Q2 2023 Bristow Group Inc Earnings Call

Hello, and welcome to the event center. Please enter your passcode, followed by the pound or hash key.

I'm, sorry, I cannot confirm your postcode you entered 9440005.

Hello, and welcome to the event center.

Thank you. Your postcode is confirmed please wait while you are joined to the event to make certain we capture your information correctly. Please wait for the tone than say and spell your first and last name and press the pound.

<unk> or hash key.

Please wait for the tone than say your company name or affiliation and press the pound or hash key.

Thank you for other governments that we'll look at the success that has occurred in the UK and the Netherlands and some of these other jurisdictions and look at the opportunity to prioritize some of these critical services to operators such as yourself.

And interesting on the VA PIH assets in some of those other opportunities.

What would you get into things like like transport for can you cover those opportunities with your current asset classes or would you need to invest in any new capabilities to kind of pursue some of those opportunities.

I think it will be a mix for example, with the.

Search and rescue work award that we picked up in the Netherlands, we are bringing in a new helicopter from Leonardo.

So using some existing assets for.

For the Dutch Caribbean Coast Guard work that is existing and helicopters that we have in the fleet any new work for government clients or is likely to require new factory delivered aircraft to support that work whether that be conventional models or new generation aircraft. We are using some unmanned air.

Leo vehicles in our UK SAR contract today, I would expect that Uavs will be an asset class that will be more heavily used by government customers going forward.

And as that requirement comes in we would need to order those aircraft to bring them into the fleet.

And if we think even longer term I think some of the new generation.

Electric powered or hybrid power, maybe eventually hydrogen powered aircraft will become relevant and for delivering some of those solutions as well.

Got it.

Okay.

Then switching over to the oil and gas side, which regions do you see as the largest drivers this year and then maybe over the next three years.

As we look forward to 2023 some of the areas that are contributing some positive aspects for oil and gas business would be the U S Gulf of Mexico oil and gas activity.

Somewhat offset by what we think will be a reduction in COVID-19 flights in our search and rescue business given the pandemic effects receding, but overall, we see the U S Gulf of Mexico, being a growing market next year as we do with Nigeria, which is recovering off of more trough like levels of activity.

In addition, we were successful in winning some new contracts recently in Brazil.

Those are not going to commence until mostly the latter half of 2023.

And similarly, we were successful in winning a multiyear search and rescue contract to support Ecuador, and Norway that contract begins in September of 2023. So again more of a latter half of next year contributor, which speaks to a broader point, which is that we expect the the ending run rate in the latter.

Half of 2023 of our oil and gas business to be stronger than the beginning of the year.

And then when you were doing the buildup what were some of the more macro elements.

You were putting into that net debt guidance outlook, just given some concerns just on the broader economy. What are some of the risk corridors that youre looking at.

Mainly that viewers informed about what we think are some global supply challenges and an increasing focus on energy security, which is supported by conversations with our customer base. So in our projections, we're not necessarily referencing a specific price deck.

Or for oil, but more spending plans that we anticipate coming from our customers and some projects that we see in their pipeline, which we believe will be mostly disc.

Disconnected from near term volatility in the spot price because again, we think the major issue is a medium to long term supply challenge.

As the global excess capacity for oil production is expected to be less than 2%.

Of total global demand as we close out this year. So 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.

Got it.

And then on the fixed wing operations.

The recovery looks like it's coming along nicely how are you projecting outwards with this segment is there a booking trends youre looking new mining projects in key destinations.

One of the major improvements would be the reopening of orders in Australia, and the pandemic effects receding and more travel occurring we are seeing an increase in bookings and demand for people to travel now, but that opportunity is again available to them.

So that's the retail side on the charter side, I think you rightly point to a growth opportunity for us as we see.

Whether it's mining or oil and gas companies, who are operating in Australia and have a need to.

We continue to meet the.

Supply.

That will be required to bring on those commodities, we are seeing some charter opportunities in northern Australia as well.

All right.

And then just on the EBITDA guidance can you just dig into the reasons for presenting adjusted EBITDA net of fixed gains and losses in the mine now.

Sure.

The issuance of guidance is one of the primary reasons that we are showing the adjusted EBITDA, excluding foreign exchange gains and losses.

As Jennifer mentioned, we are impacted by FX in various ways.

As part of that would be in our flows and the revenues that are coming in from areas like the U K contracts. The other aspect is really mostly noncash revaluation of balance sheet items, which flow through our income statement in the other income line.

In the past those have been either positive or negative depending upon the quarter. However, given the strong U S dollar, particularly over the last couple of quarters. Those have generated some significant gains and we're showing the impact of that in our presentation of adjusted EBITDA.

Going forward.

With our guidance, we're not taking a view directionally on foreign exchange. So we're presenting the guidance for adjusted EBITDA neutral as it relates to that other income FX gain and loss impact.

Got it and then obviously you have significant operations in the UK and I got the dollar impact but are there any offsets to the business.

We do have an order book for aircraft that mostly consists of aircraft that will be coming from European manufacturers and those are denominated in euros, we will be purchasing that with U S. Dollars. So there is a benefit to us in that regard with the capital and that we're using a stronger U S. Dollar.

To fund those euro denominated purchases that will ultimately lead to better.

Returns financial returns over the life of the asset if we bring those in at a lower U S denominated value.

Got it.

And then lastly, I just wanted to check in on advanced Air Mobility opportunity you guys. You guys have been a leader in an.

Orders in working with developers.

Just curious on your view throughout the last quarters any interesting developments or just how youre looking at that market currently.

We remain optimistic about the potential for advanced Air mobility, which is obviously an industry that doesn't yet exist, but one that we expect to develop and develop rapidly as some of these new aircrafts become certified we expect the first certifications to occur around the 2024 timeline.

We think that Bristow is the global leader in vertical flight solutions has a good opportunity to benefit from these new aircrafts and incorporate them into existing operations for customers as well as abuse them in new market opportunities to expand the services that we're providing both to our current customer base as well as a new class.

Customer so in terms of the recent developments we have signed recently some additional partnerships. We are supporting a number of the developers of these new asset types as they look to.

Both develop those aircrafts certify them and bring them into the market.

And we are we do remain optimistic about the potential for that industry as well as what it means for Bristow.

Great. Thank you for your time ill jump back in the queue here.

Thanks, Josh.

Okay.

We will take our next question from.

Good morning, everyone.

Good morning.

Uh huh.

Couple of questions one.

How many shares are left on the buyback program at this point her dollar amount.

We have a total of $40 million of potential share repurchases that have been authorizing and could be used over time.

A $40 million remaining.

Correct, Okay. Thank you.

Chris on your comments regarding the oil and gas outlook I think you said that.

You expect a stronger run rate exiting 2023, then going into 2023.

What is that based on is that based on third party research reports or is it based on contracts that you're winning that will start to kick in in 2023.

Yes. Thank you for the question John it's mostly based upon the timing of contracts ending and commencing so we do have a contract that we're servicing now in Guyana, that's expected to end at the end of this calendar year on the inverse we have some new contracts that had been awarded in Brazil that mostly commenced in the latter half of 2023.

We have a new search and rescue contract for Ecuador in Norway.

Which will commence in September of 2023, we have some other contracts.

In the U K in Nigeria that will really show a full benefit.

For the full for the full calendar 2023, but because of the cadence of those contracts starting and ending again.

Heavily influenced by Brazil, Norway, and a little bit in the U S Gulf of Mexico.

We will see a stronger run rate at the end of 'twenty three than the beginning.

Okay could you.

Give us some idea of.

Perhaps in a range.

Of how much higher.

Are the oil and gas.

Ours might be.

Uh huh.

For 2022, I'll ask because you know that.

Drillers are.

Uh huh.

Reporting some pretty robust results I mean significant upticks.

And I'm just curious as to if you can give any kind of range is that how much higher do you think the hours might be in 'twenty three versus.

'twenty two.

So we're not providing in our disclosure however, I would note.

We are seeing a strengthening market throughout 2023. It is the case that the offshore drillers tend to sign contracts for the rigs before our services are procured and so you will see more visibility in their business earlier.

Than you will for the helicopter support.

But we do think that there is.

In the areas that I mentioned.

A clear uptick in activities to support the growth in oil and gas demand in 2023, and I want to emphasize that we think that year is really just the beginning of what is going to be a multi year growth cycle for oil and gas spend.

Okay. Thanks, that's helpful.

Do you think the second half of 'twenty three.

It's going to be stronger than the first half.

And the oil and gas sector is that fair.

Do we think theres going to going to be a clear back half of the year waiting to the uptick in oil and gas support.

Okay.

Very good thanks, and good luck.

Thank you.

Yeah.

Okay.

And we do have one more question left.

Hi, Thank you for taking the question. So when you announced the Arab Bristow merger just right before Covid emerged you targeted $240 million of medium term EBITDA.

Given your comments on the strong fundamentals in the industry is that a level of EBITDA that you still view as achievable over the cycle.

Yes.

Yes. Thank you for the question I mean, Thats, obviously those numbers are now.

Three years old those projections, we'll put together.

Late 2019, so toward the World has changed for families and then we're providing guidance on is really 2023, which we see as being to be beginning of a recovery.

But without providing a bridge.

Two or three year stale number we think that recovery will continue to grow in 2024 and beyond if you look at this.

I would reference.

There's a slide in our investor deck, which speaks to overall upstream spending.

I think the slide number is number 10 in the deck.

And that shows a an overall market spend.

That is a recovering this next year.

Will increase in 2020 for 2025 to.

To levels commensurate with the pre pandemic.

But for now the guidance, we're providing is relevant to calendar 'twenty three.

Great. Thank you so much.

Thank you.

Thanks for taking the follow up.

You know Boeing Airbus a lot of the aerospace supply chain continues to talk about issues with it.

Particularly castings and labor and some other issues.

As your customers are looking at longer term contracts is your pool of available aircraft and spares is that part of the conversation are they concerned at all about the supply chain and your ability to services is that a selling point.

Yes. Thank you Josh that I think that is certainly becoming an increasing part of our conversations with customers as they are coming to an appreciation that.

We're no longer in a in a position where helicopters are an over abundance.

And that there needs to be planning involved if we're going to bring for examples of idle S. 90, twos back into operation that will take time and cost and that cost will need to be born.

Really by the customer as.

As well as the fact that as we think about future growth, whether it be for government contracts or oil and gas once all of the existing equipment is absorbed that will eventually require new orders, which we don't really see a backlog for at the moment, but.

That will come so I think there is yes to your point an appreciation that we are in a constrained global labor force market. We are in a tightening equipment market and that will require more careful planning going forward as you know the over abundance is quickly getting absorbed.

Okay. Thank you.

We have no further questions at this time.

Thank you Matti and thanks for joining everyone stay safe and well talk again next quarter.

[music].

Yeah.

Okay.

[music].

Yes.

[music].