Econometric analysis of factors influencing commercial helicopter operators’ stock returns in the gulf of Mexico

Abstract

Commercial helicopter services in the oil and gas industry play a vital role in transporting crews and supplies to offshore installations. There has been ample research analyzing the impacts of fluctuating crude oil and natural gas prices on regional economies, energy service firms and upstream, downstream and integrated energy firms. However, the extent to which commercial helicopter operators' stock returns are related to commodity prices and other relevant industry variables is absent. Often, firms attribute favorable financial results to internal factors whereas unfavorable financial results are attributed to external factors. Commodity prices have exhibited a negative relationship with airlines and other transportation firms due to the input price of fuel whereas demand for helicopter services is hypothesized to be positively related to crude oil and natural gas prices. In order to determine the contributing factors related to firms' stock returns, empirical analyses are required, and conducted in this paper. Using a unique data set from 2013 to 2018, this paper presents research which identifies structural relationships between crude oil prices, natural gas prices, the rotary rig count, a subset of the overall market and stock returns of commercial helicopter operators, which is a unique addition to the extant literature and provides researchers and practitioners foundational knowledge for future research inquiries and operational and investment decision making, respectively. Empirical analyses show that 10% increases in the crude oil price and the S&P 500 index yield a 2.7% and 8.0% increase in stock returns, ceteris paribus. Crude oil price risk may be increasingly prevalent as societies promote renewable energy sources. Furthermore, we present foundational knowledge that promotes further research and knowledge representing a caveat to traditional relationships between commodity prices and transportation firms’ financial performance.