Bristow Group expects growing offshore oil-and-gas profits

Avatar for Aaron KarpBy Aaron Karp | November 5, 2022

Estimated reading time 7 minutes, 54 seconds.

Houston-based Bristow Group, one of the largest helicopter operators in the world, provided an upbeat forecast even in the face of a difficult global economic environment, citing strength in its core offshore oil and gas business.

Bristow president and CEO Jonathan Baliff said offshore operators are having to endure idle aircraft, but that Sikorsky S-92s were beginning to "come in balance" with demand. Bristow Photo
Bristow provided an upbeat forecast even in the face of a difficult global economic environment, citing strength in its core offshore oil and gas business. Bristow Image

The tight supply of fuel driving inflation boosts the company’s offshore oil and gas earnings potential, Bristow CEO Christopher Bradshaw explained during a Nov. 3 analysts call to discuss September quarter earnings. 

“The strengthening fundamentals in the offshore oil and gas market support our view that we are in the early innings of a multi-year growth cycle,” he said, adding there are indications of “a significant increase in upstream oil and gas spending over the next few years … despite the potential risk of an economic recession.”

He cautioned the full benefits of the increased offshore oil and gas spending may not be seen immediately in Bristow’s results because currencies in a number of markets in which the company operates have weakened against the U.S. dollar.

“[The] strong U.S. dollar is unfortunately muting the full impact of these improvements in our calendar year 2023 financial outlook,” Bradshaw said.

Oil and gas industry operations generate 67 percent of Bristow’s revenue, so the sector’s performance is critical to the company’s financial prospects. Government services, including search and rescue operations, clock in at 24 percent of Bristow’s revenue. 

Foreign currency fluctuations result in non-cash losses and higher expenses in markets outside the U.S. Bristow’s primary exposure is the British pound’s value compared to the U.S. dollar. Bristow estimates the pound’s weakening cost the company $200,000 in revenue in its government services business in the September quarter.

Going forward, “each movement in the British pound/U.S. dollar exchange rate will impact projected calendar year 2023 adjusted EBITA [earnings before interest, taxes and amortization] by approximately $1.5 million,” Bristow CFO Jennifer Whalen said.

More than half of Bristow’s business by revenue is in Europe, so currency fluctuations are always a potential headwind. The majority of its aircraft, however, are based in the Americas, and the company is currently operating in 17 countries.

Bristow’s active fleet of 490 helicopters comprises 258 AgustaWestland AW139s, 39 AW189s, 32 Airbus H175s, and 161 Sikorsky S-92s.

In the three months ending Sept. 30 — the company’s fiscal second quarter — Bristow earned a net income of $16.5 million, more than four times the June quarter, though much of the quarter-to-quarter change is the result of higher special items costs in the three months ending June 30. The company, for example, paid $8.2 million in income taxes in the June quarter, while paying just $100,000 in income tax expenses in the following quarter.

Bristow S-92 helicopters
Bristow’s active fleet of 490 helicopters comprises 258 AgustaWestland AW139s, 39 AW189s, 32 Airbus H175s, and 161 Sikorsky S-92s. Bristow Image

“We also sold or otherwise disposed of three helicopters and other assets for a net gain of $3.4 million [in the September quarter],” Whalen said.

September quarter revenue totaled $299.4 million, slightly above $294.1 million in revenue in the June quarter. Full calendar year 2023 revenue is expected to be in the range of $735 million to $825 million.  

While Bristow executives see a bright long-term outlook ahead, they conceded the recent past was difficult as the company navigated the COVID-19 pandemic.

“The last few years have been very challenging for our sector,” Bradshaw said. “We now see the previous industry headwinds turning into supportive tailwinds, and the fundamental outlook for Bristow’s business is improving significantly. While the strong U.S. dollar is somewhat masking the full magnitude of this improvement, confidence in increasing offshore oil and gas activity … will drive robust cash flow generation going forward.”

Pressed by analysts on Bristow’s bullish view amid inflation and rising energy costs, Bradshaw said the constraints in fuel supply will drive more offshore drilling.

“Mainly, our view is informed by what we think are some global supply challenges and an increasing focus on energy security, which is supported by conversations with our customer base,” he explained. “In our projections, we’re not necessarily referencing a specific price for oil, but more the spending plans that we anticipate coming from our customers and some projects that we see in their pipeline, which we believe will be mostly disconnected from near-term volatility in the spot price. Again, we think the major issue is a medium- to long-term supply challenge.”

He noted that “global excess capacity of oil production is expected to be less than two percent of total global demand as we close out this year. There’s a clear need, in our view, to add new supply. A good portion of that will need to come from offshore sources, and that will drive an increase in demand for our services.”

Bradshaw emphasized that Bristow believes the rising need for helicopter support for the offshore oil and gas business is “really just beginning” and the company is anticipating a “multi-year growth cycle” for the sector. 

In fact, he said, apparent growth in Bristow’s oil and gas business will not be seen until the second half of 2023, when the company anticipates an “uptick” in revenue from the sector.

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