Good day and welcome to this Era’s Second Quarter Earnings Call. Today’s conference is being recorded. At this time, I would like to turn the conference over to Shefali Shah, Senior Vice President and General Counsel. Please go ahead, ma’am.

Thank you, Amy. Good morning and thank you for joining Era’s second quarter 2016 earnings call. I’m here today with our President and CEO, Chris Bradshaw; our Senior Vice President and Chief Financial Officer, Andy Puhala; our Senior Vice President, Operations and Fleet Management, Stuart Stavley; our Vice President, and Chief Accounting Officer, Jennifer Whalen; and our Director of Corporate Development and Finance, Matt McCarville. If you have not already done so, I would encourage you to access our most recent earnings press release and presentation slides available under the Investor Relations link on our website, eragroupinc.com, and on the SEC website, sec.gov. We will discuss forward-looking statements that 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 will discuss non-GAAP financial measures, such as adjusted EBITDA. Please refer to our earnings press release or the presentation slides for the calculation of these measures and the appropriate GAAP reconciliation. I’d now like to turn the call over to our President and CEO. Chris?

Thank you, Shefali, and welcome to the call everyone. As always, I will begin our prepared remarks with a discussion on safety. On May 5, 2016, one of Era’s flight-seeing helicopters was involved in an accident on the Norris Glacier near Juneau, Alaska. There were no passengers onboard the flight. The pilot sustained injuries in the accident but I am pleased to report that he is expected to make a full recovery. The NTSB has issued a preliminary report which included a statement from the pilot that flat light conditions made it very difficult to discern the topographical features of the snow-covered ice-build and characterized the accident as Controlled Flight into Terrain. Safety remains our most important core value. And we are committed to apply any lessons learned from this accident to further enhance our safety management system. Turning briefly to the highlights of Era’s financial results: despite the very challenging conditions in the oil and gas industry, Era generated positive operating cash flow of $14 million in the second quarter. During the first six months of this year, we generated over $30 million of cash flow from operating and investing activities. Given the uncertainty regarding the severity and duration of the market downturn, we will continue to prioritize the protection of our balance sheet and liquidity position. Consistent with those objectives, during Q2, the company reduced total debt and net debt by $14 million and $23 million respectively. Before shifting to a discussion of market conditions by geographic region, I will first provide an update on a situation that is impacting the global supply of marketable offshore oil and gas helicopters. As many of you are already aware, following a fatal accident involving an H225 operated by another helicopter company outside of Bergen, Norway, in April 2016, several aviation…

Thanks Chris. For the second quarter of 2016 we reported net income attributable to Era Group of $1.9 million or $0.09 per diluted share on revenues of $63.4 million compared to net income of $11.3 million or $0.55 performance diluted share on revenues of $70.7 million in Q2 of 2015. During the quarter, the company and its partner in our Brazilian joint venture Aeróleo contributed notes payable to them by Aeróleo as additional capital. This non-cash transaction among related parties resulted in a reduction of total debt of $6.3 million. The contribution resulted in a loss attributable to a non-controlling interest that increased net income attributable to the company by the same amount. Excluding the impact of the contribution, the company would have reported a net loss attributable to the company of $4.4 million or $0.21 per diluted share. Consolidated revenues were down $7.4 million or 10% versus the prior year quarter. If we exclude Aeróleo revenues from both periods, revenues were down 23% versus Q2 last year primarily due to lower utilization and lower average rates in our U.S. oil and gas operations. As a reminder, beginning in Q4 of 2015, we began consolidating Aeróleo into our financial results, which makes the year-over-year comparison less straight-forward. Aeróleo generated $14.9 million of revenue in the quarter, all reported in the international oil and gas line of service. In the prior year quarter, Aeróleo generated $7.9 million of revenue, which was included in the dry-leasing line of service and recognized based on the cash we received. For additional detail on the impact of the Aeróleo consolidation, please see slide 11 of our Q2 investor presentation. Operating expenses were $47.4 million in the quarter, an increase of $7.6 million or 19% compared to Q2 of last year. The consolidation of Aeróleo added…

Thank you, Andy. In conclusion, our Q2 results reflect the very difficult conditions prevalent in the offshore oil and gas markets. Despite these challenges, the company continues to generate a positive operating cash flow and we believe we are well positioned to withstand the pressures of a prolonged market downturn. We remain focused on maintaining the highest safety standards, maximizing the utilization of our helicopter fleet, realizing efficiencies in our cost structure and protecting our balance sheet and liquidity position. With that let’s open the line for questions. Amy?

[Operator Instructions]. And our first question is from Bill Mastoris from Baird & Company.

Thank you. Just spending a moment on your liquidity and your ability to go ahead and withstand the, obviously the very difficult industry conditions. Andrew, could you kind of update us a little bit on maybe the covenant headway that you have in your revolving credit facility? And also, is the sale lease-back market which seemingly was open last quarter. Is that still an option for you for maybe doing a future sale lease-back with some of your future deliveries?

Yes, sure, Bill. In terms of the headway under our revolving credit facility, currently our debt to EBITDA is 3 times and the covenant there is a max of 5. And interest cover we’re currently at 5.7 times and the minimum there is 3. At this time we don’t anticipate any problems maintaining compliance with our covenants. I will point out that the way our agreement is structured and because selling of aircraft is a routine part of our business for purposes of calculating EBITDA under the facility, we do include the proceeds from aircraft sales rather than the gains from those sales in that calculation. In terms of your, I guess your second question on maybe you could repeat the question, it was on the?

On the sale lease-back market, how open is that for possible future funding?

Yes, Bill, it’s Chris here. The helicopter leasing companies are in a bit of a state of limbo today given the uncertainty surrounding the CHC bankruptcy process. As you’re probably familiar, CHC filed for bankruptcy in May of this year. They’ve announced plans to reject a number of leases and return those to the helicopter less orders. 65 such lease rejections are effective as of today. There are other motions to reject another 22 or so leases although a number of those have been reserve for renegotiations in lieu of lease return. So, while it’s too early to tell, our view is that the number that actually get returns to less orders will likely be less than the initial headline numbers. That being said, this is a big flow of aircraft that a number of the less orders we’re having to absorb in addition to machines that they may have been receiving from other operators that are coming off of lease. So, for the time being there is not a lot of liquidity or active transactions in that market today.

Okay. And maybe Chris to that point, the impact on pricing for the remaining heavy and medium helicopters now that you’ve had a tremendous amount of capacity taking out of the heavy helicopter market. Has that pricing now stabilized?

So, with the 225s and L2 model Super Pumas out of the market, that has diminished much of the excess capacity of heavy and medium helicopters that had developed as part of the oil and gas market downturn. The market today for S92s is quite tight with the exception of some frictional market inefficiencies and some jurisdictions where you might have had either less 92s with operators who don’t have AOCs or operations in other markets to which they can move those aircraft. But those who have the flexibility to move S92s to markets to replace 225s that’s largely happened and the market there, has climbed considerably. There is also a call on AW139s to replace some of the missions that had been supported by 225s and L2s and so that is leading to higher utilization globally for the existing AW139 fleet as well.

And then finally Chris, with the CHC downsizing and I agree with you I don’t think all 99 helicopters are going to be taken out of their original fleet. But does that give you the opportunity to maybe expand your operations beyond the traditional geographic areas?

The only area where we directly overlap today is in Brazil. In terms of expansion into other markets on an opportunistic basis, that will largely depend on what course the bankruptcy process takes and whether or not the company emerges from that process largely intact and in similar form to where they are today or if there is a further downsizing of the size of their operations. We are monitoring a number of industry developments including that process and we’ll try to capitalize opportunities where they present themselves.

Thank you very much.

Thank you.

Our next question is from Adam Ritzer with Pressprich.

Hi, good morning guys.

Good morning.

I just had a few things to touch on. I think the last time you and I talked back I guess mid-June about the BE SI contract, you thought you might have that wrapped up by this time. I know that I think expires sometime in September. Can you potentially give us an update on the status of that?

Yes, no update on from our prior disclosures on the status of the BE SI contract. As you noted it, the current five-year contract is scheduled to expire at the end of September. We are actively involved in the process that will result in the renewal of that contract. Bids were submitted back in March. We remain optimistic about our chances of award there. I truly believe we’ve presented the most competitive offer and the one that offers the best solution for BE SI and the U.S. tax payers. But there is no update on the award status of the contract so we’ll have to update that at a future disclosure date.

Okay. In terms of Aeróleo, I know you mentioned they did a $14.9 million in revs in the quarter. But what the expenses on that? Can you break that down into any profitability and what the bottom-line is on Aeróleo?

Yes, Adam and this is Andy. Consistent with prior practice we don’t disclose profitability by line of service. And so that’s the same for Aeróleo. As you pointed out, they did generate $14.9 million of revenue in the quarter. What I would say is that the consolidation of Aeróleo decreased our operating income by about $2 million versus the way we accounted for that previously. And the other thing I’d say there is that, Aeróleo generates free cash flow for us and sends cash back to the U.S. on a routine basis.

Okay, that’s helpful. Thanks. I guess, the other question I had to do, I know you said your interest coverage is a minimum of three times. But if you take the first half or this last quarter annualized, you’re running I don’t know call it, low mid-40s of EBITDA and $16 million to $17 million of interest expense. So, if things kind of hold where they are which is kind of what you’re saying things have stabilized, at some point in time that could be an issue, you’d be under the three times. What could we do about that going forward? I was just thinking about that what happens over the next six months?

Adam, the only thing we’d say there is that we don’t expect that to be a problem at this point in time.

And just a reminder as Andy noted for the prior question, the definition of EBITDA on our credit facility is different than what you read on the financial statements because it includes proceeds from asset sales, not gains.

Right, right. Okay. Again it just seems like at some point in time, without additional asset sales, you might get right at that three-year maybe below that. And my last question has to do with the EC225s. I know you said in a weird way this could be positive and increase demand for other helicopters. Would there be a time where you might just write these off in terms of a balance sheet and just go forward servicing the contracts with other helicopters? Is that a potential way to just eliminate this issue?

It would be preliminary at this point to speculate on the future asset values for the aircraft because the investigation remains ongoing. The root cause of the accident has not yet been identified. And therefore the ultimate solution if there is one for the issue, it’s not identified. To be responsive to your question, one of the potential outcomes if there is a change in the marketability of that aircraft for offshore oil and gas operations, it could be a reduction in value of the assets. But it’s way too preliminary at this point to predict that.

Great, okay. I appreciate it. Thanks very much.

Thank you.

And from Oppenheimer we have Sean Sneeden. Please go ahead, sir.

Hi, good morning. Thank you for taking the questions.

Good morning.

Chris, maybe for you, can you give us a sense of whether there was any kind of day rate adjustment to the prior H225 contracts that you’re now filling with other aircraft or is there any kind of pricing discrepancy versus kind of what you had previously?

Sure. We don’t comment specifically on rates. I would note that we have incurred some costs related to the 225 suspension in Q2. Some of those are related to the aircraft that are backing up the 225 missions. Some of those costs are related to moving those aircraft to storage, placing them in long-term storage, reducing or retraining personnel for other helicopter models. We’re not disclosing the specifics of those costs associated with the 225 suspension or any variance in rates that might exist because of both commercial and legal considerations, pending conversations and negotiations that would take place with the manufacturer.

Okay, that’s fair enough. And then, maybe just two quick ones. One, it looked like working capital was a little bit benefit to you guys free cash flow for the quarter. How should we be thinking about working capital throughout the remainder of the year? Should we generally think about as being a source of cash?

Yes, I guess you’re right that our cash flow from operations to date, significant portion of that was generated from reduction in working capital. Obviously we wouldn’t expect significant working capital reductions unless we had significantly lower reductions in the top-line going forward. Having said that we do expect to continue to generate positive cash flow from operations going forward.

Okay, that’s helpful. And then just lastly, it looks like you repurchased another $5 million of unsecured bonds in the quarter. Can you give us a sense of what maybe the average price was there and perhaps what the larger appetite is to continue to opportunistically repurchase debt?

Sure. We do continue to view the repurchase of senior notes as an attractive use of capital. We will continue to take an opportunistic approach to that. We don’t go into any period with a specific target of how much we’re going to buy or at what price. The levels that the bonds are trading at, at the time that we repurchased them during Q2 were near the 86-range, and we’ll continue to monitor the level of activities, or level of trading activity on those bonds and make a decision as to whether or not we want to repurchase additional bonds in future periods. But we’ve been pleased so far with the aggregate $55 million of senior notes that we’ve been able to repurchase since the beginning of 2015. We feel good about the returns that that’s represented. We also like reduction that it’s had on our fixed charges. And therefore the benefit to both earnings and cash flow.

Yes, that makes sense. And maybe for modeling purposes, should we generally think about kind of directionally any kind of free cash flow you guys are generating as being used to pay down debt generically as you kind of go forward here?

We don’t provide financial guidance as part of our long-standing policy. But if you look at the first quarter, first two quarters of this year, we have consistently generated operating cash flow. It was a little over $14 million in Q1, about $14 million in Q2. We have disclosed that in terms of non-cancelable aircraft commitments we have about $13 million of firm unfunded capital equipments that are due during the course of 2016. And obviously we’ve disclosed what our interest obligations have been in recent periods. We are not a material cash payer in the U.S. So, I think if you look at EBITDA and what interest in - capital expenditures are that should give you a good idea for free cash flow.

Okay. That’s helpful. Thank you very much.

Your next question is from Christopher Hagedorn from Redwood Capital. Please go ahead.

Hi guys. I want to ask you two quick things, one: on the EC225 you spoke about it already a little bit. And this is not the first time I guess we have this grounding and this time obviously much more severe in terms of the accident that happened. But maybe you can talk and it’s early I understand in the investigation and the question is sort of where the fault it lies and if it’s with the manufacturer or the maintenance etcetera. But can you just talk conceptually let’s assume if there is sort of 50 investigations came to the conclusion that there is something on the manufacturers’ side. I guess how would, that - can you give us a sense as to how your relationship with the Eurocopter, Airbus is structured in such a way. I guess if there was a hit to the residual values or a sort of a loss of revenue. And I understand you can’t go into specifics but just sort of conceptually how we should think about if the situation and how it may get resolved further down the line?

Sure. As you noted, this will all be cavorted [ph] by the fact that it’s too early to predict what the outcome in the investigation would be. And therefore what the nature and results of any conversations with the manufacturer would be. I would note as we’ve disclosed in our public filings, when there was a suspension of the H225s in 2012 and 2013, we did reach a settlement with Airbus that had resulted in a large number of vendor credits that we’ve been able to utilize. Actually we just utilized the last credits from that settlement in Q2 of this year. It’s unclear whether the results of the current situation will result in either a commercial or legal settlement. But we do think that if we are damaged by the suspension and long-term future of this helicopter, we would expect compensation for those damages.

Got it. And I mean, and maybe if I’ll ask one follow-up to this. I mean, even if there is - because obviously this is a recurring issue and we’ve all heard sort of the rumors or the lines that I think rig workers are more and more cautious to get into the EC225. So, even if the Civil Aviation Authorities clear those to fly again, and you’re in a situation where the majors will say or the regulars will say we’re not getting on these planes anymore. How is that - is that something that you would, you could sort of go back to Eurocopter for?

Yes, again, it’s too early to predict what the ultimate outcome will be. But certainly the future of the aircraft models for future offshore oil and gas missions, will tend not just on the results of the investigation and what the potential solution if there is one will be but the market receptivity on an ongoing basis for that model, which will be impacted by customer perception of the aircraft, passenger perception of the aircraft, labor unions who represent the passengers who fly on these aircraft. And if the aircraft are not acceptable and therefore cannot be used for the mission, we would view that as damage. But again it’s too early to predict the actual outcome of the suspension and the investigation at this point in time.

Got it, I understand. And one sort of, one other question I wanted to ask you on your capital commitments. Should we, I mean, I think you broke it out I think you have like $12 million to $13 million firm commitments left for the balance of the year and then a little bit more for 2017. I guess everything else is cancelable. I mean, again, you cancel, obviously as you said in the past when you have to cancel, not before that, the option is valuable. But in the current market environment, should we expect that to, the balance of the sort of cancelable commitments to be cancelled?

As you said or as you referenced Chris in the past, we’ve noted that part of the value in the option is the time value and we’re not planning to give away the time value of the option. I would note that one thing which has changed since some of our prior discussions is the suspension of the H225 and L2 model helicopters which has diminished much of the excess capacity that had existed prior to that in the heavy helicopter market. And so, the tightness now of the S92 market, the demand on other aircraft models which could include AW189s will be an input in our decision as to whether or not we’re going to accept deliveries of some of the optional aircraft orders that we do have.

Okay, got it. Thanks guys.

Thank you.

[Operator Instructions]. And we will take our next question from Bill Mastoris from Baird & Company.

Thank you. Given your earlier comments, I’m just kind of wondering with a very tight market for the non-EC225s. How should we be thinking about the impact on your maintenance expenses, I mean, is this something that’s going to remain relatively steady, is it going to increase. How should we be thinking about that and then do I do have a follow-up?

Sure. Specific to the 225s we’ve taken measures to diminish our expenses related to those models, which include removing those for maintenance programs where we have the flexibility to do so and where it makes sense. So, we’ll try to minimize 225 related maintenance expenses through the duration of the suspension. As it relates to other models, the repairs and maintenance expense line can be lumpy from period to period, largely due to the timing of repairs. So we have some aircraft that are underpowered by the hour programs and have relatively consistent maintenance expenses per flight hour, we have other aircraft models that we maintain on a time and cost of repair basis which naturally results in some lumpiness in the timing of repairs. So, there will be some lumpiness from period-to-period in that line. I think what could result in some additional expenses would be situations where the tightness of the market driven by the 225 and L2 suspension results in additional dry-leasing opportunities for some of our other helicopter models. So, if we have cost to prepare those aircraft to return them to service, put them out on lease, that could cause a period increase in repairs and maintenance expenses. And depending upon the nature of the work, if it’s just maintenance related obviously that will be expensed through our accounting policy. If there is something required that changes the nature, the fundamental nature and mission of the helicopter then at that point in time it would be capitalized.

Okay. And my follow-up just has to do with just running some very simple math and I know that you’re not in the business of forecasting. But it looks as though you could actually generate a small amount of free cash flow this year. Is that a fair assumption?

Well, as you noted we don’t provide forward-looking financial guidance but we have generated over $30 million of free cash flow through the first six months of this year. And we’ve said that we have $13 million of remaining unfunded CapEx. So those numbers are available but we won’t specifically comment on forward guidance for free cash flow.

Okay. Thank you very much.

Thanks.

From Wells Capital Management we have Oscar Olivas. Please go ahead, sir.

Good morning guys. Just a couple of questions on the CHC bankruptcy filing. Can you comment on how it’s impacted the operating environment and also maybe the demand for secondary asset sales or the secondary aircraft?

Sure. The only area in which we have operations that overlap with CHC today are in Brazil. We have not seen a direct and significant impact on their day-to-day operations since the time of the filing of the bankruptcy other than there have been some - there has been some equipment in Brazil which has been part of the leases that were rejected and returned to the less, orders. In terms of how the actions that are being taken as part of their bankruptcy process to return aircraft both to less orders and the aircraft which have been identified to be abandoned to their secured lenders under the ABL. You really have to look at that on a model-by-model basis. A large portion of the helicopters that are actually being returned either by lease rejection or abandonment are either 225s, there is roughly 38 of those or L2 model AS332s and there are 11 to 13 of those. That doesn’t change the marketable supply as offshore helicopters today, given that those machines are on operational suspension. There are also some other models that have been part of the lease rejections that are really legacy models and not competitive for new offshore oil and gas helicopter contracts. So, you really need to look at it, in our opinion on the models that are actually marketable today which would be the S92s, the 139s and to a lesser extent, C-Plus [ph] pluses. On the S92s after the latest developments, there is really only three that are currently pending lease rejection discussions but I would note that two of those had been reserved for potential renegotiation in lieu of rejection and return. So there could be as few as one S92 that actually comes back into the secondary market from that process. On the 139s, there were a total of 19 that have been identified either for lease rejection or abandonment. Again, a good portion of those have been reserved for renegotiation. It’s too early to tell but it could be that only about half of those, number actually find their way back to either the less-orders or the secured lenders. And then again, of the C plus pluses, 12 of which are subject to lease rejection or abandonment. About a third of those have been reserved for renegotiation and may not actually be returned to either the less-orders or towards the banks. So, you really have to look at it on a model-by-model basis. And the largest number of aircrafts that are actually going back to the banks and the less-orders are aircraft that are on operational suspension in that part of the marketable supply.

That’s very good detailed color. Thank you. I appreciate it.

Thank you.

And there is a follow-up question from Christopher Hagedorn from Redwood Capital.

Hi sorry guys, I just had one follow-up. Can you provide the order of magnitude sort of what percent of sort of global supply of heavy and maybe also what percent of those are heavy and medium if you include those EC225s are of the global fleet?

Yes, it’s a more nuanced answer depending on how many models you want to include in the analysis. On the heavy discussion which I think is where the conversation should focus, we tend to think about it in relation to new generation models. So, as we noted, there was roughly 180 total 225s and AS332 L2 models in the civilian fleet today, 40 of those are L2s, approximately 140 are 225s. And there is approximately 270 or so S92s in the civilian market today. Obviously a number of both models were idle given the excess capacity that has existed as part of the offshore oil and gas market downturn, a number of those were idle at the time of the accident. Our belief is that the S92 market as a function of these 225s and L2s coming out of the marketable supply, the S92 market has tightened considerably during the period of the suspension.

Got it, okay. Thanks.

Thank you.

That concludes today’s question-and-answer session. At this time I would like to turn the conference back to our presenters for any additional or closing remarks.

Thank you, Amy. And thanks for joining the call everyone. We look forward to speaking with you again next quarter. Bye.

This concludes today’s conference. Thank you for your participation. You may now disconnect.