Bristow Group Inc (VTOL) 2014 Q3 法說會逐字稿

Good morning, my name is Caitlin and I will be your conference operator today. At this time, I would like to welcome everyone to the Era Group [fourth] earnings call. (Operator Instructions). Thank you. Ben Slusarchuk, Vice President of Finance, you may begin your conference.

Thank you, Caitlin. Good morning, everyone, and thank you for joining Era's third quarter 2014 earnings call. I'm here today with our acting CEO and CFO, Chris Bradshaw; our SVP, General Counsel and Corporate Secretary, Shefali Shah; our SVP Commercial, Paul White and our VP and Chief Accounting Officer, Jennifer Whalen.

By now you should have a copy of our earnings press release for the third quarter fiscal year 2014. The earnings press release is available under the Investors Relations link on our website, www.eragroupinc.com, and also on the SEC website, www.sec.gov.

If you have not already done so, I would encourage you to access one of those sources to print or view a copy of the presentation slides that accompany our press release. We will be referring to certain slide numbers during the course of our prepared remarks today.

Before starting the call, I would like to note that management may discuss forward-looking statements on this call. These forward-looking statements are subject to number a number of risks, uncertainties and other factors that could cause actual results to differ materially from those expressed in or implied by the forward-looking statements as described in our most recent annual report on Form 10-K, our subsequent quarterly reports on Form 10-Q, and the other filings we make with the SEC.

In addition, we may discuss non-GAAP financial measures during the call such as adjusted EBITDA. Please see our earnings release or the investor presentation on our website for the calculation of these measures and the appropriate GAAP reconciliation. I'd now like to turn the call over to our acting CEO and CFO, Chris Bradshaw.

Thank you, Ben, and welcome to the call, everyone. I am pleased to announce that Q3 2014 financial results represents the highest quarterly revenue and adjusted EBITDA, excluding gains on asset sales, ever achieved by Era. Thank you to all of the men and women in the field who made these record results possible.

Compared to the prior year quarter, total revenues increased by 12%, primarily due to strong results from our US Gulf of Mexico operations, and improved cash collections from our Brazilian joint venture, Aeroleo. Adjusted EBITDA, excluding gains, increased by 9% year-over-year. We incurred a $2.5 million pre-tax non-recurring charge in Q3 related to the accelerated recognition of compensation awards for our former CEO, which is treated as a special item in the calculation of adjusted EBITDA.

Reported net income for the current quarter was $4.3 million or $0.21 per share, compared to net income of $5.2 million or $0.26 per share in Q3 2013. Were it not for the impact of the non-recurring CEO severance cost and the non cash derivative losses, reported EPS would have been $0.34 per share.

If the FX had just been settled today, our effective exchange rate would be well below the prevailing exchange rate at the time these euro denominated helicopter purchase commitments were made. In other words, the FX hedges are performing their intended cash economic benefits, but they have resulted in an adverse accounting impact in the current period.

Compared to Q2 of this year, total revenues increased by 5% primarily due to increased international oil and gas revenues, improved cash collection from Aeroleo and the normal seasonality of our flightseeing activities in Alaska. Adjusted EBITDA excluding gains increased by 11% on a sequential quarter basis, outpacing the revenue growth rate as we benefited from margin expansion.

As you may have noticed, we recently started disclosing flight hours by line of service as we believe this is one operational metric which investors can use to gauge the direction of our business activities. I should take this opportunity, however, to remind you of the limitations of this metric. First, not all flight hours are created equal.

For example, you'll see that total flight hours decreased by 10% year-over-year, even though revenues were up by 12%. This is because heavy helicopter flight hours increased significantly between the two periods, which was more than enough to offset any declines in lighter aircraft flight hours.

Second, as you know, the fixed monthly charges accounts for the majority, typically two-thirds, of the revenues on a standard contract. In short, simply looking at variable flight hours does not capture the full picture.

Operating revenues from our oil and gas operations in the US Gulf of Mexico increased by 31% on a year-over-year basis, primarily due to a full quarter of operations for our EC225 helicopters, and increased charter activity at higher rates for our medium helicopters. In Q4 and beyond, the year-over-year variances will represent a more apples to apples comparison since we will be comparing against periods when the 225 were fully operational in both years. On a sequential quarter basis, Gulf of Mexico oil and gas revenues increased by 2%, primarily due to higher utilization of our 225s, which more than offset lower utilization for other air classes.

Given the nature of our operations in the US, it is normal for fleet utilization to ebb and flow depending on the status of various customer projects, but the current spare capacity for our medium helicopters is higher than it has been in recent periods. We're participating in several competitive bids and are optimistic that we'll be able to place some or all of the existing and forecasted spare medium helicopters on contract. Some of those projects could commence in Q4, but others have longer lead times and therefore, would not impact results until 2015.

Consistent with our stated strategy, we may also sell certain aircraft when that option presents the best potential returns on the asset. Alaska operating revenues declined year-over-year primarily due to a smaller fleet count and lower utilization. The sequential quarter decrease in operating revenues was driven by lower utilization of medium helicopters.

After a particularly strong 2013, Alaskan activity has declined in 2014. However, major oil and gas companies have announced plans for their Alaska operations that could lead to a pick up in activity in 2015 and beyond, should those plans materialize.

Revenues from our dry-leasing activity increased both year-over-year and on a sequential quarter basis due to higher cash collections from Aeroleo.

Search and rescue revenues increased 23% compared to the prior year quarter, primarily due to higher subscription rates related to a third SAR helicopter being placed into service. On a sequential quarter basis, SAR revenues increased 11%, primarily due to more charter flights with non-subscription customers.

Subsequent to quarter end, we temporarily withdrew the third SAR helicopter from service. We're taking a long-term approach to the growth of our SAR business and using this opportunity to make required modifications to the equipment configuration of that aircraft and to make certain changes in the composition of our operational program in an effort to secure additional SAR subscribers in the future.

Air Medical revenue declined on a year-over-year basis and sequential quarter basis, primarily due to a hospital contract that ended on June 30. We continue to offer premier air medical services using aircraft configured with best-in-class safety features that appeal to higher end hospital systems who are willing to pay for enhanced safety measures.

Looking at our helicopter new order and options book on slide 14, you will recall that we are the launch customer for the new AW189 heavy helicopter model in North America. We were scheduled to receive our first three 189s in September, October and December of this year. However, the aircraft has not been certified by the FAA yet, so we have not yet made the final payments and accepted delivery.

AgustaWestland remains confident that the aircraft will be certified in the US by the end of the year, but neither one of us has control over the government's timeline. Should the FAA certification process not be completed by year end, these would most likely become 2015 deliveries.

As you know, we have not been a cash taxpayer in the US, as we have been able to utilize accelerated tax depreciation on new helicopter purchases as a shield against income. Should these 189 deliveries get pushed into next year, it's likely that we'll have some federal tax cash obligation in 2014, though we would expect to return to a non-cash tax paying status in 2015.

Slide 15 of the presentation provides a brief update on our Brazilian operations. As you will recall, Aeroleo has been a challenged investment for us since we bought into the business in mid 2011. During that time, there's been two global OEM related suspensions.

First, the tail rotor issue with the 139 and then the main gear box shaft issue with the 225 which disproportionately impacted Aeroleo since those are the only two models that we have in Brazil. Because of these issues, we have never really had a time when all of our assets in Brazil were operating at the same time and this resulted in liquidity issues that has plagued our operations there.

Despite these troubles, Aeroleo actually has a very good brand and reputation Brazil as evidenced by us having the highest [TO firm] ratings with Petrobras, something which provides a competitive advantage in winning new business. The good news is that the inflection point in Brazil is now clearly visible. We have already signed five-year contracts with Petrobras for seven 139s scheduled to begin operations with start dates ranging from December 2014 to May 2015.

At that point in time, all of our existing aircraft in Brazil will be fully utilized for the first time since we bought into the business. This has huge implications not just for our business in Brazil, but for Aeroleo on a company-wide basis since the Brazil aircraft represent almost 20% of our total fleet value. In response to these developments, we're sending two additional 139s to Brazil around year end to be available for short-term work and to serve as backup support for our operations there.

In addition, we're optimistic about additional fleet growth in Brazil based on the heavy and medium helicopter vendors for Petrobras with bid deadlines currently scheduled for early next month. These developments taken in combination with the change of our partnership structure, a transaction which we now expect to close in the first half of 2015, should result in Brazil transitioning from a drag on our financial results to a positive cash flow contributor and engine for future growth.

Turning now to slide 16, you will see that our significant base expansion project in Houma, Louisiana is well underway. We expect the construction of the new hangar facility to be completed by year end and the conversion of the existing hangar into our new passenger terminal to be completed in Q1 2015. The total cost of this project is approximately $22 million with a portion of the capital funded by a couple of our customers.

Once completed, this will be the premier helicopter operating facility in the Gulf Coast area. In addition to sustaining relationships with our existing customers, this new facility should allow us to grow our business with new customers, particularly the large oil and gas companies who value state-of-the-art facilities and an airport infrastructure that supports high standards of safety and reliability.

Looking at slide 18. Operating expenses as a percentage of revenues declined from 63% to 60% in the current quarter. This improvement in margin was a result of a charge in the prior year quarter related to the early terminations of operating leases on certain air medical helicopters, and a credit in the current quarter related to the 225 settlement agreement with Airbus Helicopters.

Excluding the aforementioned severance costs, G&A expenses would have declined as a percentage of revenues relative to the prior year quarter. Adjusted EBITDA increased 9% year-over-year.

Slide 19 highlights the key variances between Q3 and Q2 of this year. Excluding the former CEO severance cost this quarter and the impairment charge last quarter and the impact of gains on asset dispositions from both periods, the sequential quarter increase in adjusted EBITDA was 11%, outpacing the growth in revenues. Our liquidity position and credit statistics remains strong, providing us with the flexibility to deploy capital for attractive opportunities whether that be growth via organic CapEx, or strategic acquisitions, or the return of capital to shareholders.

With respect to the latter, we have not as of yesterday repurchased shares under the previously approved repurchase authority. I will continue to support the executive committee of the Board in monitoring the market situation, and any share repurchases will be executed on an opportunistic basis.

I continue to believe that Era shares are an attractive investment opportunity as evidenced by my recent purchases of shares for my personal account. From the Company's perspective, it's not a question of whether repurchasing shares is a good investment, but whether it represents optimal utilization of a limited resource, namely capital.

In summary, Q3 results represent the highest quarterly revenue and adjusted EBITDA, excluding gains, ever achieved by Era. We have a significant base expansion project underway and new heavy helicopter models scheduled to arrive soon, both of which should help to broaden our customer base and drive future growth. Our Brazilian operations are on the precipice of a significant turn around which should significantly improve the financial returns on our overall fleet and lead to future growth opportunities.

Given the lead times inherent with contract awards in our sector, the current spare capacity in our medium helicopters is largely a result of the lack of success in new business generation over the last 12 to 18 months. I believe the market opportunities are there, but we were not optimally aligned from a strategy and organizational standpoint to capitalize on those opportunities.

Last week, we announced a management organizational change as part of a proactive, company-wide realignment designed to streamline our business, provide better service to our customers and grow our global market share. Under the new organizational structure, we have integrated all operational aspects of our business in a unified service center, and consolidated all customer facing aspects of our business in a new commercial team responsible for customer accounts on a global basis. The organizational changes are designed to improve execution and discipline across departments, and ensure that the business is more efficient and better aligned to support customers and execute the Company's overall strategies.

We need to be more efficient with the allocation of our time, human and financial resources, so our international expansion strategy is now focused on areas where we have a true competitive advantage. If the first time you become aware of an international opportunity is when the RFP is issued, then you've already lost. We now have a handful of target jurisdictions and are developing detailed business plans to attack each of those markets.

We're currently participating in a number of competitive processes, both domestically and abroad, which if successful could absorb potentially all of the spare capacity in our medium helicopter fleet. We're optimistic that these measures will allow us to improve the utilization of our fleet and drive enhanced financial returns for shareholders. With that, Caitlin, let's open the line up for questions.

(Operator Instructions). Your first question comes from the line of Daniel Plager from Plager Asset Management. Your line is open.

Yes. Thank you very much, and good morning. I guess my question has to do with capital allocation and particularly some of the issues regarding the return of capital to shareholders.

When looking at your Company in comparison to your largest US competitor and recent transactions that have taken place within the industry, your competitor's trade at substantial premiums to book value, 1.4 times book, premiums to what they consider fair market value. General Electric's recent purchase of Milestone Aviation took place at what we gauge to be a premium to net asset value.

With your Company's shares trading at such a substantial -- 30% to 35% discount -- to what, I think, you would argue is a conservative mid asset value for your Company, do you think your valuation reflects perhaps the poor positioning of Era relative to the competition? Does it reflect the market's views on management's capability to utilize those assets effectively?

I'm just curious why you think your shares traded at such a substantial discount to NAV relative to competition and the absolute number. Given that, I think we're all a little bit surprised to see that you haven't conducted any share buybacks; and given that there's excess capacity, you're considering maybe canceling some options on future orders. We're just curious as to how you don't see repurchasing of shares at these levels to be the optimum use of capital. Thank you.

Thanks, Dan, for joining the call and for the question. In regard to our capability to make the most of the assets that we have, I would say that Era has proven to be quite successful in making money over the long-term on the assets that we have, as demonstrated by the fact that we have sold about 90 aircraft over the last ten years at an average premium to book value of more than 45%, and an aggregate of actually sold those aircraft for more than we originally paid for the aircraft. I believe we have the abilities as a company to make the most out of the assets that we have.

In regards to the share buyback program; as I mentioned in my prepared remarks, we continue to believe that Era shares are under-valued as further evidenced by my recent purchases for my personal account. From the Company's perspective, it's not simply a question of whether it's a good investment, but whether it represents optimal utilization of a finite resource, namely capital. Era does have other investment opportunities and our cash resources are unfortunately limited.

So it's not about using the Company's capital to manage the share price, which is a short-term proposition at best, because you can't fight the market. Rather, it's a long-term investment decision which requires an evaluation of the overall market situation and must be made in the context of the recent [submissions] decline in the price of oil and the negative sentiment overall towards the offshore services space.

To reinforce that point, we had people pushing us to repurchase shares at $27. Though a good investment relative to NAV, if we had used up our entire share repurchase authority at $27 per share, I am sure those same people would be saying that it was not the optimal use of cash with the share price now touching $21 per share. In short, given the relative size of our program that we are working with, it's important that we make an investment that is not just good, but great from a long-term perspective.

Right, I understand that, and certainly I would never advocate any short-term dynamics in your share repurchase, but obviously repurchasing shares 30% to 35% discount to NAV has a salutary impact on the net asset value of the remaining shares. So viewed as a longer term investment, nothing short-term about it is just surprising that at book value that we haven't seen any activity.

Are you arguing that you can reinvest in new helicopter assets at a higher rate of return than share buybacks? Or can you help show or demonstrate what other potential uses of capital you might be thinking about acquisitively, or otherwise?

Sure. We do believe that we have opportunities to put new assets, particularly the heavy assets that are come in our new order book, to work at attractive returns. We expect to continue to do that.

It's not necessarily mutually exclusive, though, from doing share repurchases which I understand is the focus of your question. We have, I would note, been in a blackout period for the last six weeks, or so.

We will continue to be actively monitoring the share price, understanding the level that it's currently at, and in conjunction with the executive committee of the Board which has been appointed to manage the share repurchase program. I think we will evaluate, again, on an opportunistic basis the proposition of putting available capital towards the repurchased shares.

Okay. Thanks very much.

Thank you.

Your next question comes from the line of Stephen O'Hara from Sidoti. Your line is open.

Hi, good morning.

Good morning, Stephen.

I'm just curious if you could maybe give us a way to think about the opportunity in Brazil in terms of getting up to full utilization down there. I think you said that the Brazilian opportunity or the helicopters there are about 20% of the fleet value.

I'm just wondering, can you give us an idea of what that might do to earnings when that comes in? And then maybe you could talk about what the under utilization was in 3Q, and maybe if there was some earlier in the year, and how we should think about that impacting things going forward as well?

Sure. Thus far in 2014, roughly a third of Aeroleo's fleet has been idle as we have four 139s which are not currently under contract. As a result, the liquidity position of Aeroleo has continued to be weak and thus the cash return to Era has been at levels that are well below what our return on capital should be.

As mentioned in the prepared remarks, we now have visibility on when all of the existing aircraft will be fully utilized for the first time since we bought into that business. If you think about the overall value of the fleet in Brazil, which again, is just shy of 20% of our total fleet value and assume our normal EBITDA yield on asset value of somewhere in the mid teens as we've spoken about, we begin to see what the potential financial implications of that to the entire Company are and they are quite significant.

Just in terms of what was the under utilization in 3Q maybe generally? And then, how did that impact 3Q and maybe 2Q if there was any?Then in terms of the eight AW189s, do you still see good demand for those if you can get the FAA to sign off on them?

Sure, I'll start with the second question first about the 189s. Our customer base continues to be very excited about this aircraft model. It is a new class that is coming in, a light/heavy or super medium depending on who you speak to.

The versatility of that much machine is very attractive to the customers in a sense they'll be able to use it to serve a number of different mission profiles. So we're seeing continued demand and excitement about putting that asset to work, and indeed we know where the first four deliveries will go to work already with a customer and at what rates. We're encouraged about the prospects for that model over the long-term.

In regard to the under utilization of our fleet, again as I noted in my prepared remarks, this is really the result of what has been some disappointing success over the last 12 to 18 months with new business opportunities. We always have situations where equipment is coming up off of contract as customer projects end, sometimes you do have a delay in putting them back to work. Though as noted in my remarks, we are at a position now where the spare capacity in our medium helicopter fleet is higher than it has been in recent periods.

We did see that impacting some of Q3 results and we do see, based upon what we know to be the customer project schedule in Q4, that continuing to be the case. Again, subject to our success rate with the competitive processes in which we're currently involved in, both domestically and abroad; which from a scale standpoint, if we're successful in some of those could essentially absorb all of the medium helicopter capacity we have in our fleet.

Thank you very much.

Thank you.

Your next question comes from the line of Jeff Spittel from Clarkson Capital Markets. Your line is open.

Thanks, good morning, guys. Chris, maybe if you could, help us understand a little bit better some of the spare capacity overhang with regard to the Gulf of Mexico in the near-term.

Is some of this being driven by project delays and maybe customers getting a little bit more skittish about their development programs there? Or is this more of near-term phenomenon?

Yes, Jeff. Thanks for the question. I believe the market opportunities are there. I think we could have been better aligned from a strategy and management standpoint to capitalize on those opportunities.

I think we have made some changes which will result in a higher degree of success and we will be more effective at putting the equipment that is available to work. There's going to be just the nature of customer projects ending at certain times, occasionally delays and spare capacity in the fleet in a normal course, but we have reached a point here recently that is a bit higher than where we've been in some of the more recent quarters.

So we wanted to point that out, and advise of the expectation for Q4 as well. And again, with really one or two wins on the processes that we're competing in currently, that could change in an instant. It is just the nature of our business.

Okay. Would it be fair to say some of that is related to what is going on in the shelf of the Gulf of Mexico, or is there another area of the market maybe that I should be focused on?

It's more of the broader Gulf of Mexico market. We're seeing opportunities there, we're seeing opportunities internationally, any number of which could be places to put these machines to work, so it's not any particular part of the Gulf or even the Gulf itself. It's looking at the overall market opportunities that we see in Brazil and some of the other places that we're evaluating internationally.

Okay, that makes sense. And then with respect to the AW189, obviously, it's tough to predict the exact timing of when there will be approval there, but it sounds like it's probably a safe assumption to plug in an average contribution of next to nothing for the fourth quarter from those. Given your comment that it sounds like there's going to be a home for the first four deliveries, would you be comfortable with us modeling something along the lines of a contribution of three on a full year average for 2015 from those?

I think your assumption about not factoring in any revenue or cash flow contribution in 2014 is appropriate given the current status of the FAA certification and the fact that those machines will take some time to be delivered, configured for our operations and put to work. As it relates to 2015, while we don't provide guidance or can't give any specific financial guidance on that front; we are prepared once FAA certification is received for the machine to put them to work in relatively short order. And as noted, we know the customer they're going to work for and we know what price they're going to be. That's already agreed to for the first four machines.

Okay. Thanks very much for the time, Chris.

Thanks, Jeff.

Your next question comes from the line of Adam Ritzer from Pressprich. Your line is open.

Good morning, guys, thanks for taking my call. I guess getting back to the medium helicopter issue. How many copters do you have spare capacity for now?

Hey, Adam, good morning. Thanks for joining the call, as always, and thanks for the questions.

We don't provide, as many of our competitors know for competitive reasons, by model what spare capacity is. There's always going to be some number of aircraft in the Gulf that are not under contract.

We reserve, as you know, some of those for charter activity which it can be and has been this year for us a very profitable return proposition on those number of aircraft. In addition to that we have aircraft that are going to be in maintenance, that's just the nature of the helicopter business. So at any given time, you are going to have a certain amount of your fleet that's in the shop for maintenance.

What we're talking about here are aircraft that are really spares, so they're not being reserved for charter activity, they're not in for scheduled maintenance and we do have a number that is larger than what we have seen in more recent periods. I would note that if you look at what our Q3 financial results were, which again, on an adjusted basis for EPS was about $0.34 a share, relative to what consensus estimates amongst our three equity research analysis who follow the stock, which was about $0.37 a share, and understanding that each $0.01 of EPS for our Company represents about $200,000 in net income. So that $0.03 gap is roughly $600,000 net income, or on a EBITDA basis, slightly less than $1 million.

Half of that in terms of the shortfall, if you will, for Q3, is really attributable not to the derivative losses that we have already spoken about, but the foreign exchange losses noted on our income statement. That's a situation where we put in [derivative] instruments which were highly effective in achieving the desired economic purpose, which is getting the aircraft at an effective cost to us at an exchange rate below the one that was prevailing when we originally ordered the equipment.

So that leaves about $500,000 in quarterly EBITDA that was a shortfall. And for that, you're talking about -- actually, it's less than $500,000 -- it's probably $400,000, or so -- and for that you are talking about really the equivalent of one 139 being on contract. Hopefully that gives you some sense of the scale and implications of how utilization is impacting results.

Okay. But you won't tell us how many of those 139s you consider more than your normal spare capacity. Is that what you're saying?

Correct. We don't want to disclose that from a competitive standpoint. And also, Adam, it will change tomorrow. That's just the nature of the market.

Okay. Getting back to the Brazil positive situation. I guess the other analyst, you were trying to give him some direction.

I guess you said it's about 20% of fleet value. I guess on your slide presentation, you have a fair market value of a little over $900 million.

Is it fair to say that you have $180 million-plus invested in Brazil and we should see mid teens type EBITDA margins on that? Is that fair to say?

That's directionally correct and your assumptions in math are solid, Adam. It's slightly less than 20% of the total fleet value, but the rationale that you walked through is accurate.

Okay. Maybe you could tell us, but it would seem to be that whatever that exact number is, it should be significantly higher than any loss of medium copter utilization. Would that be true?

I think, Adam, certainly for the current period, for example, it absolutely would have been. But obviously, it's a dynamic situation that depends on where and how many spare machines you may have elsewhere and the gap that you're closing in Brazil. So can't provide a forward-looking statement, but that's certainly the case for the most recent quarter.

Then on the 189 issue. Is there anything specific that the FAA is not certifying these? Any reasons for that?

No, there's nothing specific. The machine has already been certified by EASA and is indeed working in other parts of the world. This is a regulatory process that each new aircraft model needs to go through.

We understand as with most branches in the government in our country today, that the FAA is relatively understaffed with limited budgeted resources. So for them, it's just a matter of time and allocation of those resources to go through the regulatory process for certification.

Okay, but this is working in other parts of the world, so it would seem it would not be a big hurdle over here?

Yes. We think it's a matter of when, not if.

Right. Okay. So I guess there's four helicopters that potentially could be in service next year. How much do one of these 189s cost? What's the capital commitment on one of those?

They're a little over $17 million a piece.

Okay. And there should be similar type mid- EBITDA type returns on these?

That's correct.

Okay, great. I appreciate answering all of my questions. Thanks a lot.

Yes. Thank you, Adam.

(Operator Instructions). Your next question comes from the line of Charles Fischer from LF Partners. Your line is open.

Good morning, gentlemen. I'm trying to get my hands around the same issue that a few other folks have in discounts and NAV. I have a couple questions.

Could you talk about your confidence level in your NAV numbers? I know they're based on a yearly assessment, but what are you seeing in the markets at mid-year?

Sure, and thanks for joining the call, Charles. We base our NAV not on Company estimates of value, but rather we employ each year Ascend Worldwide which is one of the two well-recognized appraisal firms in the helicopter industry around the world. So each year, we have them come in and do a desktop appraisal of each of our helicopters on an asset specific basis, based upon where that helicopter is on component times within it's relevant maintenance cycle.

So we are getting a tell number specific valuation estimate provided by us each year. The one that our NAV is currently based upon, it does date to November of last year and we'll have the new one available by year end.

We have not in the past, and I will refrain now from providing a management view on the changes in that value from month-to-month, and rather point to what is that detailed third party appraisal of the fleet. What we have done with the NAV slide which you reference is depreciate based upon our normal depreciation policy, the assets from the time of the completion of the last appraisal last year. So the new appraisals should be ready the next time that we report earnings.

Terrific. I know it's been asked before now, but I am going to ask it again. Is there a slowdown on the helicopter side in the Gulf?

Is it a function of cold stacking, is it fewer rigs being mobilized, is it the sale process that maybe Era could use some improvement and that's what some of the management changes have been about? Maybe you could address it one more time, and I could get it.

Sure. The Gulf of Mexico market continues to be strong and active. Again, it's our largest market as you know, and we generated this quarter the most revenue and adjusted EBITDA that we've ever generated in a quarter as a company. In terms of rig counts for floating rigs, we still see that by the end of this year there will be a net incremental increase in the number of rigs, and we're expecting some modest amount -- if you just look at third party estimates that are out there from various research houses -- in 2015, as well.

Having said that, there is, as you know, a lot of dislocation taking place in the offshore drilling market because of the significant amount of supply that is coming out of the shipyards this year and next, which has not been a one for one add in total fleet count, but rather a number of those have displaced existing legacy rigs. But again, on a net basis, we do see it ticking slightly higher by the end of this year and in 2015.

The Gulf of Mexico has been a strong market for us. Conditions there continue to be good. What we are seeing overall for our medium helicopter utilization, again, I would contribute more -- not that the opportunities aren't there -- but that our win rate, if you will, recently has not been what it should be.

We've been pretty clear and proactive in putting in some organizational changes, and aligning our strategy as a company that I think will allow us to achieve better utilization for the fleet and capitalize on those opportunities over time. Again, we're at a position given the competitive processes that we're looking at that one or two of these awards could absorb potentially all of that spare capacity.

That's very helpful, Chris. Any update on the process of naming you the permanent CEO?

Sure. That's ultimately a Board decision. The Board continues it's evaluation of both Era's needs and my own performance and expects to make a decision around the end of the year. In recognition of the scope of the responsibilities I'm currently performing as both CEO and CFO, the Board has recently asked me to commence the search for a new Chief Financial Officer, which is something I plan to launch that process here shortly.

Got you. Maybe you could just help me out a little bit. Given the discount of our NAV and the way the math works, a $10 million investment in our stock looks like it would buy something like $17 million or $18 million worth of helicopter.

One of the previous callers talked about -- are there other investments that you're looking in that range of profitability? Because that's pretty good return. Sort of almost immediate on a financial engineering basis.

Sure. We do have other investment opportunities which we believe are attractive uses of capital. I would note though that putting capital to work whether it is organically or in acquisitions is not necessarily mutually exclusive of returning capital to shareholders. Our approach with the share repurchase program, again, in light of the fact that we do have a finite pool of capital and a relatively small program size that we're dealing with here, it would take things on a very opportunistic basis.

Understanding that we can't fight the market. There has been a pretty negative sentiment towards the offshore services space in general, and with the price of oil increasing significantly recently. It's not just a matter of making a good investment at $1 or $2 below NAV, but really evaluating the market, being opportunistic and putting the limited resources that we do have to work in the most optimal way possible for a long-term investment perspective.

I understand that. I guess I would just implore the Board to continue to review this because I'm not a terrifically smart guy, but it seems like the math is a very simple hurdle to get through.

Even if you don't do too much of it, but doing a little bit might at least not signify to the market, but might just be smart and I would like to you do more. Because if you do a little, it's better than doing nothing.

Thank you, Charles. We are engaged in evaluation and discussion with the executive committee of the Board that has been charged with managing this authorized program. It will be an active monitoring of the situation.

One last question, and then I will get off the line. We have talked in the past on previous calls that even though the rig count may not be growing very much as the new rigs are larger and require more man power, so in theory, there is more to the helicopter hours required. Are you seeing a big supply increase in helicopters in the Gulf now, or is it more on the demand side of the rigs?

I think there has been and will be some incremental new supply of heavy and intermediate helicopters that will come into the Gulf of Mexico market. I also believe that incremental lift capacity is needed given the growth that is going to take place and is taking place in the Gulf of Mexico.

And as you rightly note, it's not you purely about rig count, it's the fact that the new rigs and the new production facilities are larger. So you have an increased POB, or people on board count, in the Gulf of Mexico which means that all else being equal, you need more helicopters to move those additional bodies.

Terrific. Thanks. Look forward to talking to you next quarter.

Thank you.

Your next question comes from the line of [Jeremy Gold] from [Aleeja Medikey]. Your line is open.

Hi, guys. Thanks for taking my questions.

Yes. Good morning.

So I was wondering if we could get an update on -- as many people have talked about already about the discount to NAV -- I was wondering if you could talk about an update on the sale lease back program and if that could be used to increase the buyback program, so it is not as limited as you've been mentioning?

Sure. As you know, to date we have preferred to own essentially all of our helicopters because we want to retain the exposure to residual value of the machines, and we've proven to be quite adept at recognizing that value over time. We value the optionality that provides to our fleet.

Having said that, we're actively monitoring the evolution of the leasing industry for the helicopter sector. Understanding that there has been a lot of new capital which has come into that space, and that there's been some aggressive competition amongst the leasing companies which have pushed down the rates that are available. So that's becoming potentially a more attractive economic proposition.

In addition, as the competition does heat up, I believe that you'll start to see increased competition amongst the leasing companies not just on rates, but also when it comes to duration of leases, and the return provisions which is usually where folks can lose money in the leasing game. I think that as those factors start to become more competitive, you could see developments which provide the type of optionality that we like to maintain as an operator.

And so with that in mind, the prospects of a sale lease back transaction are something that we continue to evaluate. As you rightly point out, if we were to do something sizeable on that front, it could facilitate potentially, subject to, obviously, the Board's decision of potential evaluation of additional share repurchases.

Okay. Thanks. So you seem pretty excited about that.

Is the Board and other people in the Company as excited about that? How quickly could the Company act on that? And maybe can you point me to any sort of size to a possible program?

Sure. I would say that really everything that I would say is in concert with the way that the Board is viewing the strategy of the Company. We are continuing as a team to evaluate the developments in the leasing market. They are becoming more attractive.

Some of the developments that I was looking towards in terms of increased competition amongst duration and flexibility of return provisions are not yet really fully evident or are still in the stages of developing. So we'll continue to monitor that, and I believe the options will become even more attractive over time given the competition in the leasing market.

In terms of size, no guidance in terms of how big it might be. You can see the overall value of the fleet that we have today in the fact that we essentially own all of it today. So there's certainly the capability to doing something of significance.

Also timing, I'll withhold any specific guidance there, and just again, reiterate that we're monitoring the developments there. As some of these developments start to come to fruition, it could become a very compelling option for us.

Okay, and as the capital available for the Board grew, would the Board maybe feel a little more at ease with using more cash, or actually deploying some cash for a buyback?

I can't speak for the Board, but certainly as the ability to purchase more shares exist, some of the factors and limitations we've been talking about around the size of the program would be relatively ameliorated. Again, I can't speak for the Board on that front until we get to that place.

Okay. Well, we like seeing your purchases and hope to see more from the Company soon. So thanks for taking my questions.

Thanks, Jeremy. Appreciate you joining the call.

Your next question comes from the line of Jason Kraft from Cato Partners. Your line is open.

Hey, Chris. Thank you for taking the question. I was wondering when you talked the potential for shared sacrifice. That is would you ever anticipating bending your rates commensurate with the day rate pressures that the drillers and operators are seeing? And if perhaps you could tie that into your recent win rates? If that's an issue with competitive pricing pressure. Thanks.

Sure. Thanks, Jason, for joining the call and for the question.

In terms of shared sacrifice, the dynamics which have been adversely impacting leading edge day rates in the offshore drilling space are different dynamics than we have in our sector. There are a number of different shipyards around the world.

In fact, there's been a significant growth in the number of shipyards just in China in recent years that can produce offshore drilling rigs. The supply that's coming online this year and next year is greater than it has ever been in terms of new supply coming into the drilling market.

Unfortunately, a number of those rigs are coming on a spec basis. They're not contracted. It's really that glut, if you will, of supply of drilling rigs which has had an adverse impact on the day rates in that sector.

In our sector, we have a different supply dynamic in that really there's only four Western manufacturers of helicopters, and really only three of those have actively produced new models for offshore oil and gas missions in the last few decades. Those few OEMs have set production schedules for the heavy and medium helicopters that are in demand for the type of floating or deep-water missions that we're talking about. So the supply dynamic in our space is very different than it is for the offshore drilling space, and whether we are flying out to a rig that's earning now $300,000 a day that used to be $500,000 a day, doesn't impact the demand for our services and what we're able to charge.

In regards to your question about the interplay between the utilization that we've talked about for our medium helicopters and pricing, I would say that the awards that we have missed out on recently have not been about price. They've been about other factors. A lot of them come down to relationships with the customer, certain model availability, logistical concerns, et cetera that again have not fundamentally about price.

Not I am not naive. The customer always has price as a key consideration. So we need to be cognizant of that, we need to be competitive, but I would not attribute our recent win rates to the pricing dynamic at all.

Okay. Helpful. Thanks.

Thank you.

There are no further questions at this time.

Thank you, operator. And again, thank you, everyone, for joining the call this quarter. We look forward to reconvening again after Q4.

This concludes today's conference call. You may now disconnect.