Bristow Group Inc (VTOL) 2014 Q4 法說會逐字稿

Good afternoon, or morning. My name is Jake, and I'll be your conference operator today. At this time, I'd like to welcome everyone to the Era Group earnings call.

(Operator Instructions)

Thank you. Ms. Harmony Packard, Public Communications Manager, you may begin your conference.

Thank you, Jake. Good morning, everyone, and thank you for joining Era's fourth quarter and full year 2014 earnings call. I'm here today with our CEO and CFO, Chris Bradshaw; our SVP, General Counsel, and Corporate Secretary, Shefali Shah; our SVP, Operations and Fleet Management, Stuart Sabley; our SVP, Commercial, Paul White; our VP Corporate Development and Finance, Ben Slusarchuk; and our VP and Chief Accounting Officer, Jennifer Whalen.

By now you should have a copy of our earnings press release for the fourth quarter and full year of FY14. The earnings press release is available under the investor relations link on our website at EraGroupInc.com and also on the SEC website at SEC.gov. If you have not already done so, I would encourage you to access one of these sources to print or view a copy of the presentation slides that accompanied our press release.

Before starting the call, I would like to note management may discuss forward-looking statements on this call. These forward-looking statements are subject to 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 CEO and CFO, Chris Bradshaw.

Thank you, Harmony, and welcome to the call, everyone. I would like to begin by thanking everyone at Era for their hard work in achieving our objective of zero air accidents in 2014. Safety is at the core of everything we do at Era, and we strive to maintain the highest standards of safety performance, operational excellence, and people management. We are also committed to partnering with our peers, customers, helicopter OEMs, regulatory bodies, and other stakeholders to improve overall safety in the offshore helicopter industry.

In October 2014, together with four other major helicopter operators, we officially launched the new industry association, HeliOffshore. We will continue to compete vigorously in all other aspects of the business, but safety is one area where we can work together to share best practices, technological advances, and lessons learned to help improve the offshore industry's already strong safety record. HeliOffshore currently has over 30 members with more than 70 additional memberships in process from all regions of the world.

Our efforts are already resulting in tangible progress as Airbus Helicopters recently issued the industry's first standardized EC225 Flight Crew Operating Manual. I would like to thank the HeliOffshore CEO, Gretchen Haskins, her team, and my fellow Board members for their work in launching this important new organization, and I look forward to achieving our collective safety enhancement goals over the coming months and years.

Before addressing the macro environment and state of the industry, I would like to briefly summarize Era's financial performance for the fourth quarter and fiscal year ended December 31. I am pleased to announce that Era achieved record financial results in 2014. Full-year revenues increased by $32 million, an 11% improvement over fiscal year 2013, primarily due to strong results from our US Gulf of Mexico operations, which benefited from a full year of operations for our EC225 heavy helicopters in 2014 compared to a partial year of operations in 2013.

Adjusted EBITDA, excluding the impact of gains on asset sales, increased by $7.7 million, a 10% improvement over 2013. While the full-year results were the best in Era's history, our fourth-quarter results were weaker than the normal seasonal pattern.

Compared to Q4 2013, revenues declined 2% due to the conclusion of contracts in our international oil and gas and air medical service lines. Our Q4 results were negatively impacted by a $1.9 million foreign currency loss due to the strengthening of the US dollar against the euro.

Adjusted EBITDA, excluding gains, declined by $1 million, a 5% decrease compared to Q4 2013, due to the aforementioned revenue declines and slightly higher OpEx, which was partially offset by the recovery of a previously reserved account receivable from a customer in bankruptcy. On a sequential quarter basis, revenues declined by 17% compared to Q3 2014 due to the end of seasonal activities in Alaska, and the normal seasonal drop in flight hours that we experience in the winter months, and also due to lower than normal utilization of helicopters in our oil and gas line of service, as anticipated in our third-quarter earnings announcement.

Our costs were lower as OpEx and SG&A expenses decreased by 16% and 25% respectively compared to Q3. Adjusted EBITDA, excluding gains, declined by $6.3 million, a 25% decrease compared to Q3.

Turning to the macro environment, which I'm sure is a topic that many of you on the call are interested in, I will now share some brief comments on the challenging industry environment we are currently facing. On the demand side, oil and gas companies have responded to the significant decline in oil prices by substantially reducing their capital spending plans in 2015. Many of them are also seeking rate reductions from their service providers, including those of us in the helicopter sector.

In response to this pressure, we are guiding our customers to aircraft sharing, higher seat utilization, and other measures to achieve cost efficient operations. As many of you know, approximately 75% of our business consists of production support, pipeline operations, transportation of US government inspectors, and dry-leasing activities, all of which are well insulated from short-term commodity price movements.

On the supply side, there is currently a surplus of helicopters in the industry. The degree of the surplus varies by class and by model but there are helicopters of essentially all models readily available in the market today.

Needless to say, an imbalance of supply and demand represents a potential threat to the utilization, pricing, and residual values of our helicopters. There has been a lot of discussion about the outlook for recovery in oil prices, with various market prognosticators predicting either a V shaped, U shaped, W shaped or double U shaped recovery. We at Era are not in the business of predicting oil prices.

Our responsibility is to design and execute a business plan and strategy that will be viable in any commodity price environment. We believe we have a strong balance sheet and ample liquidity to weather market downturns of this nature, even prolonged ones.

In the meantime, we are focused on number one, achieving the best safety standards. Number two, maximizing the utilization of our helicopter fleet, and number three, realizing efficiencies in our cost structure.

I spoke about safety initiatives at the beginning of my remarks. With respect to the second point on fleet utilization, it is normal for fleet utilization to ebb and flow in our business depending on the status of various customer projects, but the current excess capacity for our medium helicopters is higher than it has been in recent periods.

I am pleased to announce a number of recent commercial successes in the US Gulf of Mexico and Brazil. For example, the results of the recent Petrobras tenders should see our working fleet count in Brazil increase to 20 helicopters by this time next year, which represents a 2.5 times increase over historical levels.

Some of these new awards are represented by signed contracts where the work has already begun, but many will not commence operations until the second half of 2015 or early 2016. In the interim, the excess capacity in our fleet will continue to be a drag on financial results. Consistent with our stated strategy, we may also sell certain aircraft when that option presents the best potential returns on the asset.

On the third point regarding the realization of efficiencies in our cost structure, we began these initiatives last fall when we implemented a management realignment and a reduction in force. Those measures streamlined our organization and significantly reduced our personnel expenses. We are identifying other areas for cost savings and those efforts will continue throughout the year.

While we are focused on reducing our cost structure wherever possible, we are continuing to make select strategic investments to sustain and grow our business. You will recall that we are the launch customer for the new AW189 heavy helicopter model in North America. This new model just received FAA certification within the last two weeks, and we are working with AgustaWestland to schedule acceptance and delivery of the first two helicopters soon.

The delivery of our third and fourth AW189s should follow shortly thereafter. We will also take delivery of our first S92 in August of this year, which will provide us with greater diversity of heavy helicopter models and should help us grow our business with major oil and gas companies who have a preference for that aircraft.

We have identified customer contracts for the first four AW189 deliveries, and the first two S92 deliveries. We also retain the ability to cancel more than half of our unfunded capital commitments, which provides attractive flexibility in an uncertain market environment.

Another area of strategic investment is our base expansion project in Houma, Louisiana. We recently completed the large new hangar building which is climate controlled and features a state-of-the-art fire suppression system. The work on the new passenger terminal is progressing and is on track for a grand opening the middle of this year.

The new passenger terminal features improved passenger processing with automated kiosks and TSA-level security, more efficient baggage transfer capabilities, and a large passenger waiting area with improved food and beverage options and comfortable seating. The whole facility offers better safety features with enhanced storm protection, reduced flyaway limitations, and IFR infrastructure to provide better reliability of flight operations in adverse weather conditions. Once completed, our expanded Houma base will be the premier helicopter operating facility in the Gulf Coast area.

Turning now to our capital structure and liquidity, I would note that our debt to total capitalization ratio was 40%, and our debt to adjusted EBITDA ratio was 3.4 times as of year-end 2014. We have approximately $250 million of available liquidity between cash on hand and available borrowings under our revolving credit facility, which matures in 2019. Subsequent to December 31, we repurchased $7.9 million of our 7.75% senior notes at a cost of [93 and a quarter], which will reduce our annual cash interest payments by approximately $0.5 million.

In conclusion, we have a resilient business model, a strong balance sheet, and ample liquidity to withstand the pressures of even a prolonged market downturn. We remain focused on achieving the best safety standards, maximizing fleet utilization, and reducing our cost structure, while continuing to fund select strategic investments to grow the business in a prudent manner.

With that, let's open the line up for questions. Operator?

(Operator Instructions) Your first question comes from Steve O'Hara. Please state your organization.

Hi, Steve O'Hara from Sidoti & Company. Thanks for taking my question.

I guess I was just curious about the status of the Aeroleo partner. I'm wondering where that stands in terms of the sale? And then, how soon the revenue could return to an accrual basis from a cash basis.

Sure, good morning, Steve. As you're referencing, we signed a deal last February -- so, about a year ago now -- to change the partners that we have in Brazil. We are taking out the existing partner; and that person will be replaced with a new local Brazilian capable of owning an aviation business in Brazil, and who is someone who has long been known to Era, and really will act as more of a partner for us in that business.

The approval of the sale, which is required to transfer the interest from the existing partner, is subject to approval -- a number of approvals. We've already received the one from the aviation authority in Brazil, but we are waiting on approval from what is effectively the probate court system in Brazil because our existing partner there is a family estate.

That process does not have a defined timeline. It's been slower than we would have liked. Our current estimate is that the transaction should close by the middle of this year. Once that happens, we anticipate that we will start consolidating all of Aeroleo's results within Era's financial statements.

So, once that happens, Brazil will look really no different than the Gulf of Mexico or Alaska, and the accounting will be the same as for those other business lines. So, you'll have, I think, a more direct look about what the underlying business in Brazil -- how the underlying business in Brazil is actually performing.

Okay, thank you.

And then, just on the coming deliveries -- and I missed how many you have coming soon, and what, in terms of the S92s and the AW189s. And I guess beyond that, what's your appetite for taking aircraft, given the current status of the industry? How much lead time do you need to cancel things, and if you could just talk about that a little more. Thanks.

Sure. To recap our existing order book, we currently have orders for 19 aircraft, which include 10 AW189 heavy helicopters, four S92 heavy helicopters, and five AW169 light twin helicopters. There's no delivery schedule yet determined for the 169 helicopters.

On the 189s, they just received certification from the FAA two weeks ago. We're working with Agusta to work out the details of the delivery and acceptance schedule. We would expect that the first two of those machines will be delivered soon, with number three and number four coming shortly thereafter. We have identified customer contracts for all four of those machines.

The other AW189s -- aircraft number 5 through 10 -- we actually retain a great deal of flexibility to cancel those contracts, should work not materialize, at a very de minimus cost to us.

On the S92s, the first one is scheduled to arrive this August, which would be the first time we've had that aircraft model to offer to our client base. The second one is scheduled by the end of this year. We have identified customer contracts for those two aircraft already.

The other two deliveries for the S92s will occur over the next couple of years. We do not yet have identified contracts for those remaining two, but we have 15-plus months or so to develop the customer work for those.

So, in summary, we have a great deal of flexibility around our order book. Based upon the current market conditions, I would not anticipate us adding a lot of new orders over and above what's currently in the order book. And if they don't materialize for the existing order book, and we have the ability to cancel, you may see us do that.

Okay. So, you guys have a decent amount of lead time, where, if the industry doesn't get better, maybe the excess capacity doesn't take care of itself, then you guys have enough lead time to cancel those proactively and not have excess aircraft sitting around?

Yes, for a very large portion of the order book, that's correct.

Okay, thank you.

Thank you, Steve.

Your next question comes from Adam Ritzer. Please state your organization.

Hi, guys. I'm with RW Pressprich.

I guess I just wanted to focus a little bit more on the Petrobras tender, and what you've already announced from Petrobras. I think, back in September, you had said there's seven AW139s that are going to start, call it, end of 2014, early 2015, but now it looks like you're going to have a total of 20 aircraft down in Brazil. I guess part of that's from new tenders, part of that existing business, but can you talk about that a little bit in more detail?

Sure, and good morning, Adam. Good to hear from you.

The seven aircraft that you referenced that we spoke more about in September were actually from tenders that we won about two years ago, in 2013, but the contracts were just starting up. The first couple began in December of 2014; some others have begun already. And by the end of the next couple of months, all seven of those AW139s with Petrobras should be working.

Over and above that, we had a new round of tenders in Brazil with Petrobras in January of this year, for both medium and heavy aircraft. We're pleased to announce that we were the low bidder in one of the lots for medium aircraft. That award was for four AW139 helicopters. The contracts there are scheduled to start in the first quarter of 2016, although they could be anticipated earlier.

On the heavy tender side, we were the low bidder for four heavy aircraft in that Petrobras heavy tender process, three of which are really renewals of existing aircraft that we have in the country, and one is an incremental aircraft that will be going to Brazil.

So, that's how you bridge from, really, what has been a historical fleet count of 12, only eight of which have been working at any given time, to what will become, over the next 12 months, per these latest awards, 20 aircraft working in the country. So, roughly a 2.5 times increase on the number of working aircraft that we have in Brazil.

Okay, so it's -- some quick math -- it looks like an added 12 copters from end of 2014 to early 2016? Is that right? The seven that you announced, the four 139s, and the one incremental heavy?

That's correct, Adam. Although, of the seven that are starting up, either have started or are starting up now, some of those are rotating off other customer contracts.

Okay, so, it's not 100% incremental because some of those were already in service. It's incremental to Brazil, but not total incremental. Is that how to look at it?

Well, really none of these are incremental to our fleet. We're not relying upon any new deliveries to facilitate this aircraft growth in Brazil. It's going to be a combination of the 12 aircraft that have already been in the country, and aircraft that we're rotating down from the Gulf of Mexico.

Okay. I got it. Okay. So, some of the excess supply you had in the Gulf of Mexico -- you're moving that down to Brazil to fulfill some of these new tenders?

That's exactly right. And this, along with some of the other commercial successes we've had in the Gulf of Mexico and abroad, is going a long way to absorbing much of the spare capacity that we've spoken about in our helicopter fleet. Now, that's assume all else remains the same, which is not a given in this kind of market. But assuming that all else remains the same, because of these new awards, you should see much of that excess capacity absorbed over the next 12 months.

Got it. How much more incremental capacity do you currently have, factoring in the Petrobras tenders? Can you give us some idea of how much spare capacity you have now in the medium side in the Gulf of Mexico?

We've never quantified that with a specific number. And if you look at our disclosure, our competitors' disclosure, no one really discloses, on an aircraft class or aircraft model, what their existing utilization is, for competitive reasons. And as you'll appreciate, if I know someone has too many machines, they're going to be more aggressive with pricing, I'll adjust my bid accordingly. If I know they don't have the machine to offer, I'll take the opportunity to take more margin by bidding higher. So, for those competitive reasons, really no one in the sector discloses detailed utilization statistics.

What we have identified, going back to last quarter's call, is that currently we do have a higher-than-normal excess capacity in our medium helicopter fleet, which is resulting in lower utilization of the fleet, which is impacting our near-term financial results. Thankfully, we have had these recent commercial successes, both in the Gulf of Mexico and abroad, including Brazil. And again, all else being equal, which is not a guarantee in today's market, but all else being equal, those new contract awards should absorb much of that spare capacity over the next 12 months, and put us in a much improved utilization picture.

Got it. And I know you guys listen to everybody else's calls. On one of Bristow's recent calls, they said the Gulf of Mexico is robust, quote, and they're moving assets into the Gulf of Mexico. So, like, what are they doing? Are they seeing something that you guys are not? Do they have newer models?

Something doesn't make sense here if they're talking one way, and you're talking another way. Maybe you could comment on that.

Sure. I would certainly note that relative to a lot of the other oil and gas markets around the world, the Gulf of Mexico is a relative bright spot. The current floating rig count in the Gulf of Mexico today is about 43, which has held up pretty well. It's actually up from about 38 at mid-year 2014, and about 36 at the end of September 2014. So, relative to a lot of the other international markets, the Gulf of Mexico has been a robust one.

We've certainly -- you've seen that in our 2014 financial results, which were a record for the Company. Revenues were up 11%, driven really in -- almost entirely by improvement in our Gulf of Mexico activity.

So, I would not say that we're seeing necessarily anything different there. But, overall, the industry is challenged. Our customer base has significantly reduced their capital spending plans for 2015, and everyone in the sector is going to feel some impact from that.

Got it. Just some financial questions: Can you tell me, of the taxes that you have paid, how much of that is cash? Is it all cash taxes, or are there some tax benefits to that?

We paid very little in the way of cash taxes; really, a very de minimus amount in the US. Any cash taxes that we do pay are going to be from the limited foreign jurisdictions in which we operate today.

Got it. And I guess the last question, or, if I have any more, I'll get back in line: I know you guys have a stock buyback in place. Apparently you haven't done anything yet. Maybe you could comment on why you would buy back debt versus buying back stock below book and significantly below net asset value?

Well, I'll address, first, the refinancing of our debt. So, refinancing the debt is not a net increase in leverage. What we took advantage of there was an opportunity to take out higher-cost debt in our 7.75% senior notes, and refinanced that with lower-cost debt on our revolver, and capture about 5 percentage points of spread there.

I realize that, but why would you do that versus using your -- you'd have $40 million of cash. You said you would possibly buy back stock. I know you're trying to narrow the discount between the stock price and net asset value; why not buy back stock?

Yes, so, I will address the share repurchase question. But, again, just wanted to highlight: This is not incremental leverage.

No, I realize that, right.

So, on the stock front, we do continue to believe that Era's share price is undervalued. I took the opportunity, for my personal account, over the last few weeks to buy some more via our employee stock purchase program.

From the Company's perspective, it's not a question of whether repurchasing shares is a good investment, but whether it represents the optimal utilization of a limited resource, namely capital, which has to be viewed in the context of our unfunded capital commitments and other investment opportunities that we see, and the fact that cash resources are limited. And obviously it involves an evaluation of the overall market situation, and has to be made in the context of what are, really, ongoing oil price weaknesses and declines, and the negative sentiment overall towards the offshore services space.

Okay, I mean, I know Charles listens to all the calls. I know in the past, he's been an acquirer of assets at discounts to NAV. I would just suggest canceling some of your orders on the longer-term copters that you may not need if there's excess supply, and being more aggressive on your stock. But I'll leave that up to you guys, and I appreciate your taking my call.

Thanks very much, Adam.

Our next question comes from DeForest Hinman. Please state your organization.

Hi. It's Walthausen & Company. You talked about the headcount reductions in the fall. Can you quantify the annualized cost save on those reductions?

Sure. On an apples-to-apples basis, it should -- the headcount savings should result in about a few million dollars of annualized expense reductions for personnel.

Okay. And I don't know if this is the right way to do the math, but you have the flight hours in the Gulf going down about 17%, and then you have basically pretty flat revenues, which would mean revenue per flight hour up substantially. Is that more a function of the mix change, or are rates going up for certain classes, but going down in others? Can you help us understand that?

Yes, it's a good question, and also serves as a good reminder about this disclosure. It's not a perfect disclosure in the sense that not all flight hours are created equal. So, what you saw in Q4 is that we had better utilization of our heavy helicopters. And so, while there may be fewer hours associated with the heavy machines, they are at much higher rates and better margins.

So, really, you can't compare one flight hour from a heavy to one flight hour in a single, and that's what you saw. It was really the mix that you referenced that led to the dynamic, with just better utilization on the heavy than we lost flight hours on the lighter aircraft.

Okay. And it sounds like we need to reposition one EC225, and I guess potentially four AW139s to Brazil over the next 12 months or so. I think, in the past, you talked about a couple months to get a new unit that's delivered up and running, get the software put in the way you need it I guess, and get everyone trained and ready to go. But in terms of moving a unit, on a boat I'm assuming, how long does that take? And then, do we have to do certain tests, once it's in a new country for their air regulations, or something along those lines?

Yes. I would note, first of all, that we have actually sent three 139s to Brazil in the recent months here. So, the existing fleet count went from 12 to 15. And then, you rightly point out that we'll be sending, over the next year, four more 139s, and an incremental EC225 as well.

For Brazil, we can actually ferry flight the aircraft down in a matter of days. So, we don't have to ship them via any ocean-going containers, or put them in air cargo or anything of that nature. We are able to ferry flight them to Brazil on a cost-effective basis.

And then, the holdup really becomes just the regulatory process of getting the aircraft imported. And that's somewhat dependent upon the local authorities in Brazil. And that can range from being a pretty quick turnaround to a more drawn-out one.

Is it months and months? Is it a quarter, or what is it?

Yes, it could be anywhere from six weeks to two months, just depending on how quickly the process is moving at that particular time.

Okay, and --

What the Brazilian holiday schedule is.

Okay. And in the past I think we talked about parts credits related to the EC225s. Were there any parts credits in the fourth quarter?

Yes. We did realize, through the Airbus settlement, about $1.3 million of credits, which did serve as a reduction to OpEx in the quarter.

Okay. And then, this is kind of a hypothetical, based on your commentary from the Aeroleo JV, but in theory, if this partner transaction goes through, it basically sounds like you're going to take a majority control of that, which allows you to consolidate that. But at the same time, that would basically allow you to, I'm assuming, pay the receivables to yourself almost. Is that one of the end games with this transaction, or do you still see there being this cash accounting going on with that business?

Once the transaction closes, as you reference, we do expect to consolidate the financials. The interests in Brazil, by matter of regulation, are required to be controlled by a local Brazilian. The difference between our existing relationship and the new relationship is that our new partner is someone who is very well known to us, and has been for a number of years, and will function really as an agent of ours in the country. Because of the dynamics there and the accounting rules, that's why we expect to have consolidated financials on a go-forward basis.

The payment of the past owed amounts is not so much extracting the cash, but building the cash. So, that will be a determinant of improvement in the actual underlying business of Aeroleo, which, as we've spoken about, is going from a position where they've had to support 12 aircraft, only eight of which are working, generally speaking, at any given time, to a position where there are now going to be, over the course of the next 12 months, 20 working aircraft in the country.

So, an improvement in the underlying business should drive improved cash collections out of Aeroleo. We'll be able to extract those -- that cash -- both through current lease payments on the aircraft, as well as starting to catch up on the older balances that are due. The nice thing about those balances is that when they're paid, all of the associated expenses were incurred at the time that they happened, and so any cash collected on those past-due amounts is going to drop to the bottom line.

Okay. And then, the last question, and a comment, as well: It doesn't sound like we're too inclined to buy back stock, at least at this point in time, but you did do the transaction on the debt buy. Is that something we would continue to look at if the bonds are trading for a discount, kind of rolling those senior notes into the revolving credit facility?

It is something we'll look to continue to be opportunistic on that front, where we see opportunities to buy in bonds. We had a relatively small offering at the time we did the deal in December 2012, and the bonds don't trade very frequently. But if we see opportunities to buy in bonds at an attractive price and reduce our ongoing cash interest obligations, that's something that we will look at.

Okay, thank you.

Thank you.

Your next question comes from Rob Galtman. Please state your organization.

Hi, Chris. This is Rob with Central Square Management. Thanks for taking the call.

Just had a couple quick ones: I guess first on Brazil, just to clarify, as well. I think on the last call it was mentioned that, with the fleet expected to be fully utilized this year, that you would see sort of a mid-teens return on capital, as you had seen on your fleet in the past. Which, I think, if I assume, call it, 20% of the fleet value, that implies about $25 million to $30 million of EBITDA in Brazil, which just, making some assumptions on how much that contributed this year, I think implies about $15 million to $20 million or so of incremental EBITDA in 2015. Would that still be the case, based on what you're seeing today, and just help me understand some of the puts and takes there.

Yes, Rob. I would say the fundamentals of your understanding of the situation are still accurate. We do expect a significant improvement in our business, now that all of the existing machines will be operating, and there will be, over and above that, some incremental fleet growth going on in Brazil under what we believe are attractive lease rates. So, again, without providing specific guidance, since we don't provide the forward-looking guidance, I think the assumptions of your -- the framework you walked through are accurate.

Okay. And then, shifting to the Gulf -- so, the commentary around utilization in the release, and earlier in the call, it was less clear to me. Have the utilization trends that you're seeing today gotten worse versus what you talked about in November, or is it similar to what you'd seen before?

It's similar to what we were talking about in November; really it hasn't changed there. There's been a couple of improvements.

But what we saw going into the fourth quarter, and we talked about a lot in the third-quarter call, was that we had a number of contracts which were scheduled to end. And we knew that they were scheduled to end, and didn't have work to replace them, which, as we spoke about at the time, was really largely an intrinsic issue to Era, where we hadn't had a lot of new business wins over the prior 15 to 18 months. It's one of the reasons that we did pursue the management realignment that we did in the fall.

We're happy that we've been able to achieve some recent commercial successes, both in the Gulf and abroad. I think we're starting to see the fruit of some of those changes. And again, all else being equal, which we can't count on in this environment, but all else being equal, those recent awards should lead to a much improved utilization picture over the next 12 months.

How many new contracts did you win in the Gulf, and what were the fleet types?

So, we've press released some of the ones in the Gulf, so I am comfortable talking about those. We had, really from incremental from what we were looking at on the Q3 call, the addition of one medium helicopter with a customer, the addition of two medium helicopters with another customer, one medium helicopter plus two light twins with a third customer.

Okay, got it.

And then, if I just think through some of the puts and takes in the Gulf -- so, you have all these new additions on the 189s that have the certification now, and will be rolling in; you had the S92 later in the year. If I assume all, or a majority, of those go into the Gulf, I think that implies, actually on a realized basis, maybe $5 million to $7 million of incremental EBITDA this year. Again, just on a realized, not annualized, since they will come in mid-year, which will be somewhat offset by the underutilization you're seeing in the Gulf.

But just net basis, and not to get too specific on the numbers, but qualitatively can Gulf of Mexico EBITDA be flat or even up this year, based on what you're seeing today?

Well, since we don't provide guidance, I can't answer that question, unfortunately, Rob. What I can talk about is -- some of the new awards that we've announced have already started, but more of them will be coming online in the second half of the year, and certainly by Q1 of 2016. Of the new machines that are coming in, the four 189s, and the one S92 that will be delivered this year, we do have contracts identified with customers for those aircraft. And so, you will see, once they come online, a benefit as those machines go to work.

Okay, got it. And then the last question I have: On the cost side, the reductions that you had seen, if we assume sort of a few million as you mentioned on an annualized basis, did we see that in the fourth quarter in the G&A? It seemed like that came down maybe about $1 million sequentially -- a little bit less on a like-for-like basis.

The biggest impact on SG&A for the quarter was that we recovered $1.1 million of a previously reserved account receivable from a customer in bankruptcy. On the OpEx side, in Q4, you really would not have seen the full benefit of the reduction in personnel expenses in Q4 because it was done in late November, and there were some severance expenses associated with the reduction in force. So, it won't be until Q1 that you really see the impact of the reduction in personnel cost.

Got it. Okay. Thanks very much.

Your next question comes from Christopher Hagedorn. Please state your organization.

Hi, it's Chris Hagedorn from Redwood Capital. Hi, Chris. Thanks for taking my question.

I just want to ask one thing around the capital commitment, and you talked about how, for those that are firm, you have mostly contracts lined up at the back end, so there's little contingency. Can you qualitatively talk about how these contracts work?

What gives you comfort that, if the environment changes in the meantime, that those are sort of -- that the customers are -- have an incentive to stick to them, or are they structured in a way that allows you guys to hold them to it, if things move? I guess I want to understand those contracts a little better.

Sure, and thanks for the question, Chris; appreciate you joining the call today.

The contracts that we have in the Gulf of Mexico, and this is true for essentially all of our contracts in the Gulf of Mexico, are not firm contracts. The customer does retain flexibility. That's the way the industry works in this region, and has always worked that way.

What we rely upon is really the relationship with the customer. And certainly, before we enter into capital commitments and talk about identified contracts, we have a very high degree of confidence that we understand the customer's plans, and have confirmed and reconfirmed those plans to take the aircraft.

But there are no contractual guarantees there. We're really relying upon the strength of the relationship, which has been a very sticky, long-term relationship with the customer, in which we sit down and go through their production schedule, their drilling plans, rigs coming in, coming out of the market, what their aviation needs are going to be, and then we work to support those.

Got it. Understood. And is that approximately similar in Brazil, or is the contract structured a little different down there?

The contracts in Brazil, and really most other areas of the world, do work differently. They are fixed contracts for a specified period of time.

Got it. Can you say how long those usually -- if Petrobras puts out a tender, you win, what those time periods usually are that we're looking at?

Sure. Sure. All of the contracts with Petrobras that we've been speaking about are five-year contracts, usually with options to extend for another five-year period.

Got it. Thanks. That was my question.

Your next question comes from Andrew Mees. Please state your organization.

Hi, Andrew Mees with Babson Capital. Thanks for taking the question.

I apologize if I missed this earlier, but just wanted to get some color around the Gulf of Mexico -- kind of the current competitive environment. And understanding the rate change that you saw based on the mix shift, can you maybe just talk about leading-edge rates for heavy aircraft at this point in time? And are you hearing from customers looking to reduce rates on existing contracts?

Sure, Andrew. I'll start with the last part of your question first. As it relates to customers, we, like all of E&P companies -- service providers -- are seeing requests for cost reductions. We have responded to that with guidance and discussions, and working with our customers to talk about aircraft sharing options, increasing the seat utilization on the aircraft that they already have, and other operational efficiencies to help control their cost structure.

As it relates to the competitive dynamic in the Gulf of Mexico, I would characterize it as stable. You still have, in the deepwater, the three large players; one with slightly more market share, the other two of us with fairly equal market shares.

As it relates to rates, this is certainly not a market where we are going to win by pushing rates. So, we are focused more on maintaining and improving the utilization of our aircraft fleet.

The nice part about being in the Gulf of Mexico is that, relative to other major oil and gas markets around the world, the Gulf of Mexico has held up pretty well. And with a working floating rig fleet count today of 43, which is actually up from mid-2014 to today, we have seen more stability in our business than a lot of the other areas around the world.

Great. Thanks for taking the question.

Thank you.

(Operator Instructions) Your next question comes from Saidal Mohmand. Please state your organization.

Yes, this is Saidal Mohmand with GrizzlyRock Capital. I would like to, I guess, get some clarity. As your Brazilian fleet ramps up, would you perhaps be able to take advantage of some lease financing, and unlock cash for uses such as a share buyback, et cetera?

Sure. And thanks, Saidal, for the call.

The contracts in Brazil, since they are long-term, fixed contracts, do tend to lend themselves more to, for example, sale leaseback financing and other potential alternative financing sources. That's something that we have looked at -- we'll continue to look at -- now that we have the contracts actually starting up with Petrobras, and more coming online. It is certainly something that's under evaluation.

Got it. And then also, I guess on the current contract wins for the mediums down in the Gulf -- now, those haven't been operating for a full quarter, correct?

Most of the ones in the Gulf of Mexico, which we have press released, started up either at the beginning of 2015 or some time during Q1 of 2015; very little impact to Q4 or 2014.

Got it. Appreciate it. That's all I have, thanks.

Great, thank you.

There are no further questions at this time. I turn the call back over to the presenters.

Thank you, operator, and thanks, everyone, for joining the call. Look forward to speaking to you again next quarter.

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