Bristow Group Inc

Recent concerns, amongst industry observers, around the offshore rig count and white space pose important questions about the outlook for global offshore energy markets. While there are headwinds that impact our business, including supply chain challenges and a strong U.S. dollar, the dynamics that continue to support the positive outlook for our sector differ from those of other oilfield services companies in key ways.

For instance, although the offshore energy market is highly cyclical with demand linked to the price of oil and gas, the impacts of short-term fluctuations in commodity prices are less severe on our primarily production-focused business. While long periods of depressed prices would have more significant impacts, we believe current prices can continue to provide the fundamentals needed for sustained growth.

During the offshore energy downturn that began in late 2014, deliveries of new helicopters were limited, as the price of crude oil had been range-bound for a number of years. This 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. Throughout this downturn, numerous helicopters were sold or otherwise exited the offshore market. However, the recent increase in offshore energy activity that began in 2022 is driving a constructive supply and demand balance for offshore helicopters, and the once excess available capacity has shrunk, with utilization levels for offshore-configured medium, super medium and heavy helicopters at or near 100%. Furthermore, militaries and governments placing orders for aircraft models that share OEM production lines with civilian aircraft have led to longer lead times for new builds, in some instances taking upwards of 18 to 24 months for new order deliveries. The long lead times, coupled with at or near full utilization of relevant aircraft models, come at a time when we have only reset a portion of our Offshore Energy Services contracts at leading-edge rates, with the majority set to renew in late 2025 and 2026.

Severe supply chain challenges have also delayed parts and repairs for the S92 heavy helicopters, thereby limiting the number of S92s that are serviceable today and further tightening the overall supply; while this has helped raise rates to some extent, there is now unmet lift demand that serviceable S92s could absorb. Any further exacerbation of this supply chain issue could bias our guidance to the lower end of the range, while relief or return to pre-pandemic levels can positively influence our results.

Additionally, given our sector’s late cycle exposure and the lag effect involving new projects, helicopter operators are typically contracted later amongst the late-cycle businesses servicing offshore energy exploration and production platforms, often long after rig announcements. As a result of the lack of spare capacity and current helicopter market tightness, contract lead times are beginning to increase. Some of our contracts that recently commenced were awarded last year, and conversations with customers are just beginning for services set to commence in 2025 and 2026. Furthermore, markets such as Nigeria and Brazil continue to show growth and increased demand for vertical lift. We believe we are well positioned to meet this demand given our decades-long experience operating in these markets, our reputation for safety and reliability, and our performance history. The combination of all these factors continue to support our outlook that we are in the midst of a multi-year growth cycle that will benefit the offshore helicopter market.

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 few years, we have experienced growth from notable awards of government services contracts, and the investments we are making to grow and diversify our leading government services business are expected to result in attractive long-term cash flow yields for the Company well into the middle of the next decade. Operations for the previously announced IRCG contract commenced in late 2024 and are expected to finish transitioning in 2025. The transition to the previously announced UKSAR2G contract also commenced in the fourth quarter of 2024, and the last base will finish transitioning in late 2026. We expect the full year impact of these contract commencements to have positive impacts on our financial results in 2026 and beyond, though the strengthening of the U.S. dollar relative to local currencies, particularly the British pound sterling and the Euro, and the impacts of penalties due to aircraft availability, primarily related to supply chain challenges that are expected to persist, could offset a portion of the benefits we expect to derive from increased activity. Additionally, 2025 will largely remain a transition period for our Government Services segment as we incur costs related to these new contracts while revenues and operations fully ramp, and though the majority of capital expenditures will conclude in 2025, associated operating expenses and delays in contract transitions may not present the full earnings power and quality margins from this business until 2026 and beyond. For further commentary on these risks, see Part I, Item 1A, “Risk Factors” and Part II, Item 7A, “Quantitative and Qualitative Disclosures About Market Risk - Foreign Currency Risk” in this Annual Report on Form 10-K.

The duration of Government Services contracts generally lasts for ten or more years with options for extensions. 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. We believe that we are well positioned to continue to serve the market as more opportunities arise.

Other Services has experienced growth in recent years from charter revenues in Australia, and we observed higher yields in scheduled passenger transport throughout the year. Performance for this market is largely tied to passenger demand in Northern and Western Australia. We believe the financial performance of this business will remain consistent with at or near current levels of activity. Dry leasing, albeit a smaller portion of our Other Services, is expected to continue providing cash flows without significant operating or capital requirements.