Tomas Johnston - Acting General Counsel & Corporate Secretary Christopher Bradshaw - President, CEO & Director Jennifer Whalen - SVP, CFO & Principal Accounting Officer.

William Mastoris - Robert W. Baird & Co. Adam Ritzer - Pressprich William Schnier - Evercore ISI John Deysher - Pinnacle DeForest Hinman - Walthausen & Co..

Good day, and welcome to the Era Group Reports Second Quarter 2018 Results Conference Call. Today's call is being recorded. At this time, I would like to turn the conference over to Mr. Tomas Johnston. Please go ahead, sir..

Thank you, Brad, and good morning, everyone. Welcome to Era's Second Quarter 2018 Earnings Call. I'm here today with our President and CEO, Chris Bradshaw; our SVP and CFO, Jennifer Whalen; our SVP Commercial, Paul White; our Corporate Controller, Tricia Schroeder; and our Finance Manager, Seema Parekh.

You may access our recent earnings press release and presentation slides on our website, erahelicopters.com. Let me remind everyone that during the call, management may make forward-looking statements that are subject to risks and uncertainties that are described in more detail on Slide 3. I'll now turn the call over to our President and CEO.

Chris?.

Thank you, Tomas, and welcome to the call, everyone. As always, I will begin our prepared remarks with a note on safety, which is Era's most important core value and our highest operational priority. We are pleased to report that Era has achieved our dual goals of 0 air accidents and 0 recordable workplace injuries through the first 7 months of 2018.

This follows the company's best safety performance year on record in 2017. I'd like to commend our entire team for their hard work and dedication in achieving this performance. Understanding that our safety record must be earned anew each day, we remain focused on continuous improvement in 2018.

If you will reference pages 5 through 7 of the earnings presentation slides, I will now comment on the strength of the company's balance sheet and our financial flexibility. We have a strength in liquidity position with total available liquidity of approximately $173 million as of August 3, including almost $50 million of cash on hand.

The company continues to have a strong balance sheet with limited debt maturities prior to 2021 and manageable fixed charge obligations. We've worked hard to achieve and maintain an efficient operating cost structure, which is proven to be an important competitive advantage.

Please note that we will be presenting at the Barclays Energy Conference in New York next month, and we plan to discuss additional detail on our efficient cost structure at that time. In addition, we are not obligated to spend any new capital on helicopter deliveries as our entire order book is cancelable.

These factors have the company prime to generate free cash flow. Consistent with our long-standing disclosure policy, we do not provide forward-looking financial guidance, but we have provided an analysis of what returning adjusted free cash flow would have looked like over the last 12-month period.

Over that period, we spent approximately $15 million on nonroutine professional services fees related to litigation that has now been settled.

If you add those nonrecurring expenses back to our operating cash flow and then subtract capital expenditures, the company's recurring adjusted free cash flow over the last 12 months would have been approximately $22 million.

We believe Era possesses industry-leading financial flexibility and the company's cash flow generation presents multiple opportunities to create value for shareholders. Given the broader turmoil in the global helicopter industry, we believe that opportunity set includes potential value-added strategic transactions.

As disclosed in the recent press release, we are augmenting the company's leadership team with the hire of a new senior Vice President of Strategy and Corporate Development to help lead Era's pursuit of these strategic opportunities. For a review of our Q2 financial results, I will now turn it over to our CFO.

Jennifer?.

Thank you, Chris. Turning to the financial highlights for the quarter. Comparability of the recent quarterly results has been less straightforward due to two main items. First, the existence of litigation that has now been settled has generated significant nonroutine professional fees.

The impact of the nonroutine professional fees in Q2 2018 was $7.1 million, which was $3.3 million higher than the preceding quarter. Secondly, foreign currency losses, which are primarily noncash and related to the Brazilian real, were or $1.1 million in the current quarter. The effects of these 2 items in the current quarter was $8.2 million.

Had it not been for these items previously mentioned, adjusted EBITDA excluding gains would have been $10.4 million in the current quarter compared to $11.9 million in the previous quarter. As adjusted, Q2 2018 was $1.5 million lower than Q1 2018, primarily due to higher reserves and maintenance expenses.

See Slide 8 for more details on the impacts of the adjusted EBITDA excluding gains. Now onto the quarter over prior year quarter results. As noted previously, the 2 primary items affecting results in Q2 2018 and, to a lesser extent, in Q2 2017 are the nonroutine professional service fees and foreign currency gains and losses.

Had it not been for those 2 items, Q2 2018 adjusted EBITDA excluding gains would have been $1.9 million higher than Q2 2017, primarily due to lower personnel expenses. Also, it's important to note that while total revenues for the quarter were consistent with prior year quarter, the increase in U.S.

Gulf of Mexico oil and gas revenues over the prior year was $5.7 million or positive 20%. This increase was offset by the absence of flightseeing revenues following the sale of our company's flightseeing assets in early 2018 and the recognition of lease return charges in Q2 2017. At this time, I'll turn the call back to Chris for further remarks.

Chris?.

Thank you, Jennifer. I will now provide some brief comments on market outlook. The offshore oil and gas market recovery has begun, but it will not be linear. The cadence of customer projects may cause some quarter-to-quarter variability during the recovery.

That being said, the demand for floating offshore drilling rigs has increased significantly in 2018, with over 50 tenders currently outstanding globally. This represents a 50% increase over the last 6 months and is approximately 25% higher than the July 2012 peak. A new demand is coming from a combination of exploration and development activities.

The pace and slope of the offshore oil and gas market recovery will vary by geographic region. For example, we have seen a significant increase in customer activity in the U.S. Gulf of Mexico over the last 12 months. The third quarter of last year saw the first year-over-year increase in our Gulf of Mexico revenues since 2014.

The pace of those year-over-year revenue improvements increased to 21% in Q1 and 20% in Q2 of this year. Based on currently available information, we expect our customer activity in the Gulf of Mexico to be more or less steady state for the remainder of 2018. In contrast to the U.S.

market, we have not yet seen a meaningful increase in customer activity in our Latin American operations where revenue trends have been relatively lackluster over the last year. However, when you break down the increase in floating offshore drilling rig tenders by region, the growth has been driven by Latin America and the Asia Pacific region.

This has positive implications for our Latin American operations and our global leasing activities. While we do not expect these trends to have a meaningful impact in 2018, they do provide reason to be more optimistic about 2019 and 2020 activity levels. With that, let's open the line for questions.

Brad?.

[Operator Instructions]. Our first question comes from Bill Mastoris with Baird & Company..

Chris, with the signs of the increased activity and, obviously, the increase in request with floating -- or the outstanding tenders for floating rigs, that would imply not only a higher level of activity, but would also imply that you might need a slightly different composition of fleet, maybe a few more heavy helicopters.

So with that in mind, is it your intention to go ahead and take deliveries of your remaining aircraft at this point?.

Thank you for the question. We're pleased with the flexibility that we've built into the order book that we have with our long-term OEM partners, and that flexibility provides us the optionality to bring in new aircraft, primarily 189s, if market opportunities present themselves. So we're glad to have that optionality.

That being said, we also retain the flexibility to cancel all of those orders if the market opportunities don't present themselves.

Fortunately, we have some time left before we have to make those decisions, and so that provides us with a lot of flexibility to monitor market conditions and if we need to bring in new aircraft, we can certainly do that..

Okay. And Chris, during the quarter, you saw some of the H225s, and it looks as though you're beginning to pair down your fleet a little bit. Can we expect to see more asset sales going forward? And I'm assuming those asset sales would be pretty much on the light and medium side.

Do I have that correct?.

That has historically been the case. You're right that in Q2, we saw a total of 8 helicopters. It was 1 Bell 212 medium and 7 H225 heavy helicopters.

If you look at the first half of 2018, we've sold a total of 20 helicopters through the first 6 months of the year, but that included all of our flightseeing operations in Alaska, which were comprised of 8 helicopters. So the first half of this year has been particularly heavy with asset sales.

I don't know that we'll see that same volume of sales in the next couple of quarters.

But that being said, if you look at history, that would be an indication that we will continue to sell aircraft over time when that makes sense, which ties into our big picture strategy, which is that we view ourselves as a manager of assets from which we're trying to generate the best return and we can earn that return either operating the aircraft, leasing it out to other operators or selling the aircraft when that option presents the best net present value potential for the asset..

Okay.

So would it be fair to say at this point that you're satisfied with your current fleet composition? Or do you think that you're going to need to supplement that at some point should these outstanding tenders come to fruition and the activity levels pick up materially?.

I think there are two points I would make there. First, our current fleet provides the potential to grow our earnings and cash flow over time. The greatest concentration of available capacity we have on our fleet today is in our AW139 helicopters.

The good news is that if you look at the market for that model helicopter globally, it's seen some of the best, if not the best improvement in the supply demand balance over the last few months.

So if you were to go back several months, you would have been able to readily find a number of available 139s from any number of lessors marketing those aircraft than what would have been pretty attractive terms.

That supply of available capacity has tightened considerably over the last few months, which is good news if you're in our position as someone who owns the assets as exposures to residual values and also in our position today, where we have available 139s that we can put to work.

And indeed, we have seen an increase in the number of competitive opportunities that we're participating in, either to operate 139s or to lease them out to other operators. So first point is we do have the potential for growth of earnings and cash flow with our existing fleet today.

The second point is if we need to go beyond the existing fleet, we have the optionality to do that. We have an order book that provides us flexibility. We can bring in new heavy helicopters if we need to, to capitalize on opportunities as they present themselves. But we also have the flexibility, but we don't have to make those commitments today..

Okay. And then my final question just has to do with, there's been some talk of consolidation in the industry, and this has been for the last several quarters. I'm just wondering whether the inclusion now of a new strategist is done with maybe some consolidation activities in mind.

Or is this entirely unrelated? Is this going to be something that you explore, maybe, new in areas where you may want to become involved? Maybe a little bit more color on that would be greatly appreciated. I know that's a two part question..

Sure. The decision to bring in the new SVP of Strategy and Corporate Development was certainly an intentional one, and it was informed by our view of the market opportunities out there. As we look at the industry today, we think the global helicopter industry continues to face a number of significant challenges.

There are a number of players in the industry who remain in some degree of financial distress, and we think that could present an opportunity for someone in Era's position, who has a strong balance sheet, is continuing to generate free cash flow that could be put to work. We think we have the best financial flexibility in the industry.

And so in order to evaluate and potentially pursue some of those specific opportunities, we've augmented our management team by bringing in this new SVP to best position us to do that..

Okay. And so consolidation is pretty much on the horizon.

And do you see that evolving as a number of smaller players, actually, being acquired where you now have much fewer players in the marketplace just through maybe some bolt-on acquisitions? Is that how you would envision this evolution that would take place?.

I think consolidation could take a number of different forms. It certainly would involve existing players coming together. So the number of total players would definitely contract with that consolidation. But there's different forms it could take, both in terms of size of partners, location of partners.

We're not going to comment on any of those specific opportunities, but the opportunity set out there in the industry right now is such that there are probably multiple situations that could become actionable..

Our next question comes from Adam Ritzer with Pressprich..

Just a couple of follow-ups on the last questioning. In terms of tenders, I know you've said that they are big.

When do those tenders actually result in you guys getting contracts? What's the lag in that?.

Yes. Adam, thanks for the question. The answer is that it varies. Each tender will have a date that they're looking to put the rig to work on. I think the best way and the high level to address that question is to say that we don't necessarily see this activity impacting our results in the balance of 2018.

But it does indicate a positive trend and potential for our operations and our leasing activities as we look into 2019 and 2020, and this offshore recovery that's taking place continues to build momentum..

Okay. So that's kind of consistent with what some of the earnings calls on the rig operators have been saying, it's really more of a '19 and '20 type of recovery. Okay, that makes sense. In terms of Latin America, I know a lot of the 225s were down in Latin America to service Petrobras.

What assets do you have down there now in case -- as you said, Latin America is starting to come back? And how readily can we move assets down there to support any tenders you might win?.

The nice thing about helicopters is they are highly mobile assets, and that's how we look at our fleet as being -- that's why we look at our fleet as being a global one, and we can certainly move them around if we have excess capacity in the U.S. that needs to go into Latin America.

To specifically address your question, currently in Brazil today, we have 13 139s; in Columbia, we have 1 139 and four light twin helicopters. We have been doing some work from time to time in Suriname and Nicaragua, moving helicopters in and out of those jurisdictions as dictated by customer projects..

Okay.

So the 14 139s you have down there, can you comment on what utilization is on there or give us an idea on how many could be put to work?.

Yes. Consistent with our long-standing policy, we're not going to provide specific information on individual customer contracts or specific utilization rates for competitive reasons. We do have competitors listening to the call, and I think that policy is consistent with how our peers approach it.

I would note that the fleet that we have in Brazil today is not all being utilized today.

So we have -- of the 13 139s that are positioned in the country today, that particular fleet is consistent with what I said about our overall fleet, which is that there's capacity today for additional growth in both earnings and cash flow by increasing utilization, and most of that potential pickup or improvement is really related to the 139 asset class..

Got it. Understood.

And the follow-up, in terms of hiring Grant Newman, can you talk about what areas you may need to boost your business, or the parts of the world globally? Are there certain types of helicopters or services that you would find attractive? Or is it more just looking at deal by deal on what has the best returns?.

Certainly looking at it deal by deal, what has the best financial returns, what has the best fleet mix with our existing fleet, those are all important factors.

So without being able to comment on specific opportunities, I think what I would say in terms of general characteristics that we're looking for, we certainly like opportunities to increase our scale, increase our diversification. We also like opportunities that come with value creation potential for synergies.

So if we have overlap and the ability to realize value by reducing costs, that's something that you can accomplish in M&A that you really can't accomplish in any other format. So those are some of the general characteristics that we look at in terms of what makes a deal attractive.

If it's an existing geography, where we have overlapped, great value by cost savings and increased scale, increased diversity and of course, we look at fleet mix and absolutely, we're not going to do a deal unless it is a value-added one, so it has to make sense financially..

Okay. The synergies would be more in the Americas, Gulf, Latin America, I guess, areas where you may be lacking.

You don't really have much now in Asia Pac or in Africa, do you?.

That's correct. We do not. We do not have any operations today outside of the Americas. The way that we've been able to capitalize and monetize market demand opportunities from those other regions of the world is through our leasing business today..

Got it, okay. And then last question, sorry, to keep asking stuff. In your hours of service, it looks like June was up significantly from March. I know some of that's seasonally, but that was your best hours in a long time.

Is that short-term work? Is that more contractual work? Can you comment on why it was up so much in June?.

I think it's consistent with the pattern that we've seen beginning in the third quarter of last year, which is an increase in customer activity, primarily in the U.S. Gulf of Mexico, primarily amongst the heavy and medium helicopter class. So this is deepwater projects that are occurring in the Gulf of Mexico.

The Gulf is a market that has a certain level of foundational production support work, given the high number of production platforms that are located in the Gulf, which provides, again, a nice base or foundation.

In terms of exploration and development projects, which by definition are short term in nature, we've always had a very short cycle market in the Gulf of Mexico for the work of that type. It's really about the cadence of the customer project, so during the depth of a downturn, it had slowed down significantly to more of a drift.

Beginning in Q3 of last year, we started to see that cadence of these customer projects pickup, and it's really that volume, the number of the short-term exploration and development projects, that adds to an overall level of increased activity..

Our next question comes from Cameron Schnier with Evercore ISI..

Can you discuss the mechanics behind the decline in revenue per flight hour in the Gulf of Mexico in 2Q? It looks like the incremental revenue was pretty low compared to a year-over-year and sequential basis..

So we disclosed flight hours on an aggregate basis. But just a reminder that our -- not all flight hours are created equal. So we had an increase in utilization in our heavy helicopters in the Gulf, and utilization from light twin was down on a sequential basis and mediums were relatively consistent, slightly down from Q1.

So it's really a mix of the flight hours. And a flight hour from the heavy, obviously, has more impact than the flight hour from a single-engine aircraft..

Got you.

And on the international side, I guess, without giving any sort of discrete guidance, are you able to compare sort of the contract coverage for the duration of the year relative to how it looked last year?.

Pretty steady state in Latin America. It's been, overall, a slight decline in revenues over the last 12 months. Some of that has come from less activity in Suriname this year than what we had in 2017. Brazil has been pretty consistent.

So it's been a not too volatile but somewhat lackluster last 12 months for our Latin American operations and, again, I think that probably remains the case for the balance of 2018.

It's really in 2019 and 2020 that we've seen signs from customer conversations from the new rig tenders that have hit the market that those years could be better as this offshore market recovery continues to build momentum..

Got it.

And with the increasing tendering activity, are you seeing any sort of customer interest in longer-term contracts or securing equipment for longer than sort of the short bursts work you are seeing right now?.

It's a mix. I would say in the Gulf of Mexico, most of the new work has been more shorter term in nature, measured in months to a year. In Brazil, the contract opportunities tend to be multiple year, opportunities that are awarded at that time. So it's really, I would say, a mix of duration that we're seeing..

Got it. And just one more.

Can you just sort of enumerate where potential M&A fits in your capital allocation priorities over the next, like, 6 or 12 months?.

Yes. Happy to do that. So I think we feel that we're in an attractive position today, where we have an ample liquidity amount today, about $50 million of cash available. We're also continuing to generate cash. That part's important, right? So that liquidity should continue to strengthen, over time.

We think that this is a fact that then it presents multiple opportunities to create value for shareholders, and that could be through a continued deleveraging of the company, it could be returning value to shareholders via buybacks or dividends, or it could be via value-added M&A transactions -- -- and we think that last category is particularly interesting, given the current state of the industry, the amount of turmoil that's still out there in the helicopter segment and the fact that you have a number of players who are in some degree of financial distress.

And there's obviously aspects of M&A that are different than other forms of capital allocation in terms of how you can realize value, such as synergies, as we talked about earlier, the ability to create value by reducing costs through synergies, the potential to increase your scale and the diversification and the implications that has for the long-term value creation potential of the company.

So I think we are, given the opportunities that sit in front of us today, taking that seriously and looking at carefully at some of those opportunities and how we might pursue and potentially consummate some of those to realize value for shareholders.

If that doesn't come to fruition, then obviously, we have other opportunities to create value for shareholders with that cash. Thank you, Cam. Special thanks to you, Cameron, and Evercore for allowing us to use the data for the new floater tenders that we have on Page 11 and Page 12 of the presentation. I think that was very helpful. Thank you, guys..

Our next question comes from Ralph Dumont with Raymond Group [ph]..

A quick question. On Slide 13 of your annual presentation, you provide an NAV per share calculation.

Now that you've sold the 225 and taken in some cash for that, and the Gulf has taken in some cash for -- from the settlement with Airbus, what are -- with those sort of pluses and minuses, what would that do to your NAV calculation, keeping the aircraft guidance the same?.

Yes. So our disclosure policy is that we release our NAV once a year. Similar to how an E&P company releases their PV-10 values. We give a third-party appraisal of our helicopter fleet once a year, and when we have that data, we provide the NAV disclosure. It is a point in time appraisal, so over time, it becomes stale.

It becomes stale for a number of reasons, whether it's supply and demand of particular helicopters, whether it's other market movements like interest rates, foreign currency movements. So it's not updated throughout the year. We get the appraisal once a year and we provide the NAV disclosure once a year..

Let me ask you another way.

You got about $40 million from Airbus that I think -- I forget how much you're getting for the sale of 225, if you take those 2 numbers and add them together, are they greater or less than the heavy values -- value you're carrying the 225s at?.

So we, by another policy, never disclose what our individual transaction gains or losses are. We disclose them in the aggregate. I would note that last September, we received a third-party appraisal for the 225s.

Based upon that appraisal, we took an impairment charge of approximately $117 million and as we disclosed at that point in time, the average carrying value of the 225s in our fleet was, at that point, roughly $4 million per aircraft..

Okay.

Could you give a sense of whether or not, if we talk to someone like Ascend, whether or not aircraft values have come up since the beginning of the year?.

Really, if you're having a conversation with Ascend, I think they would tell you something that we would certainly corroborate, which is that you need to look at each model as a separates sub-market. It's going to have different supply-demand trends, depending upon the individual model of helicopter.

I think with the 139s as an example, we've seen an improvement in the supply-demand balance for that model type over the last few months, as excess supply has been absorbed. The balance there has tightened, and I think that's very constructive for the residual value of the 139 helicopter type.

You have other models, where there aren't as favorable characteristics. So it would really need to be a conversation, and I think Ascend would tell you this, or you have to look at individual model types..

Okay. A couple more questions. You have roughly $700 million or $750 million of book value here.

What should that set of assets earn on that sort of pretax unlevered return on investment over very long periods of time?.

So consistent with our long-standing policy, I can't address that question because they don't provide financial disclosure.

We have tried to highlight in the earnings presentation this quarter, on Page 7, I looked at the last 12 months, adjusted for some of the nonrecurring items namely the nonroutine spend on our litigation, which has now concluded and settled, so those are not going to recur in future periods.

And then we also back out the CapEx in there to try to show what that's been. But in terms of go forward, we have adopted a policy in the company where we don't provide forward-looking financial guidance..

Yes, I wasn't looking for forward-looking guidance. I was looking for what should the earning powers of assets be. Obviously, if you're looking at doing M&A, you have to have a clear view on how much these assets should earn. So if you guys would say $100 million, or by $100 million of NAV, how much should that $100 million, on average, over the cycle.

I'm trying to sort of get to the earnings power of the company without talking about it in terms of guidance..

Yes. So I understand the question. Obviously, a lot of folks are looking for help in putting together their projections for the company. But to address the question about normalized or potential would be, in effect, providing forward-looking financial guidance, which we have adopted a policy, we do not to..

Fair enough, okay. Final question.

We're trading at maybe $0.50 on a dollar of NAV here, would you expect M&A to be done at an equal discount?.

I think, when you look at M&A, one of the opportunities is to use a flexible currency like your equity to potentially combine in a way that is acquiring assets at an even greater discount than where your assets are trading today. So we would certainly look at using the flexibility of an equity security if it can be consummated in such a fashion.

And of course, the other benefits that come along with acquiring assets at a discount in M&A is that you potentially have synergies and cost savings on top of that, that have benefits from scale and diversity. So it comes with other attributes that maybe you don't get just by looking at your own share price discount..

And our next question comes from John Deysher with Pinnacle..

I just had a quick question on the settlement, the $42 million.

Have we in fact gotten that cash at this point?.

Yes, the cash was received in July, and we paid down all balances outstanding under our credit facility at that time, and the rest is currently in cash accounts on our balance sheet..

Okay, great. And it also says certain trade account credits that maybe used by Era for up to 5 years.

What exactly are those? And do they have any real monetary value?.

So when we do business with any of our OEM partners, the channel by which we do that business is through something that's referred to as a trade account. And via that trade account with the OEM, we can transact for any products or services that are provided by the OEM.

So we can get repairs and maintenance support, whether that's PVH or buying spare parts, we can get training for our pilots, if necessary. We can also use that trade account to buy new helicopters. So a trade account with an OEM is used to transact for any products and services provided by the OEM and, therefore, it's essentially cash..

Okay.

But the settlement, does that have any value at this point? Do we have any monetary value assigned to those trade account credits?.

Okay. So we are not able to quantify the amount. We have entered into this litigation settlement with Airbus, as with most all agreements of that nature. It's highly negotiated, it comes with certain terms and conditions. We are not permitted to comment on the settlement agreement other than what we are required to disclose in our SEC filings.

So for that, I would refer you to our most recent 10-Q disclosure under recent developments, where we stated the amount of cash and that we have received certain trade account credits that we can use for up to five years. But we're not permitted to quantify that amount..

Our next question comes from DeForest Hinman with Walthausen & Co..

A few questions. Just on the clarity on the settlement, a follow-up on the last caller. $40 million cash received, is there any tax implications received in that cash? I think I know the answer, but I just wanted to confirm that..

So as it relates to cash taxes, there are many items that come into play, right? Prior to net operating losses, operating activities for the current period, asset sales as well as the settlement. So all of those take into account where we end up from a tax position. As it stands right now, we expect to pay less than $2 million in cash taxes for 2018..

No, I'm talking about the settlement.

Did we have to pay any taxes related to that settlement?.

That's all included and part of our operating results, which would equal that less than $2 million of cash taxes for 2018..

Okay. And then from a geographic perspective, is that cash in the U.S.

Yes..

Okay. And then on the G&A expense, on a go-forward basis, you've been doing some headcount reduction and it seems like we've tightened the belt quite a bit.

Looking forward, is it just as simple as taking that second quarter number and backing out the legal expense? Or with the new person you hired for the M&A review, does that number step up potentially a little bit in the second half?.

As Chris has stated several times, we don't give forward-looking guidance. You can ask about our -- if you can back up $8 million of legal expense or $7 million legal expenses in Q2, you get to a number, and that's going to vary over time. G&A is not terribly variable, but it will vary over time..

Okay. And then, obviously, getting the cash from the settlement was positive and then the transaction to get some of the EC225 is off the balance sheet or up meaningfully with our liquidity position and we spent some time on this call discussing -- looking at M&A, and then there's opportunities there.

When we look at the balance sheet as it's currently structured with the revolver in the senior notes, is this an appropriate capital structure to do the things we need to do? Are we working with the banks right now to try to get something in process to change that?.

We feel very comfortable with our current balance sheet, our current capital structure for our existing operating business. If we are going to consummate the transactional size on the M&A front, it's likely that we would need to do something with the capital structure to permit a larger deal.

We feel like we have a good relationship and support from our financing partners who recognize that consolidation opportunities are attractive in the industry. And so we feel very good about our ability to finance potential opportunities that we are looking at.

But it's likely that any one of them of this significant size would require some modifications to the current structure..

Okay. And then more detail on the M&A strategy. You talked about the synergy opportunities, which sound like they're pretty meaningful, maybe more so depending on the geography.

If we could think about how you're prioritizing -- what you're looking at, is it more focused on asset purchases than business purchases?.

We're open to a lot of different opportunities, whether it's combining with another operator, whether it's buying discrete assets at an attractive valuation level, whether it's potentially looking at portfolios of leased helicopters for acquisition.

I think the state of the industry right now is for better or worse, it presents a lot of different opportunity. And so we're going to evaluate all the ones that we think are actionable and that our compelling from the ability to add value to the company..

Okay. And I just want to make sure I understand some of your earlier comments, and by no means do I want to put words into your mouth. But you talked about potentially using your stock as a currency in deals. And you have a situation where another caller talked about it briefly earlier. You're trading at $0.50 on a dollar ballpark, on NAV basis.

Equity dilution, from a shareholder perspective, isn't usually a good thing to hear, it's usually not a good thing to hear when it's such a -- starting at such a discount. So I want to be clear in my questioning and I want to be clear with my understanding of your answer.

If you were to issue equity, are you saying that the people that you would be transacting with would be cognizant of that discount being -- what term to use exactly, it's irrational and they would be willing to, from our stock receipt perspective, they would be willing to value at a higher level, is that what you're trying to say?.

Not exactly. I think the best way I can answer that question is to start maybe of a higher level, and then focus it in. So I think we're at an attractive place today where we have ample liquidity on our balance sheet with a good amount of cash balances. We're continuing to generate cash which provides us a lot of flexibility.

Our liquidity is not being used to fund cash flow losses. And that liquidity is actually growing over time as we generate cash. So I think that presents on number of attractive opportunities. It could be that we might deleverage some more. It could be that we might buy back some shares or pay a dividend.

I think we look at something like a share buyback, again, not speaking to anything about timing or probability, but just from a high-level standpoint, if we're looking, as a potential for share buybacks, if you can buy your shares at a 40% discount to value and again, I'm not using specific numbers, just being illustrative year.

That clearly is attractive. If you can use shares to buy other assets at a 50% discount to value and that comes with the additional benefits of value generation from synergies and cost savings, increased scale and diversity, that looks pretty interesting to us as well..

Okay. So this is the first time you mentioned share repurchases. You and I have spoken publicly on this call about share repurchases and lack thereof.

Maybe just put it in real simplistic terms, why aren't you buying back the stock right now, given this newfound liquidity and this meaningful discount?.

We have strengthened our liquidity position today. We're pleased with the position that we're in today. We think that presents us a number of opportunities. Over time, we might use those proceeds to do things like buy back shares or pay a dividend. Those are all possibilities that will be evaluated.

I think we're in a pivotal space -- pivotal point in time for the global helicopter industry today, where given what's gone on over the last 4 years; there's a significant amount of turmoil, and you have a number of players who are in some different degrees of financial distress, and that could potentially present a unique set of opportunities that could be one of the better long-term value creation opportunities for the company because of other attributes that are associated with M&A, synergies, increased scale, diversification and so forth.

So we think, given what we're seeing today on the market, it makes sense for us to evaluate some of these opportunities. And it might be that terms are reached, where you can consummate that, and it's a great long-term value creation potential for shareholders.

It could be, over time, that none of the consolidation that we're looking at out there comes to fruition. And then, obviously, we're in a fortunate position where we have liquidity.

We're continuing to generate cash and we have other options to create value for shareholders, whether it's buyback, dividends, whatever might be appropriate given the facts and circumstances at that point in time..

Our next question comes from Bill Mastoris with Baird & Company..

Chris, I'd like to return to some of your earlier comments, specifically with the 139 and also your comments on the deepwater projects in the Gulf of Mexico. There's been a lot that's been mentioned and written about overcapacity in the industry. And the AW139 seemed to be coming into a much better supply-demand balance.

Where is that overcapacity now in the industry? Is it concentrated in maybe the light sector? Is it a few of the heavy helicopters with the S92s? Any color that you could provide would be greatly appreciated.

And then if you care to comment on how quickly you think that supply demand may come into balance on an industrywide basis, maybe either within the Gulf or really in Latin America, that would also be greatly appreciated..

Sure. Yes, thanks for the question, Bill. I can address those in a general directional way, the best I can. So I think if you look at the offshore oil and gas helicopter industry, you're primarily talking about medium and heavy helicopters.

There is some presence there from lighter helicopters, but light helicopters have a number of other end markets that they serve. And as a percentage of that asset class, offshore oil and gas represents a much smaller percentage. I'm going to pause there in terms of broader commentary and come back to aero suite for a second.

If you look at our helicopter fleet, we currently have a pretty high degree of utilization in our light helicopters. And we like the exposure that we have in our light helicopters. For the most part, they're working either for BESI in the long-term contract that we have with the U.S.

government to, on an exclusive basis, move their inspectors offshore in the Gulf of Mexico. And then we have light helicopters working for pipeline companies, which is a very different customer profile than your typical small-cap E&P company.

We really don't have any contractual exposure to Gulf of Mexico, small-cap E&P, shelf work today at the company. It's the light helicopters which are highly utilized or either working for BESI, they're working for pipeline companies or they're out on lease in other places around the world.

So I'll put a pin in that light helicopter class discussion, come back to the general industry discussion for offshore oil and gas and focus it really on the medium and heavy category, where we have seen come, over the last few years, as you well know Bill and as you referenced, a high degree of excess capacity where we had too much build, too much order that came out pre-downturn and too many helicopters that came available once the downturn occurred.

We think you really need to look at that excess capacity by individual model type. For example, there are some helicopter models in the medium category that really are not relevant anymore when you're talking about new projects because they're not eligible to be bid when the customer puts out the tender.

You're looking at a relatively small number of helicopters that are eligible within that market category. The 139 has really been the dominant offshore oil and gas helicopter support for deepwater work globally. During the downturn, we did have an excess capacity that grew in that helicopter class, and some of it still exists.

But as has been noted earlier in the call, it's gotten much better. That supply demand balance has come much more into balance with the available capacity tightening quite a bit, which we think is an opportunity. We think it's good for us as an owner of those assets.

We also think it creates ability to generate additional earnings and cash flow growth because we do have some available capacity in 139 from our fleet today. And we have not seen the number of competitive opportunities to put those to work, either operating and leasing, increase in recent months.

So that's something we would highlight as a positive trend that we've witnessed. If you look at the heavy category today for offshore oil and gas helicopter support, you're pretty much talking about the S92. I mean, that is what is working, that's what in demand for new tenders.

In that category, that heavy category, namely the S92, and you do have a higher degree of excess capacity that exists today and it's likely that it will take longer to work through that excess capacity for the industry globally than the comments that I just made about the 139 class.

Today, you still have a number of S92s that are available for lease for multiple lessors, and you have additional S92s that are coming off of the lease that will be returned to those lessors, which will also going to increase the available capacity of that helicopter type.

Fortunately for us, and I'll again put a pin on that global discussion, and come back to Era, we have just 4 S92s and we have good utilization today amongst our S92s. And we feel good about the position that we're at within Era today for that asset exposure..

And we have no further questions in the queue at this time..

Great. Thank you, Brad, and thanks, everyone, for participating on the call. We look forward to speaking to you again next quarter. Please stay safe..

Ladies and gentlemen, that concludes today's teleconference. You may now disconnect..