Investing.com -- Fitch Ratings has assigned Bristow Group, Inc. a 'BB-' Long-Term Issuer Default Rating with a Stable Outlook, while the company's secured notes received a 'BB+' rating with a 'RR2' Recovery Rating.
The ratings reflect Bristow's leading position in a relatively stable subsector of the cyclical oilfield services industry, reasonable leverage metrics, and consistent cash flows from its government services operations.
Bristow currently generates 68% of its revenue from offshore energy services, though this exposure is expected to decrease to the low-60% range in coming years. While this sector experiences fluctuations tied to commodity prices, approximately 85% of the company's revenue in this segment comes from production-related activities rather than more volatile drilling and development operations.
The company's contract structure provides additional stability, with about 65% of offshore energy revenue derived from monthly standing charges and the remainder from variable flight-hour revenue.
Bristow's government services segment offers search and rescue operations under long-term contracts with several countries, including 10-year agreements with the U.K. Maritime & Coastguard Agency, Irish Coast Guard, Netherlands Coastguard, Dutch Antilles Coastguard, and the Falkland Islands. These contracts generate about 85% of revenue from monthly standing charges.
The company is well positioned to benefit from higher pricing as legacy contracts expire. Currently, about 53% of Bristow's offshore energy contracts operate under pricing established during weaker market conditions.
Bristow maintains a $4.1 billion backlog, with 76% coming from government services contracts extending up to 10 years. This backlog includes only monthly standing charge revenue, not variable flight-hour revenue.
Fitch expects Bristow's leverage metrics to improve throughout the forecast period. Leverage stood at 3.0x at year-end-2024 due to elevated capital spending for new search and rescue contracts. With this spending largely complete and new contracts commencing, Fitch anticipates stronger free cash flow that will be directed toward debt reduction.
The rating agency expects Bristow to achieve its $500 million debt target in the near to intermediate term and reduce leverage below 2.0x in 2026 and beyond.
The helicopter market has seen higher utilization since the mid-2010s due to decreased capacity and cautious new-build activity. Bristow has scheduled eight aircraft for delivery in 2025-2026, with options for 20 more.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.