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To: Bocor who wrote (2956)	6/27/2001 10:50:25 AM
From: Bocor	Respond to of 6873

From a recent Individual Investor article re: OLOG individualinvestor.com While some of this decline can be attributed to initial fears that OPEC would raise its production quota at its recent meeting (it didn't) and concern about the notoriously cyclical nature of the industry, we believe that the prospects of this sector remain extremely strong, especially for companies carrying reasonable multiples. Offshore Logistics (NASDAQ: OLOG - Quotes, News, Boards), one of the world's largest providers of helicopter services to the oil & gas industry, is one such company. Offshore Logistics, through its subsidiary Air Log and its North Sea affiliate Bristow, operates a fleet of close to 300 helicopters in the Gulf of Mexico, the North Sea, Africa, South America, the Middle East and the Pacific Rim. This fleet transports personnel, time-sensitive equipment (i.e. replacement parts) from onshore bases to offshore drilling rigs, platforms and other installations. Offshore Logistics' subsidiary Grasso Production Management Services is one of the leading contract maintenance operators of oil and gas production facilities in the Gulf of Mexico. We would like to note that while the company's international helicopter operations (those termed not the GOM or North Sea) are important, the company's strength lies in its GOM operations where is the second largest competitor with a 30% market share and in the North Sea where it is also the second largest player with a 40% market share. The company charters this fleet out on either a daily or monthly fixed fee basis plus additional hourly charges. While this can prove detrimental in times of lowered demand for exploration, development and production activity (1999 comes to mind), the leverage is that much better in times a relative plenty. And now is certainly a time of plenty. Consider this: Crude oil prices still hover around $28 per barrel, significantly ahead of the $18 level where major integrated oils expand their exploration programs (indeed, the average major is expecting to increase capital spending by 20% to 25% in 2001 and a further 20% in 2002). Similarly, natural gas prices are extremely high. As a result, oil service sector companies are as happy as pigs in mud and Offshore Logistics is no exception. For the fourth quarter of fiscal 2001, ended March 31, the company reported the second best fourth-quarter results in history. Operating revenue (which excludes gains or losses on sale of equipment) came in at $121 million, up 18% over last year's quarter. Growth was driven by a 39% increase in sales from Air Log. Coupled with the previously announced 6% hike in rates in January and almost a 100% utilization rate in the Gulf of Mexico (the North Sea is almost 100% as well), the company was able to post earnings of $0.35 per share, up 150% from the $0.14 earned in last year's quarter. While we note that both the number of hours flown in the Gulf and in the North Sea declined on a sequential basis, this is a normal pattern due to seasonal issues (i.e. bad weather). We'd also like to point out that on a year-over-year comparison, domestic hours flown and international hours flown were up 28% and 35%, respectively. On top of the above-mentioned 6% rate hike in January, as of June 1, 2001, Offshore Logistics instituted a 25% rate hike effectively immediately. This will not hurt its position vis-à-vis competitors Petroleum Helicopters (NASDAQ: PHELK - Quotes, News, Boards) or Rowan's (NYSE: RDC - Quotes, News, Boards) Era Aviation subsidiary since they both had already hiked their rates earlier. The strength of demand coupled with the implementation of this rake hike lead management to say in the conference call that the outlook for the industry is as good as it has been in the past 24 years and that they expect that fiscal 2002 (ends march, 2002) should prove a record year for the company. We believe such bullishness, especially when the company indicated that the previous consensus earnings expectation of $1.71 per share was $0.20-$0.25 too low. Even modeling in the lower end of this range, that means that Offshore Logistics should earn a minimum of $1.91, representing a growth rate of 45%. Bottom Line Given the increasingly strong industry fundamentals, the expected delivery of 12 new helicopters to begin work later this year and a 45% EPS growth rate, we believe Offshore Logistics offers a compelling valuation. Believe it or not, at a recent price of $23.00, the stock trades at a mere 12 times our conservative estimate and 7 times estimated cash-flow.