Bristow Group Inc

The offshore energy market is highly cyclical with demand linked to the price of oil and gas. The prices of oil and gas are critical factors in our customers’ investment and spending decisions. The price of crude oil had been range-bound for a number of years, and then the COVID-19 pandemic further devastated the global oil and gas industry, which negatively impacted the cash flows of our customers and led to reduced capital and operational expenditures, including reductions related to offshore exploration, development and production activities. As such, deliveries of new helicopters were limited during this period.

The offshore energy services market, following several years of challenging industry conditions, is now in the early stages of a multi-year growth cycle. The increasing activity in offshore energy is driving a constructive supply and demand balance for offshore helicopters. The market for AW139 medium helicopters as well as the market for super medium helicopters, such as the AW189 model, was expected to tighten significantly, and placing idle S92 heavy helicopters back to work on new contracts would be the best way to meet increased demand. Due to supply chain challenges that have delayed parts and repairs for the S92 helicopters, thereby limiting the number of S92s that are serviceable today, the overall market has tightened even more quickly than expected. The combination of these factors supports a positive 2024 financial outlook in our offshore energy business. Additionally, given our sector’s late cycle exposure and the lag effect involving new projects, we expect the benefits of increased activity to become evident in our financial results in the coming years. A tighter equipment market, constrained global labor force, and inflationary cost pressures are expected to drive meaningful rate increases for our business. And while we are encouraged by the improved fundamentals and outlook for Bristow’s business in 2024 and beyond, there are some headwinds, including the supply chain challenges and constrained global labor force noted above, as well as a strong U.S. dollar.

Government services, especially the public SAR market, are continuing to evolve, and while there are no current active tenders, we believe further outsourcing of public SAR services and other government contract work will become available to the private sector in the future, although the timing of these opportunities is uncertain. Over the past two years, we have experienced growth from notable awards of government services contracts. Operations on the recently awarded IRCG contract and the transition to the previously announced UKSAR2G contract are set to commence in the fourth quarter of 2024. We expect the full year impact of these contract commencements to have positive impacts on our financial results in 2025 and beyond, though the strengthening of the U.S. dollar relative to local currencies, particularly the British pound sterling, could offset a portion of the benefits we expect to derive from increased activity. For further commentary on our foreign exchange risk, see “Item 1.A. Risk Factors - Foreign exchange risks and controls may affect our financial position and results of operations” and “Item 7A. Quantitative and Qualitative Disclosures About Market Risk - Foreign Currency Risk.”

The duration of government services contracts generally lasts for ten or more years with options for renewal. Privatization of aviation services historically operated by the public sector depend heavily on governmental agencies receiving funding through budget appropriation, and the desire to outsource such services. As government agencies in various countries begin to see the advantages of outsourcing public SAR services, other opportunities such as firefighting, surveying, training, maintenance and emergency response services could become available. We believe that we are well positioned to continue to serve the market as more opportunities arise.