the results, in the third quarter you’ve seen and most people expected that 225 is not flying, there would be a dip actually went the other way, I think that’s reflective of we’ve already achieved rate increases, we are, we could have contracted most of those 18 S-92s already, so we have chosen not to and we will contract them very shortly based on discussions that are happening with customers. An interesting trend that’s going on as well as we are in a number of direct negotiations with customers rather than defender in exercises. Got it.

Unidentified Analyst

On page 57, you showed the aircraft pass in Aberdeen, where was that 14 taken out and you being able to build this number of backdrop. Are there any two to five customers that you had at the point of announcement that would like to be flying but or not because they don’t have aircraft the platform or have you been able to find something for everybody who was flying into it?

Unidentified Company Representative

No, not everyone is getting service. In Aberdeen where it is 70%, 80% of…

Unidentified Company Representative

Yeah we have probably grown interesting clients who run on 225. We have Tom and Mark alluded to a long-term relationship with intend to focus on those clients who were willing to enter into five year plus contract with us for additional of calendar capacity. I think we’ve lost probably two clients than we had previously. So we had certain amount of clients who are previously used clients i.e. the only piece as a used that Helicopter. They were at the bottom of the contracting change towards this feat and they have unfortunately funded very difficult to secure supply. Some of us have actually gone to it now and asked for a e-contract of the aircraft, but a five year down for example where the only one 50% of that aircraft but they know, that they don’t take 100% they don’t get it.

Unidentified Analyst

Okay. So, if I heard you correctly, your clients who’re flying 225s, 70% of them are now seems to start this via a different craft? What would you say that percentage is for the rest of the market?

Unidentified Company Representative

Currently, there is not enough capacity in the market. If I look at where I’m just staying in Aberdeen and the passengers we move, so we are probably still on 12 months backward look 2200 passenger on a weekly basis. Whilst we’re up in starting aircraft just now, unfortunately those starting aircraft don’t have the capacity inside than the previous 12 did. I think we’ve gotten stronger as we progressed. I think if you look at the other market providers, they are probably in a lesser situation than we are at the moment.

Unidentified Company Representative

So this would point to the idea that in these regions that there is a significant amount of oil and gas business that’s not being done right now or just work is going in a much slower rate.

Unidentified Analyst


Unidentified Company Representative

Jeremy, can I comment on that because what’s happening in the world is we would see this that affected in Aberdeen that were not so much in other places. Other companies or our other competitors are more affected in other places than us. So there is an effect of people that offshore work being delayed or not done. What the oil companies are doing is where it’s really seriously affecting them, they’re don’t mining their installations to almost like minimum maintenance mode, but they just do enough to keep the production going but then they can (inaudible) the people, until the 225s comes back. So that’s how the oil companies are managing through this.

As the construction season in the North Sea for example, comes up their requirements go up because they had planned projects that had been two years in construction and now have to be installed. And they need this installation happen and they need more people on the platform to receive the facilities that are the new facilities being tied into existing infrastructure. So they are all coming to managed to reduce the actual loading requirement as much as we can, but it’s going to go back up.

So the additional capacity that’s coming in the market is going to serve them well. We are just trying to choose where is the best place to go and which are the best customers to sell. And understanding the seasonality and that the 225 did a lot of flying in the North Sea area still haven’t seen the full verifications of this grounding because we’re just getting into a seasonal upswing right now.

Unidentified Company Representative

That’s correct.

Unidentified Analyst

In regards to you’re being able to satisfy clients with perhaps that where coming to an end of a lease and you extended the lease for, as I think some craft that perhaps where you’ve been thinking of evolving out of the your total lives. Say Eurocopter this is done in 18 months, in 18 months where we are going to have a situation where all of a sudden we have 20 craft that would have gone out of service or out of the priceless books over the last two years and all of a sudden we have the poppies out. Will there be any kind of end of scenario situation that has a – in a way a backlash to it?

Unidentified Company Representative

We don’t see as a backlash Jerry, because the clients are now starting to look at different attracting strategies. For example, our client who has in the past had only 225s that same clients going, I’m never going to beat myself in the position where all my eggs are in one basket, again I’m going to contract now for two types. Other clients are saying, I need one and a half helicopter, I will get one full-time and the other one I will go to the market and get add, that guys now you going to contract two, and he is going to try and then use this field capacity on that.

On slide 57 you’ll see number of 332L they are the – they’re classified as refurbished. Those aircraft were held-for-sale and in some cases were already sold. And we manage to lease them back from those companies they were held-for-sale, because they used up their useful life and it was going to cost more to refurbish them than the value of the helicopter and we’re not sure we could get work, because the presence is always for new.

What we were able to do with the once here are called refurbished. We spoke to those customers and said you’re going to have to pay for the refurbishment and you need to give us a guaranteed utilization, because we’re not going to spend that money unless you pay for it upfront and then give us a contract that allows us to continue training pilots on that type, because we’d plan to stop that and they’ve all agreed and they’ve all paid us. And those helicopters are now in all cases they are earning more than the original 225 is earning, talking about rates.

Unidentified Company Representative

I’d like to add just one thing Mark. There is a common theme here I think, and it comes back to the question of pricing. I think we should think of it not only in terms of pricing, but in terms of improved terms for us. And that comes in the form of contract terms that are more favorable to us potentially that or that occur as a result of this situation, longevity, and hence more stable revenues and cash flows going forward. So we’re very cognizant of the needs of our clients, and we’re willing to work certain deals that give us the best combination of terms in pricing and this is going to coming out in various ways right now.

Unidentified Company Representative

Well, I think what Mark was going to say is, there is a real close coordination between the finance, commercial and operational group. Not to be similar what happened with UK SAR with the current 225 issue because a lot of these leases on the 332 have been coordinated through the finance Stryker groups. Yes, there is a lot of coordination here Jerry that allows us to, really have an emphasis or not creating such fluctuation. We could absolutely get much higher pricing, but we’ve also do that for significantly shorter contract period.

The nature of the BVA improvements that we want to see is that we want to see you in our stock and have this conversation in 2018 and say, we got you that long-term contract that’s what the market. One thing we know is the markets can’t be the same today as it tomorrow, it could come off, but we’ll still enjoy as compared to the transitions for or others to have a much shorter in elastic pricing.

We are willing to sacrifice, this is of course we’re going to sacrifice 50 top pricing, it’s great value for the client and then just extend our terms, a number of years as you know, we want to get that contract term beyond five years we can and it’s appropriate.

Mike Imlach

You can imagine Jerry that, when you charge and go to the clients and not always going to be happy about it. And that happens in the suppliable business, where is the same suppliable can – it can be hard at one day for ten times the rate it was the previous month.

For sure, we’re in discussions with clients who we are aligned with our values and they recognize the value we’re bringing to the operations and therefore it’s a discussion that fits with our business model. Our business model has never been to be the low cost provider. Our business model has been to be the value provider.

William E. Chiles

Jonathan, it’s only for you, right. It’s (inaudible).

Jonathan E. Baliff

Okay. Thank you very much. And, before we break for lunch, let me just thank Linda McNeill and Leila McKinney for putting on this venue for us. Great job they’ve done. Please join us for lunch. We’re going up to the very top of the hotel. You have to go around the corner to another elevator bank and go to the very top. We’re going to wrap it all five beautiful helicopter models S-92s and you got to go to lunch, because you’re going to listen to a great talk by Hank Williams. He is diva number one. So, again thanks for coming, thanks for hanging with Bristow. We want to continue this wonderful performance, and be here next year celebrating again. So, thank you very much.

[Break-out Session]

Unidentified Company Representative

Keep all your meal, but we’ll start moving things along and introduce our guest speaker Hank Williams, we’re going to be drawing for the model, so if you have empty seats at your table, you can just quietly reach over to grab that other ticket but [on the whole] still helicopters at your place, there is a number. Then I’ll call out five numbers. Bristow employees are not eligible, so Bristow employee wins I am going to go to next number. So are you ready? First number is 8436, 8436 all right, you get your pick okay, there are plenty of models around here, so…

Unidentified Analyst

(Inaudible) that’s in the middle of the table that still get (inaudible).

Unidentified Company Representative

Okay, okay. Next number, are you ready? 8454, 8454 there we go here, all right. Next number 8449, 8449, Linda check my number oh! There we go, all right, you get a model of another taste. We got two more to go preference to number okay, 8462, 8462 Antony, all right, what about this Cougar model, somebody get it, that’s go where Hank, Hanky. All right last, but not least 8406, 8406 nobody, no one. Okay, try again 8490, 8490

Unidentified Analyst


Unidentified Company Representative

Jerry, all right, congratulations Jerry, okay that’s it. So all right we’re going to lower the blanch, let me introduce our guest from Canada, first (inaudible) who is sitting next to Hank and Hank Williams. Ken, want you can stand up or Hank comes up here, Ken yes please. Kenneth and Hank basically together run the whole operation in Canada, and Hank actually couldn’t operate without Kenneth, so she really does, she really does run the operation.

As all of you know, we made an investment in Cougar that was closed in early October. Cougar is the largest provider of helicopter services on the East Coast of Canada. They may be the only provider of helicopter services on the East Coast Canada, and then we’re very happy with our investment. You guys have seen the results in our numbers since October.

So we as you know, we structured the transaction where we bought all the assets of Cougar in St. John’s and Halifax along with eight S-92s, we leased all of that back to Cougar so it’s a financially very accretive transaction for Bristow, we’re very happy. The other thing I would like to say is probably and I don’t want to say this in a discouraging way, but discouraging to other people in the Bristow world, but it is about us get an operation as you’ll find anywhere in the world, I will say its better than Bristow operations.

As I guess that would be discouraging but, it is a high quality operation to very similar what we do in the North Sea what Mike, in Mike’s operation. I encourage all of you guys to go up there and look at the operation; it is really something to see. They have a lot of practices up in Canada that we Bristow we’re going to learn from. But we have a few things they will learn from us as well. So it’s a great relationship, where we’ll share best practices and we actually show aircraft. As most of you know, we have moved aircraft between St. Johns and Halifax and Aberdeen in Norway.

Several times over the last couple of years so, for example started all had an excess capacity of Norway and maybe did helicopter in Canada. So they ask us we would lease the helicopter temporarily to Cougar, before we actually made the investment in Cougar. So, it’s a very, it’s a wonderful partnership don’t have to, we got a hands off. I think then need bunch of micro managing out there; they do a great job and is beautiful to see, so please get up you. We get up there also; you’ll get this one Asia Trip to Aberdeen, which you’ll be able to see a oil and gas SAR operation. They probably think you unless you do an [vincing] maybe.

Okay, so Hank is General Manager and he’s been there since 1998, right Hank? 1997. So he knows lot about the business in Canada. So with that, Hank would you come forward for your award to speak.

Hank Williams

I’m apologized for the change in the view and I going to look at me rather than beautiful view of there, I noticed, I’m not wearing a microphone. I guess the performers of the last presenters that we should take that away, what you think, I mean between Bill and Mark dropping in (inaudible) whatever was there. So, first of all I’d like to thanks Linda and the Bristow Group for this opportunity.

And I’ll think I was in Cuba, when I got an e-mail from Linda about coming down here. I’ll sure, I get back to you. And Kane’s was probably make yes, you should go there. But then I thought about, if I’m going to see Bill and Marc in the Bristow team again. I don’t care there is a Mary Kay function I am coming.

I am going to go that so much I enjoy hanging with those guys. But Bill mentioned about the Cougar, Bristow relationship. We’re into the – I think it’s March 7 right now of operations, since is the transaction took place and very pleased with it. And I guess we go back to the last year of year and half of the due diligence and everything. And probably the most is in my house hold was Don Miller, because I get all for dinner, I get all for dinner I’d say even I reported back with Don Miller is called another conference call. So, Don, I think that’s beyond this done, so you get some makeup to do, when you come St. Johns.

So with a name like Hank Williams I guess some of you might have thought you’re going to come here to hear some country music. And probably the last thing you want to see is more slides. But we got a few initial and I’m want to trying to give you a little snap shot of the St. John’s operation. Little bit of emphasis on, but of course the Sovereign UK model that we saw this morning is no where near the magnitude of that. But what you can see all of the same basics is there. In our training, our equipment our delivers to the customer, so it’s all there, so this is what I’m going to try and do for a brief short period of time. I tell you a little bit about Cougar in our operations.

Just a little bit of background. We’re headquartered in St. John’s, Newfoundland, one of the best places in the world. I said to the guys at dinner last night that Don Henley, as line in one of the songs go the Last Resort says, you call a paradise, you may chip. So we lie to people about how good it is there. It is an awesome place.

Newfoundlanders are very strong, proud people and hospitable; would you say, Bill? Hospitable and we’d love that. Any of you guys come and visit, give Candice your card and she’ll make sure she’ll get all the arrangements made for you for sure. When we talk about world’s most challenging weather conditions and I guess when we talk about harsh environments, it’s relative to where you live, but it is considered to harsh weather environment. We can go from plus 6 to a minus 6 all in the same day. So we’ve got to make sure the aircrafts are all housed as that would not enter freezing rain conditions.

Fog – I mean during the summer months, we go through two or three months where we may be six or seven days where we don’t get an offshore flight down because of weather. So then the challenge becomes in catching up and getting the people to and from the platform. So it is a challenging environment.

Full spectrum and what I mean by that is we do offshore passenger transfers. We’re in the search and rescue. We are very – I’m going to say, very good at doing clear trip changes for all the offshore installations. There is only five pilots that are approved by VERTEC out of Norway that does these clear tip changes and we have two of those five approved pilots flying with us. So that’s the kind of work we’re into.

As Bill mentioned about the aircraft, we have right now seven in St. John’s and I’ll get into ‘07, our distributor leader and two in Nova Scotia. So if you do the math, that’s nine. Bill said he’s giving us eight. So we do have one aircraft on our short-term contract right now from a third party. St. John’s base, we constructed in 1996 and we did some major renovations in 2007 and basically, it can accommodate four aircrafts here in our main passenger base here in St. John’s. In Halifax, that base was only completed in 2011 and we can get three machines in that facility.

So as the growth goes on and we talked about CapEx and all that, obviously, we anticipate that we’re going to need some more infrastructures in the land of Canada, that’s for sure. This is probably one of the best maps that I can put up that will give you an idea of our operating zone in the Eastern Canada. And if you see the group of red dots that are in the center there, that’s to refer to what we call Jeanne d’Arc basin.

In Newfoundland, we have three core production companies, ExxonMobil, Suncor and Husky Energy. So those three operators make up the production in that Jeanne d’ Arc Basin. And I won’t go through all of them, but we talked a lot about range of aircraft this morning. The shortest distance we’re flying out of St. John’s is the 170 to Hibernia. And we’re up in a very challenging place called the (inaudible) pass. If any of you people ever saw the movie, the Perfect Storm, the Andrea Gail, the fishing vessel, that’s where we are. That’s 270 plus out of St. John’s. It equates to probably a 4.5 hour ride for a passenger if we end up doing a mist approach for weather out there. So it’s a long ride.

It’s funny at the entry, I – this year we had some meetings with AgustaWestland. They started talking about do we think there is a need to put laboratories in our aircraft. After 4.5, I need one. So you know something in – there it is, we go further offshore in the range, there is something we have been looking to.

The Nova Scotia activity there in the blue had operated over Halifax space and the (inaudible) and the Sable projects are both natural gas. The good news around Nova Scotia is that shareholders made some major commitments to that area. and they’re starting a fairly major seismic program here now commencing in mid-May of this year.

So from a Search and Rescue point of view, I pointed there in this map is that out of St. John’s, it’s mandatory the offshore is regulated what we call it a C-NLOPB, Canada-Newfoundland and Offshore Petroleum Board. For the operators to drill there, they must provide first response capabilities for SAR, that’s the same definition there.

However, that same regulatory model, you operate out of Nova Scotia doesn’t insist on the oil companies providing Search and Rescue. And a rationale behind that is that, and I think Mark alluded to this morning, the business is offshore and the business from SAR is that in St. John’s, our Department of National Defence was to provide SAR was located in [Gandhar], that’s about an hour and half from St. John’s.

So any mission to the oil field, they would have to have hour and half and probably a few stop in the St. John’s. So we’re closer. in Nova Scotia, that’s not the case, the D&D aircraft are located right there in Greenwood, right next to our Halifax base.

So there is no benefit to the oil companies bidding that. A little bit of SAR operations and as I said earlier is that the magnitude of the UK program and congratulations to Mike and his team, massive program and I was listening very carefully when he talked about his resumes that he had in, I hope he has known from Cougar, when you want to check those and see that make sure none of our guys have come in North America.

So little bit of SAR operations, we provide 24x7 SAR services and crews. and this is the nature of the services we’ve performed. and the key here the Search and Rescue that we have in St. John’s is for exclusive use for the oil companies and the oil companies only. and I’ll speak to little challenges we have around that a little bit.

Cougar as I learned this morning, from Bristow, they’ve been active in SAR long time. Long before, I came on to Cougar; they were active in the SAR business, more solid from LIMSAR or Limited SAR. I think the base I guess 76 that we operated first at Nova Scotia and fully started, that was an idea.

So the past and present bases, of course where, today is, if you look at it today, the only place we operate SAR is at the St. John’s, Newfoundland. What we have done in Nova Scotia, up in (inaudible) and we’ve been in Alaska, and in Greenland as well as in a couple of places.

The SAR from LIMSAR on has continued to advance and grow and evolve. and today, we feel that I think as Mark alluded to that the UK SAR was the top level of SAR operations that to provide and that’s what we feel we are in the St. John’s Newfoundland.

Just a little bit of timeline of when I say evolved in SAR, from 1991 to an S-76, we had the Nova Scotia. So when we started our first offshore activity in Newfoundland, we were providing SAR with Super Pumas. and I won’t go right on through that. But right on down to 2013, Night Vision Goggles I think Mark spoke about this last morning. Currently, as we speak around the training with all our Search and Rescue crews, and we anticipate by the end of May that will be rolled into our program then all of our Search and Rescue crews will be fully NVG certified and qualified.

Enhanced First Response and I want to talk to that a little bit, because you have to understand where we came from. When I mentioned here, we started in 1977 with three Super Pumas. The petroleum order that I mentioned earlier, their stipulation was that we had that one hour response time to respond to an emergency.

So what the operators along with us did was we had three Super Pumas, these three Super Pumas have the provisions to install Search and Rescue gear. But those three aircraft continually flew the line in the passenger arrangement. What that meant, when we had the Search and Rescue machine, we had to reconfigure that aircraft. So we need a 30 minutes just to reconfigure the aircraft, get hoist on, seats out done on.

So now under the new regime and the new regulations when a Petroleum Board is that they’ve said they want that reduced down to 20 minutes. So we said, what do, we do to do that, and what we need to provide what Cougar needed to provide that to meet those stipulations. We had that SAR facility. We were operating in a facility that was pretty tight. We needed that dedicated SAR facility that would allow us to do that. We needed the dedicated aircraft. We couldn’t, for the time we would be taking equipment on and off of the aircraft.

And of course, we needed the dedicated crews, same thing with the Pumas I mentioned being used for passengers that’s what our SAR crews were doing. They will find a line and they were all certifying for Class D hoisting and that was about to hit, that was the limit.

And that would have 20 minute response time, and because of dedicated aircraft, the challenge for us in previous times was getting access to airplane for training. Today we’re doing 60 to 80 training hours per month on the aircraft. So we’ve referred to it as enhanced first response with all of these items in there and very proud of where that has come.

Current rule of posture, we’re supporting five Grand Bank’s offshore oil projects and all of their vessels, any asset that they have in the field, whether it would be a supply vessel, a drillship, or diving vessel or platform, we are responsible for the Search and Rescue or First Response to that program.

And there is currently sit in St. John’s today, one S-92s, 24/7 always in the SAR posture and we provisioned another aircraft and in the event this one has to come out for regular schedule maintenance or downtime, and we do the transition over and we have a backup aircraft. 20 minute response time, 24/7 coverage and this all managed from our dispatch set, which are such based on few minutes here.

Here is the kicker, if you can read that one there, as I mentioned earlier the service we provide is exclusive for the oil companies. What do we do when we get a call that attrition minutes in the stress 60 miles offshore. Can we go get them? And basically what I’m saying is we need to get approvals from the people who are paying for that aircraft to go and do that.

And where the oil companies come from on this, is that they feel that the government is totally on their service, so soft sponging off the back. So the oil and gas was paying for the Search and Rescue service. Now that being said, we all know that when a call comes in this life of death, we’re always going to try. We’re going to be there.

And as this said, I need permission. But many times over the last 16 years when I not the last four are not directly involved, but I got forget this in a morning, not permission when someone is in distress. And it’s never been an issue.

When we talk about the stipulations, what the oil companies want to do now to allow me to release an aircraft, they will get that fishermen or (inaudible) fell off the cliff is that no one of our passenger aircraft will fly they released the aircraft. So the by-passenger aimed at flying, they figure two big of an exposure to release their aircraft to go to another part of Newfoundland to do Search and Rescue.

When I talk about SAR, I still move Bill Chiles, a $100 because I told we were going to be end in April and I bet him a $100 and it was June before we got it, so we own $100 of this. So that’s actually that’s where as I hang over there in that billing as well as that’s where our office is.

But it’s like a firewall type concept, the guy sleep there. They’re all prepared to do that 20 minute response. They trained under there, all the medical equipment is kept there. And we’re very proud of that facility. And that Mr. [Nori] prior to Bristow made a commitment to the oil companies in Newfoundland with the SAR contract will come in proposed facility and that’s what we did.

Okay our operational control center, we can have the best of aircraft, we can have the best of crews, but who is coordinating this, who is making sure that everything works well. And for the people from Bristow that often visit our place that have seen how we manage our OCC center, operational control, we are very proud of it.

24/7 as I mentioned, every Cougar flight we do whether it’s Halifax, whether it’s Greenland, whether it’s in (inaudible), it’s all dispatch and flight plan from that centre, all of our training. In the event study, any emergency occurs that literally red button is hit and you’ll see in the video later, the red button is hit from the center to activate the SAR.

We operate what we call, Type B authority dispatch. And we were first rotary wing in North America to do that. And basically what Type B coal authority means is that the opposite of not doing a Type B is that a single pilot, the captain will prepare flight plan, analyze the weather, file the fight plan and he is making the decision whether he goes he is making a decision how much fuel he needs.

Now with Coal Authority while the aircraft is on the ground, we have a dispatch of this, preparing the plan and both of these people must agree on the plan. So, Bristow has other layer of discretion in what we’re talking about things like amount of fuel, weather forecasting, so that I think as what we offer. If those two people, the Pilot and the Chief Dispatcher does not agree in the flight plan, the flight will not go and our Chief Pilot steps in to find what the reason for is.

I won’t get into all of that but we have to make sure that it’s a self contained emergency response of course. And it’s all back-up generators and truly tested, I won’t get into all of that. But I’d like to speak about, how we are set off and if you can see that here, one of the things we do that I think most, overall the, what we called Blue Sky Tracking system. This is where we must; of course it’s a regulatory component to we must know our aircraft is at all times.

So, what Blue Sky Tracking systems that we have, gives us that information. So, if I get turn that over to Search and Rescue and with those systems on the aircraft and regular reporting, we can almost remove it, if we have a aircraft incident, we can almost remove the search from Search and Rescue. We know exactly where it is.

In addition that you can see there of what we’ve done for the oil companies as I’ve mentioned, we have a regulatory reason to follow the aircraft. However, the vessels, every vessel is working offshore for the oil companies are tracking this system as well.

And there is two reason for that, I guess the logistics and the situation awareness where the vessels are, but if we have an emergency in an aircraft, it’s great information those pilots know that where the vessel traffic is? And where they should be heading and within our dispatch of those brief in the morning, he gets a visual snapshot of the Blue Sky Tracking that shows the positions let long all the vessels that is reflected. Defense Flight Information Display, which displays our on-time schedules and departures, our homeless monitor there, basically shows us after every flight, of course, we’re pulling the homes data, reviewing it and if that, if any aircraft turns with, their dispatch is not that aircraft is not available for flight, so, don’t use that.

We have a maintenance control center there as well, we have two maintenance guys in the really old time that based on our planners and our maintenance control and that makes up the OCC. So, they work well together with the tracking of the aircraft, dispatching the aircraft, and knowing about the serviceability of the aircraft and then of course, we have all the video feeds through various places, even in our remote locations, we have video piece going into this place.

Little bit of SAR equipment, at Bristow, touched on the near presentations about the aircraft and how S22 was configured and I guess some of the keys here is you know, it seems like the dual is standard these days. You do it on machine, one hoist sales; you bit have a backup there, if you got guys in the water.

So, it’s a dual place configuration. The forward-looking infrared and the night sun and I’ll go through all the list, but you know, I don’t know what else you could put under the aircraft but it’s pretty similar I guess Mike to all of your standard configurations your aircraft when have.

The auxiliary fuel tanks are a key for us because as I said, we’re operating 271 nautical. So, when we have facilities or installations that are altitude 70, our standard configuration for our SAR aircraft will change that we will have two auxiliary fuel tanks and to make sure we’ve got the range to get there. And the compliment in the back, two products, of course, I just mentioned and we’re operating with three individuals in the back, a hoist operator and two rescue specialists.

We have extensive experience so, we’ve been very fortunate as I listen to Mike again this morning. We have been very fortunate that we have a lot of experience from Ex-military people that fly with us. And, it’s interesting, the mix is pretty well the same, I would say we’re probably 50-50 in from the civilian pilot to a military pilot.

Transport Canada Standards of course, Transport Canada has been great working with us and lot of the standards they develop. They came into pretty early to get some where they needed to go from creating the standards. Full-motion D simulator of course, we do a lot of training on that and NBG is being a part of that these days.

And proficiency checks pretty standard that every company, that will be doing forms as forth. When we talk about experience of flying the 500 maneuvers, it’s our experience in that one operation that we run right now. So, there is a lot of folks there. The medical expertise, I’m not going to go through all of them, but actually you’re going to see our guys in the back of that aircraft are pretty good at what they do. They have a lot of training behind them and continued training behind them.

I’ll provide the service for permission they’re going into. And I’d like to put that up, because I have such an admiration for search and rescue teams, lot of times we see them just hanging to it, with the facility and little bit of training, but when push comes to push, who’s going to hang after that line at high winds, high seas?

I have a lot of, something in here that to say they’re special people, and you know the model that the guys have hung up (inaudible) say that others may live and many times they almost forget themselves, and what they do is so others can live, so I’m very proud of in all these medals that our team in St. John’s that they have with them, most of these of course, we’re all gotten through their military days, but some of these have been in cumulative since they’ve been with Cougar.

Opportunities, I’m going to flick through this a little bit, oil and gas pretty similar to what Mark said, I mentioned Nova Scotia were the regulatory body at this point in time does not mandate that the oil companies have a first response, but there is no doubt in my mind or going there. Shell, who is coming in May have already asked for LIMSAR, they want ability to be able to hoist up in the vessel, so we are accommodating them for LIMSAR and Nova Scotia starting in May. And Shell has been adamant that when they do come into Nova Scotia they were insistent that they have their own dedicated search and rescue or first response.

That’s Nova Scotia; Labrador, Labrador is a big potential market for us, a lot of interest in Labrador, seismic activity, so from an oil and gas perspective that opportunity exist there as well. And of course, the big Arctic, we were there last year for Chevron providing with 139, providing SAR Service in the Arctic, it’s a massive land there, so any activity up there from an oil and gas operators are always going to require SAR activity.

And Mark mentioned Greenland, I think the Greenland opportunities are something that Bristow and Cougar will be working together on as we go forward on aircraft supplying and crews and operations. So as I mentioned in the Arctic, we feel that there is a lot of opportunities out there we will continue to chase those. In Greenland, just for your information of the folks, 2010 and 2011 we provided both passenger services and the search and rescue in Greenland for Cairn Energy, nothing in 2013. But they anticipate and they’ve been publicly stating that they are back there again in 2014.

A program in Cairn Energy in Greenland will require about three to four aircrafts. And when we left there in 2011 we had two S-92s on passenger aircraft and 21 SAR because they went in two separate locations, big opportunities there.

But let’s do oil and gas. I want to talk about the potential growth and what we called the civilian market. And Mark jumped right over something today that we’re jump right on to something rather that know that is in my mind is that what you guys are doing in the UK? You talk about other countries looking at it. We’ve already had folks from our federal government talking about wanting to come over and see, what they are doing over there, and how that models would work and will work. So with the Cougar and Bristow arrangements and you guys going into your [gap] started leaving and what you are doing, there is no doubt in my mind that the Canadian government will be looking at that.

Just a little bit how this works here in Canada, JRCC SAR base, but the Canadian forces provides aircraft for search and rescue to the Joint Rescue Coordination Centre, and the Canadian Coastguard provides a ship-submarine to support that rescue those to split up into two zones, if it’s a land mission or if it’s a marine mission. The trouble, I am just going to bring it up, the trouble is you can see that the vastness of the region and look at the aircraft that they are coming in, not so good.

And I want to focus specifically on the Newfoundland here in the Bataan island, this is the area of, right now was operated by Gardner, three comrades and out of three comrades their best day is they have one available and you can see the region that they have the Cougar, so it’s no wonder the offshore petroleum board says to the oil companies, that’s not sufficient if you are coming and you drill, you have to provide your own.

So the big market therein the sensitivities and people spoke about public today, what the local public will do and unfortunately not a lot of search and rescue gets attention until something goes pretty wrong, last winter, there was a very unfortunate event in Labrador, which is just up there from.

Anyway in Labrador, 11 year old boy decided to go for a snow machine ride and got lost on the ice, and it was 36 hours before they had any activity from see at (inaudible). For a number of reasons, it was aircraft issues and it was the region and then exposing the rest of region was at the land base it was at marine, there was number of reason, but it’s a political nightmare, a lot of attention given to it, a lot of politicians want to jump all over the federal government say you are not providing adequate services.

And Cougar’s approach and we I walk cautiously on this one because every time there is an event, we have an opposition politician sitting at on my office wants to come in and speak to how I feel the federal government is providing services, and what we, our approach to being there for this type of work is keep doing what we do, do it well, make the right people and all that we’re here, this is what we do, and this is what we can do and I think that what’s happening and we’ve had a few trips to Ottawa to visit the federal government and I don’t think, it will be a cut off from military numbered over to privatization.

I think you are going to see some sort of a hybrid between the industry and government effort, and they’ve spoken to us about doing, may be doing a pilot project letting us about three year grab in [Gardner] and moving to CFB base down the Labrador, so there is a little exploring a lot of options of what they can do this, but I would bet, that over the next five, eight years, this is probably our biggest potential market in civilian SAR.

Okay, we’ve got a short video to run that basically runs through all that after the video is over you can ask a few questions, and I just roll from here guys away. Here we go


Unidentified Company Representative

So, we were trying for two years to get whether good enough to look at that video. No, that’s not true, we often like I said, we joke a lot about with our new plan, but it is a harsh environment and that we struggle with and I best [heard] it described by a Frenchmen that lived there for a while, and he said this four seasons are winter, winter, winter, and two weeks of bad skating,

So, no way, it’s hard, but it’s a beautiful place, we love it there of course, it’s home, we continue to do what we do and then the goal was in, I guess I stood at a little bit more when we got into when they’ll spoke about the Bristow, Cougar arrangement, as a company and for me personally when the news came that we were associated with Bristow, we were very proud.

One, that Bristow saw value on us that they wanted to partner with us and I don’t think there is any other company that we would want to partner with to share the same values and I listen to Bill talk about his mission statement and his vision and everything, we are so similar culture in our safety culture, everything we do and Mark is talking about focus on the client and how we better make sure that this any helicopter company can provide an aircraft and cruise, we better have to value added that keeps us above the competition.

And I think our relationship with Bristow, I call it we’re tag team and I feel right now Cougar as a big brother, a big brother that can help us grow, move forward and we’ve already had so much interaction with the Bristow team of recognizing best practices, the areas we can improve and anything we can share, so we’re going to continue that so, any questions. Guys?

Question-and-Answer Session

Unidentified Analyst

(Inaudible) of opportunities over the next couple of years that, sure, that you’ve outlined a number of opportunities that you see over the next couple of years that will obviously require additional aircraft. Do you have an option book that you can tap into, or would you lean on the Bristow relationship…

Unidentified Company Representative


Unidentified Analyst

So you possibly get additional aircraft, Mark?

Unidentified Company Representative

As Bill alluded to releasing eight aircraft, any new opportunities come through for Cougar on talking to Mark Duncan at Bristow to provide us with those assets, whether it would be infrastructure, or whether it would be aircraft?

Unidentified Analyst

What is the single greatest thing you’ve learned so far from the Bristow partnership?

Unidentified Company Representative

Well, it’s – I think it’s – it gives us financial stability moving forward. And I think for all of our clients and customers, it gives in a feeling that our access to aircraft for going forward is much stronger through Bristow. From an operations perspective, I would say, Zero has changed in a way we run our operation today. But it’s being able to – been a 2016 head run is the next big production project sanctioned, constructing a GBS as we speak in St. John’s. It would have been very difficult for Cougar to been on that contract to acquire three aircraft, led through our Bristow arrangements. I think we are much stronger and our customer see us as being much stronger, being deeper when it comes to assets, for sure.

Unidentified Analyst

We’re going to give a lot of relation with Cougar?

Jonathan E. Baliff

For us, Hank mentioned the financial, but there’s a lot that we can learn from Cougar operationally. And even somewhat commercially because of the nature of how they do their business. There’s a lot of things that Cougar does for their clients like a lot of the equipment change off on the rigs that we don’t do as much of and I know that – I don’t know Jeremy said, but I think there’s a lot of best practices that are exchanged and we will continue to be exchanged too.

Unidentified Company Representative

And when it comes to the OEMs, I mean, we’re operating in St. John’s with eight, nine aircraft. And we have an issue with Sikorsky on delivering our parts supply. And as I mentioned about the Big Brother, I have a much bigger stick going to Bristow than with Cougar we’re just coming in alone.

So that area of support and our maintenance program and everything running under Bristow, great support from that Group, and just more access to parts, components, you just increased your warehouse of assets and materials 24.

Unidentified Company Representative

Hank, I just wanted to add one thing, the type of environment that Cougar works under an expertise they’ve developed, that type of exploration and their oil and gas activities only going to increase in Arctic and harsh environments. And for us, building on what Jonathan was saying, that’s a plus, because now we have a sort of a direct way to transfer knowledge and to work with Cougar collectively on other opportunities that will present themselves in the future. So it’s very – strategically very important in that region, I would say.

Unidentified Company Representative

Yeah. And we share a lot of customers now i.e., Statoil. And I think it was Bill mentioned about two years ago getting an aircraft from Bristow to service Stat on Newfoundland. The transaction was another boardroom on the 18th Greenland in LACE rate, Mike, where our customer needed something in St. John’s, it was absolutely possible for Cougar to provide and Bristow stepped up, mutual clients and help us do that.

Greenland is up there and Mark and I talked about it briefly yesterday. Greenland is a big challenge, because where do you find four S-92 or three to four S-92 assets for a six-month program and commit to it that is a challenge. But if Cougar had to do it alone, I would say, it’s virtually impossible for us to find three or four aircraft. But, Mark, there might be some clients who are finishing up certain period of time collectively together we maybe able to provide that exploration work.

And Greenland is, you’re not going to be drilling in Greenland past November or you using icebergs far often at landing sites. So that’s a challenging, but the growth potential and more specifically in Newfoundland, East Cost Canada, I mentioned that Shell doing in Nova Scotia. But we have three production entities, number fourth is coming online, Statoil was in the St. John’s doing exploration for the last three to four years. They now became levered; I think it’s only 84 people into our office at St. John’s. They are not there playing, they are going to be there as a big player, while there is ton of optimism in St. John’s. And I told Mark and Bill, we are down here in May, I think that in Houston, Jeremy, and I’ll become old my five-year CapEx for that.

Anymore questions guys, but I think seriously they rolled out that welcome to St. John’s. We would more than welcome anyone who want to come up and see what we do, Dan has been there, are you too Dan? Dan has been there all good rate Dan, and we have our own many Bourbon Street, let’s call it, I would challenge you all the Google of George Street Newfoundland, St. John’s that 52 berths, a quarter of a mile. So Bill, because of our operational excellence, client centric focus has, had to depart New York City for our client meetings. So he wanted to thank especially Hank and Kenneth who – can you please stand up Kenneth, so, yes, you can, because you are from Google too.

Mark B. Duncan

Thank you.

Unidentified Company Representative

So anyway Kenneth, but it obviously add that dimension to our company. I know Mark left for a second; he is going to come back. We do have a few more minutes to answer few other questions, but we do want thank you, you’ve spent a lot of quality despite with Bristow probably more than many of you in the last number of months and we really, really want to thank you. We also very much want to thank Linda McNeill, and Leila McKinney who, of course, still working to get this finalize, but they did a great job and we appreciate all the effort. But we will take some questions just to finish it out if you got anything extra. Mark?

Mark B. Duncan

So there’s a lot to digest, that’s the one thing that we’ve heard it from the rating agency yesterday, this is a lot of material, so we understand that too.

Unidentified Analyst

Thank you, guys. They’ve also done a good job of finding levers, levers to pull on the working capital side. Are there any additional levers that you can pull to further increase the BVA percentage that you are earning?

Unidentified Company Representative


Unidentified Analyst

Well, yeah, pricing.

Unidentified Company Representative

I mean, if you really look at the BVA improvement over the last, two years, two or three years, a lot of it has been, let’s face it a good chunk of financial engineering with a combination, and it doesn’t mean that it’s easy, right. You have to work with George Bruce and his team has operationally been doing in conjunction with Brian Allman and a lot of the teams have been fantastic, and there is still a lot to be done there. I mean, we really do believe that we took the low-hanging fruit, but then the next level in (inaudible), but really I think the bulk of its going to be with these two gentlemen with finance support in the operational excellence and then in the commercial management, I know a few.

Unidentified Company Representative

I think the contracts tend to be 5-year post contracts. So we have a number of those that of terms in them that we would rather or not how when they renew they won’t have. So they are spring other than just which Jeremy mentioned before in industry terms that not fully right first timeline that we was stuck with it until that contract, but also I would say that operation excellence (inaudible) of how contracts (inaudible)

Unidentified Company Representative

There is still lot of [booking] improves in these two wells. You have not seen the pricing increases come through BVA that much, you’ve seen it in the last six months, but prior to that there was a lot more financial engineering with price increases. And then I think overall, we don’t talk too much and we don’t believe with M&A as one of our opportunities, but they are out there, right, they are out there.

Unidentified Company Representative

Yeah, honesty if you remember, I think it was this financial year we made an announcement of 20 of (inaudible). Seven of those were started this year; the other 13 aren’t started till next year. They were reviewed with a several reviews (inaudible).

Unidentified Analyst

There is a question for Jonathan. You talked about the 10% to 15% growth next UK SAR, 10% to 15%, but you made it very clear that you don’t expect to be linear. What are the key factors we should be thinking about when modelling it out as simple as new delivery of contracts, or is it a lot more shelties within there in terms of pricing big contracts roll in over, contracts startups?

Jonathan E. Baliff

I think you have to get into the LACE rate and LACE methodology on where we could view the tools to do it. And it’s not that complicated that we give you options in order book, we give you the CapEx associated with that. And then it only select that were lumpy, because you just kind of have to wind those up for the deliveries. And once you do that, you can – if there is enough break front you can get there. We don’t like being too specific with all that information for competitive reasons.

We are, and in fact, disclosure that did put out. We thought long and hard about doing it, but we think it’s important that this contract get really understood. But you should be able to use the option order book, we give you where the contracts are going to look as you get LACE rate per region, and then you can make that a map portion by using the margin work that we give you.

I think you are going to see future disclosure concerning the leases, and we generally get some lease information. We’ve been trying at least to lineate that a little bit more to complete the model. But other than that, it’s not as complicated as some people tell us, it’s definitely easier than a rig company, we have to make a lot of other assumption.

Unidentified Analyst

Right. So there is not going to be big swings and margins or whatever?

Unidentified Company Representative

Not only…

Unidentified Analyst

Or the contracts or who ever said

Unidentified Company Representative

We always – I have told you that we have a tendency to earn more in the second half of the year, in the first half of the year, and sometimes, we will give you some regional information on a quarterly basis. For example, we gave our information about Nigeria, if you remember for the second quarter as we thought it was important for you guys to understand that. But we’ll very really give you quarterly information other than just kind of second half better than first half.

Unidentified Analyst

Okay. Thank you.

Unidentified Company Representative

One more question. Well, again, on behalf of Bill and my fellow partners here, we really thank you for participating. We look forward to talking you in the future, now we put it out there, and we expect for sure to have some other maybe one-on-one time with a lot of our existing investors, with our new investors to put some more flesh on this bone. So I appreciate it. Thank you.

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