Petroleo Brasilero SA (PETR4), Latin America’s largest company by market value, plans to boost oil production by more than 50 percent over the next four years. To do so, it needs helicopters bigger than houses and floating platforms longer than two football fields.
The state-controlled oil company’s demand for heavy helicopters, used to move equipment and workers to platforms as far as 300 kilometers (186 miles) from the coast, will double in 2012 from 2011 and rise 350 percent over the next nine years, according to Barclay’s Capital. U.S. helicopter lessors Bristow Group Inc. (BRS) and Seacor Holdings (CKH) Inc. may benefit the most.
Petrobras, which produces 90 percent of Brazil’s crude, is spending more than any other oil company as it seeks to develop offshore fields located in the pre-salt area, so called because the deposits lie below a layer of salt two kilometers thick. The company has a $224.7 billion, five-year investment plan through 2015 to do so. Repsol YPF SA (REP), BG Group Plc and OGX Petroleo e Gas Participacoes SA (OGXP3) also are seeking to develop the fields.
“Nowhere in the world looks like Brazil” for helicopter and vessel companies offering support to off-shore drillers, said James C. West, an analyst with Barclay’s Capital. “Winning lease contracts from tenders announced recently by Petrobras, and others expected early next year, would be a positive” for Bristow and Seacor shares, he said in a Nov. 28 phone interview from New York.
Petrobras’s demand for rigs capable of drilling in ocean depths of more than 2,000 meters is expected to grow by 147 percent between 2010 and 2015, to 37, according to a Sept. 25 presentation by Mauro Yuji Hayashi, the company’s exploration and production pre-salt planning manager. The company’s heavy helicopter needs will climb to more than 40 in 2012 from the current 20, according to Barclay’s West.
A Sikorsky S-92 heavy helicopter costs $17.7 million, according to the website Aircraftcompare.com.
Bristow’s global helicopter fleet numbers more than 550 worldwide, according to Senior Vice-President Mark Duncan, who oversees new business. The Houston-based company has six leased helicopters in Brazil, all operated by Belo Horizonte-based Lider Aviacao Holding SA, 42.5 percent owned by Bristow and the country’s largest provider of helicopter services, Duncan said.
“We entered into Lider in 2009 when we saw the increased demand in Brazil,” Duncan said in an e-mailed response to questions. “We saw it as having growth potential similar to the North Sea in the mid-1970s. The pre-salt will be a new dimension.”
Five more Bristow medium-size helicopters will start operating in Brazil next year under a recent contract, Duncan said. Petrobras has a bid in progress for six to eight heavy helicopters. Such choppers generate average revenue of $1.5 million to $2 million per month, while prices in local markets may vary widely, he said.
The total global fleet of helicopters servicing offshore oil and gas companies is about 1600, Duncan said, estimating annual revenue at about $4 billion.
Medium-size helicopters are used to fly 10 to 12 passengers as far as 120 miles. To reach the pre-salt fields requires heavy choppers than can handle 19 passengers. The Sikorsky S-92, which Lider leases out, is about 18 meters (60 feet) long and 5.5 meters high.
Rio de Janeiro-based Petrobras declined to confirm how many helicopters it will need in 2012 to “avoid influencing prices offered in tenders,” the company’s press office said in an e- mailed response to questions. The company currently has 91 choppers for off-shore activities, the statement said. It did not address a question about the contract mentioned by Duncan.
Fort Lauderdale, Florida-based Seacor, which Barclay’s West flagged as another company likely to benefit from the Brazil oil boom, declined to comment in an e-mail message.
Seacor has a fleet of 177 helicopters, according to a Sept. 30, 2011, presentation for investors on the company’s website. Heavy helicopters account for four percent of the fleet. Among choppers used for deepwater support services, the company has seven heavy and 34 medium-size, according to the presentation. Seacor’s aviation unit had $235.4 million in revenue in 2010.
West has a positive rating on both Bristow and Seacor stocks, which are down 1.7 percent and 13.7 percent this year, respectively. The Standard & Poor’s 600 Smallcap Index (SML) has fallen 0.3 percent. David Wilson, an analyst with energy investment firm Howard Weil Inc. in Houston, rates Bristow “market perform.”
At least one company is concerned about a possible shortage of heavy helicopters in Brazil. OSX Brasil SA (OSXB3), the shipyard controlled by billionaire Eike Batista, is building two large platforms for offshore drilling and plans to lease and operate them.
The first platform, known as a floating, production, storage and offloading unit, or FPSO, arrived in Rio de Janeiro last month and is 271.5 meters long. Crews of 45 will have to be shuttled on and off the platform every 15 days, said CEO Roberto Monteiro.
“Right now we don’t see a bottleneck for platforms operating near the coast, but for the pre-salt there’s huge bottlenecks because the helicopters must be able to come and go 300 kilometers each way, and there’s very few heavy helicopters with that kind of range,” Monteiro said in a Dec. 1 phone interview.
Madrid-based Repsol and Berkshire, U.K.-based BG are among the foreign oil producers holding concessions for some of the largest pre-salt reserves. OGX is the biggest Brazilian oil company by market value (IBOV) after Petrobras, though it still has to start producing oil.
Petrobras also projects a 67 percent increase in vessel demand between 2010 and 2015 and the company is receiving tenders for ships to renew its fleet, according to Barclay’s West. Vessel support companies, including Hornbeck Offshore Services Inc. (HOS), Gulfmark Offshore Inc. (GLF) and Tidewater Inc. (TDW), may benefit from the higher rig count in the next five years, according to West.
The ships the company needs are so-called supply and special vessels, used to support offshore oil platforms.
Wilson Sons Ltd. (WSON11), South America’s biggest tugboat operator, plans to increase its number of oil service vessels almost three times to 30 by 2017, the company’s press office said in a response to questions Nov. 30. Rio de Janeiro-based Wilson is targeting orders from Petrobras, Chief Financial Officer Felipe Gutterres has said.
Prospects for Brazil’s offshore support industry make it “one of the best in the world because of its sheer size, and the willingness to get out there, put capital to work, and drill,” said Howard Weil’s Wilson in a telephone interview.
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