Good day, and welcome to the Bristow Group Reports Fourth Quarter and Full Fiscal Year 2022 Results Conference Call. Today's conference is being recorded. And now at this time, I'd like to turn the conference over to Crystal Gordon, Senior Vice President and General Counsel. Please go ahead, ma'am..

Thank you, Cody, and good morning, everyone. Welcome to Bristow Group's fourth quarter and full fiscal year 2022 earnings call. I'm joined on the phone today with our President and Chief Executive Officer, Chris Bradshaw; and Senior Vice President, Chief Financial Officer, Jennifer Whalen.

Let me remind everyone, during the call management may make forward-looking statements that are subject to risks and uncertainties that are described in more detail on Slide 3 of our Investor presentation. You may access our Investor presentation on our website.

We will also reference certain non-GAAP financial measures such as EBITDA and free cash flow. A reconciliation of such measures to GAAP is included in the earnings release and our investor presentation. I'll now turn the call over to our President and CEO, Chris..

Thank you, Crystal, and welcome to the call, everyone. As always, I will begin our prepared remarks with a note on safety, which is Bristow's most important core value and our highest operational priority.

The company achieved very good safety performance in FY '22, with a 25% year-over-year reduction in lost work days and an 18% reduction in the total recordable injury rate. I want to thank and commend all of our Bristow team members around the world for their continued dedication to our mission and Bristow's Target Zero safety culture. Thank you.

The company also made additional integration progress, following the merger of Era and Bristow in June 2020. As of March 31, synergy projects representing over $53 million of annualized savings have been completed, exceeding the identified synergy targets.

Before turning it over to Jennifer, I want to remind everyone that the March quarter, which is Bristow's fiscal Q4 is traditionally our lowest activity quarter due to seasonality. As inclement weather and fewer daylight hours the suppress flight activity levels. With that, I will hand it over to our CFO, for a review of the financial results.

Jennifer?.

Thank you, Chris. Today, I will begin with the sequential quarter comparison of Bristow's financial results.

EBITDA adjusted to exclude special items and asset dispositions was $35.9 million for the fourth quarter of fiscal year 2022, compared to $30.7 million in the third quarter, or an increase of approximately $5 million driven by foreign currency gain.

Operating revenues decreased $9.4 million primarily due to lower utilization in oil and gas services in the Americas and Africa regions, and fixed-wing services per usual seasonal patterns. Operating expenses were $4.2 million lower, primarily due to lower repairs and maintenance.

General and administrative expenses increased $0.7 million, primarily due to increased compensation expenses and severance costs. In addition, we experienced gains on foreign currency of $6 million in the fourth quarter compared to losses of $0.8 million in the previous quarter, or $6.8 million positive effects on EBITDA.

As a reminder, the close of the merger was on June 11, 2020. As such, the previous year's financials do not include results from legacy Era Group Inc. prior to the merger date.

With that reminder, the current year EBITDA adjusted for special items and asset dispositions was a $151 million compared to $177 million in the prior year results, or a decrease of $26 million. Operating revenues were consistent with fiscal year '21, as lower revenues from oil and gas services were offset by government and fixed-wing services.

Operating expenses were $21.7 million higher, primarily due to higher fuel and repairs and maintenance expenses, partially offset by lower lease costs due to helicopters that have been returned and lower compensation costs.

General and administrative expenses were $5.8 million higher due to higher professional fees, increased insurance costs and the absence of certain grants related to fixed-wing services. Finally, Bristow continues to benefit from a strong balance sheet and liquidity position.

As noted in the 8-K we filed last week, Bristow was successful in amending and restating our ABL, with the primary change being the extension of the maturity to May, 2027. As of March 31, available liquidity was $319 million and our net debt-to-LTM adjusted EBITDA ratio was approximately 2 times.

While this quarter was effectively breakeven on adjusted free cash flows due to a $15 million adverse impact from working capital changes, in the last 12 months we've generated $107 million in adjusted free cash flow, and we still believe that this business model will continue to have strong free cash flow.

At this time, I'll turn the call back to Chris, for further remarks.

Chris?.

Thank you, Jennifer. I will now provide an update on management's outlook for Bristow's three principal lines of service. Bristow has a leading government services business with key contracts in both the U.K. and the U.S. Over the last year, we have successfully secured the award of two new government contracts.

The Dutch SAR award is a 10-year contract that will commence in November 2022, and involves providing three SAR quipped AW189 helicopters in the Netherlands. The Dutch Caribbean SAR award is a 10-year contract, involving two SAR equipped AW139 helicopters in the Caribbean region.

That contract is scheduled to start in June 2023, with potential to provide interim support beginning later this year.

About a month ago, we were pleased to announce plans to acquire British International Helicopters, expanding Bristow's government services business to the provision of search and rescue and personnel transportation services in the Falkland Islands.

In addition to expanding our geographic presence, that deal will establish an important new relationship with the British Armed Forces. This all-cash transaction is expected to close in the third quarter of this year.

In addition, we are currently involved in other active tender processes for government SAR contracts, and we believe Bristow is well positioned to continue the growth of our global leading government services business. These long-term attractive margin contracts provide a stable and robust cash flow foundation for the company.

Turning to Bristow's fixed-wing services. Q4 FY '22 was a difficult one for our business in Australia due to the pandemic-related issues depressing our revenues, as well as aircraft lease return costs causing a drag on profitability. We have previously discussed the ongoing fleet transition taking place in our Australian affiliate business.

We expect that fleet transition to be substantially complete a year from now. Combined with an improved demand environment as the COVID-19 pandemic effects recede, we believe the financial performance of this business will be much stronger in 2023 compared to 2022.

Finally, we had a positive outlook on the future demand for our offshore oil and gas services. And we continue to believe the industry is on the precipice of a multiyear growth cycle.

Given our sectors' late cycle exposure and the lag effect involving new projects, we now believe this offshore oil and gas recovery will benefit our business in earnest in 2023 and beyond, with the next couple of quarters of this year representing a transition period. The industry fundamentals and trends continue to strengthen.

The supply and demand balance for new generation offshore helicopters is in the process of tightening materially. With the tighter equipment market, constrained global labor force and inflationary cost pressures, rates in our sector must increase significantly to mobilize and support increased activity levels.

In addition to safety, which is always the highest priority, this new stage for the industry will see availability and reliability as key differentiators. Our Bristow team members are amongst the most experienced and highly skilled aviation professionals in the world. Bristow has the largest and most diverse helicopter fleet in the industry.

We intend to utilize our global leadership position to deliver the flexible and reliable solutions that are becoming increasingly more important to our customers. With that, let's open the line for questions.

Cody?.

[Operator Instructions] All right, we'll take our first question from Oscar Olivas with Allspring Global Investments..

Good morning, Chris and Jennifer.

Can you hear me?.

Yes, good morning..

I just wanted to touch a little bit on the regions. And maybe which of your regions you think are on the other side to potentially see the most transition? I know we've been waiting for kind of an uptick on that side of the business, and it sounds like next year, 2023, would be the more earnest recovery.

But in the next couple of quarters which region would you expect to be the -- maybe has the highest transition, higher?.

Yes, happy to address that. So starting first in the Americas, which I think we've noted is the first place that we started to see some green shoots of additional activity. We are supporting a small number of incremental projects, exploration projects today in the Americas region. The more active places would be the U.S.

Gulf of Mexico that Guyana Suriname basin, as well to a lesser extent in Brazil. For next year where we believe that a broader base activity increase will commence in earnest in 2023. We think the other regions of the world will join that increase.

And that would include -- first, I would say, more projects moving forward in the Americas region, some of the same areas that I just mentioned, but also in the North Sea, where we are starting to see additional tendering activity, as well as some short-term ad hoc work increases. Again, modest today, but we see that building over time.

That would apply in Norway and also the U.K., where we are seeing a need for additional support activity in the U.K. portion of the North Sea. Beyond that, Nigeria, which has been one of the markets that was the hardest hit over the last couple of years. As you may recall, the market size there is less than half of what it was previous last downturn.

So the overall addressable market less than half of what it was. And in addition to the overall market contraction, we at Bristow did lose a couple of customer contracts to some lower-cost regional competitors.

We're now at a place where those same customers are coming back to us, looking for Bristow to provide and deliver a solution as the other competitor was not able to deliver on the service.

So I think with the re-balancing of that customer share, as well as hopefully an increase from current levels of activity in Nigeria, our business there, which has been the leading business in Nigeria for decade now, should benefit. So those are a few of the highlights for the different regional -- regions in which we operate today..

Thank you. And then can you provide any commentary on maybe the supply of helicopters. I'm not sure if -- I know we would need price I think later on in the recovery to incentivize higher investment in the sector.

But today, how would you categorize the supply of helicopters for you and your competitors?.

Yes. So, I'll start first with where we've made some comments recently, for example, that the AW139, which is really the workhorse in the medium category of helicopter, but that market had already started to tighten. We've certainly seen a continuation of that trend.

If you're looking for a new generation AW139, for a new project, they are getting harder to come by. We have also noted previously that the light heavier, super medium category, which primarily consists of the AW189 and the H175 model helicopters, since those are newer -- that's a newer class of equipment, smaller installed base.

The supply-demand balance has been good, has been constructive in that space. That remains the case. And again, any new demand there in that category would need to involve new deliveries from the OEMs. I think where we've seen the most change over the last few months would be in the heavy category for the S-92 helicopters.

You may recall that previously we would have noted that the excess supply -- and that the category of equipment would likely take multiple years to rebalance, we've seen an acceleration in that actually. And as we think about the outlook for needs for that for S-92s, it, again, has tightened considerably.

I want to be clear, not necessarily for work that's already begun, but tendering activity for projects that would commence, for example, next year. We've seen a much higher market now particularly from newer generation S-92s.

Some of the older equipment actually is probably going to be taken out of the marketable supply, and a few machines we parted out to help support that supply chain. But for newer generation S-92s, in particular, it's a much tighter supply demand balance today than it even was a few months ago..

Great. A question regarding the use of free cash flow. You made an acquisition.

It's supposed to close on, just to confirm, third quarter in terms of fiscal or calendar year?.

We're expecting third quarter of this calendar year. So just a few months' time..

Okay. And then you still have -- you continue to have excess cash on your balance sheet.

I mean, can you maybe give us an order of priority or what you would do with that capital?.

So since the merger, we used available cash to pay down debt. We bought back shares. We've repurchased about $50 million of shares in the open market. I think the return of capital will continue to be one of the main considerations and priorities for capital allocation.

I would also note here, where we are today, that we will have some capital expenditure needs. We mentioned it in our comments earlier that we've been successful in winning a couple of new government search and rescue contracts. There will be capital associated with those. In addition to that, we are in the final stages now of the UKSAR2G award process.

We hope that Bristow will be successful in securing that 2G contract and there will be a more material amount of CapEx associated with that. So certainly, the need to fund capital expenditures, the need to invest in our business on attractive returning projects will also be a high priority for our available cash..

Understood. Thank you. Appreciate the time..

Thank you..

Thank you. We'll take our next question from Dilip Badlani with SKM..

Hi, guys. Thanks for taking the time. I was just wondering given the current discount to NAV why not get more aggressive with the share buyback now before we see a turn in the numbers in the shares a much higher..

So we have bought back about $50 million of shares out of the 75 million share repurchase program that was approved by the Board. Capital returns to shareholders will continue to be one of the primary considerations and alternatives for capital allocation.

As I noted here in the near-term, we do have some CapEx needs, and we hope to be in a position to secure the award of UKSAR2G, not taking anything for granted there, but we are optimistic that we're well positioned to win that contract. And there will be a meaningful amount of capital associated with that.

So the use of cash to fund the growth of our business and continue to invest in our business will also be one of the primary considerations for capital allocation..

Got it. Thanks..

Thank you. We'll take our next question from Michael Kaufman with Redwood Capital..

Hi. Thank you for the time today. A couple of questions.

First is on in terms of the acquisition that you made, it will close in the third quarter, can you give us any directional context on how big of a deal that was? I know it's an all-cash deal, but can you give us some guidance on how big the number was or any economic terms?.

Michael, thank you for the question. I will address this as best I can directionally with the limitation that this was a negotiated deal with the seller, and there are confidentiality provisions that we have agreed to. So we're not in a position to disclose specific financial information at this time. That being said, it is a cash transaction.

We do expect it to close in Q3 as previously noted. And so you will see the number come through our cash flow statement. When you do, I think it will become evident that in terms of the transaction size relative to the size of Bristow's balance sheet and our current liquidity position, it's not a material percentage of the cash.

Strategically, it's a deal that we like quite a bit. It, both, expands the geographic reach of our government search and rescue business to the Falkland Islands, it also importantly establishes a new relationship with the British Armed Forces, with whom, we have not previously done business.

And so, if you think about the footprint that the British Military has, the number of contracts that are available within that market, we think this new relationship is going to be an important one for the company..

Great.

After the deal closes, will you be able to disclose how much EBITDA they do or revenue they do?.

After the deal closes, we'll be able to disclose the size of the transaction and certain historical metrics related to their financial performance. As you're aware, currently, we're not providing forward-looking financial guidance for Bristow or any parts of our business.

But in terms of the size of the deal and their historical financials, we will be in a position to disclose..

Great. And then the second question I had is, I wondering if you could discuss a bit further about the path to profitability and what the drivers are to push that back up to recent historical levels? I think you talked about seasonality and pricing in the transition of Australia and so the pressure in Nigeria.

Can you give us a bit more color, particularly with regard to this quarter, maybe which were the drivers and how you can improve those to get the profitability, particularly the underlying margins back to the levels I think we all think this is capable of doing..

So taking different components of that, first, I would start with a reminder that the March quarter is historically our weakest quarter. It's where we see the most impact from seasonality due to inclement weather and fewer daylight hours depressing flight activity. The biggest impacts there would be in the U.S.

Gulf of Mexico, the North Sea and also in Nigeria for different reasons, but due to sandstorm issues in Nigeria. And so there is a seasonal component to the March quarter.

In terms of other headwinds that the business is currently facing, we have -- not as much in the March quarter as the December quarter, but we are going through a period from a timing of repairs standpoint where we are having heavier than normal full cycle timing impacts from repairs, primarily related to the AW139 portion of our fleet, not exclusively, but that's the biggest driver is in our AW139, which are not all the current AW139 fleet is on a full just to sell PBH program.

So we do have some variability and timing of repairs moving through that portion of our fleet, which is sizable. You've noted the fixed-wing business in Australia, which we also talked about in our commentary, historically that was a positive EBITDA, positive cash flow contributor to the company.

It's going through a difficult time right now for a couple of reasons, one, top line has been depressed by the COVID-19 pandemic. We're optimistic that those effects are receding and hopefully will be behind us soon for that business.

And then, at the same time, from a cost standpoint, we are working through a fleet transition in that business, rotating out of some older smaller E170 regional jets into newer larger E190 regional jets.

There are some lease return costs, one-time lease return costs associated with that fleet transition that are significant -- placing a significant drag on profitability for that portion of the business today. I think, I've made some comments already on the oil and gas side and some of the regions.

Just quickly, would refer for the purposes of this discussion two, for example, the Nigeria commentary, addressable market over the last few years is contracted by more than half. We also lost a couple of customer contracts to smaller regional competitor.

An opportunity now where that competitor was not delivering, so we expect to recapture some customer share there, and expect to benefit when that market activity increases. Again, from a broad based market increased activity, we really think calendar 2023 and beyond is when we'll start to see that in earnest for our business.

A few projects, new projects that were supporting this calendar year, again, I noted where those are in the Americas today. We think the rest of the world starts to join that party in earnest next year..

Great. Thank you.

Do you think we'll see improving profitability throughout this year for the business? Or do you think this is -- it's more of a 2023 story?.

Considering, we don't provide financial guidance, I can't provide specific numbers or commentary as it relates to the few specific financial results.

However, we did note in our prepared remarks that we think that the next couple of quarters of this calendar year will likely be more of a transition period for the business, and that broader based increase and activity, particularly on the oil and gas side would be a 2023 and beyond, as we see it multiyear growth cycle for the business.

At the same time, as I noted, we have been successful in growing our government service business with some new contract awards there. Those really won't be contributors of a material amount this calendar year, it would be really more of a 2023 start to see full period benefit of those new government contract starting up..

Great.

And last one from me is, can you remind us what the PBH intangible amortization is?.

Sure. So when you buy into a PBH agreement, if you have a helicopter that's been flying already and you haven't had it on PBH and you need to put it on PBH, you have to buy it in to the maintenance up to that point. And so that's typically a larger amount that you put in.

And from an accounting perspective, you put that on the balance sheet as math and you amortize that over the life of the PBH contract.

The one's that we have right now are that, as well as when we did, when we emerged from Chapter 11, and then when we did the merger and we had to do a recalculation of those for purchase price accounting, and so that's just a run off over the life of the contract of that amortization from that calculation, non-cash..

Got it. So it's maintenance spending that you expect upfront and that's getting amortized over the remaining life of the lease..

Sure..

Great. Thank you very much. Appreciate the....

Not the life of the PBH agreement..

Thank you..

Thank you. We'll take our next question from Gabriela Perez with MacKay..

Hi. I was wondering if you could talk about the U.K. windfall tax and if there is any impact on your customers..

I assume you're talking about -- I mean, there is an increase in the U.K. tax rate starting in 2023, unless you're talking about something different than that. I mean, as far as our financials go, we adjust our deferred taxes related to changes in income tax rates.

And in the U.K., we have a large NOL that protects us from any cash taxes related to that. But, if you're talking about something different, I'm not aware..

Yes. I was speaking about the U.K. windfall tax on oil and gas that was recently announced on the recent profits for oil and gas companies..

Yes. Obviously, the more cash that our customers are able to retain, I think it's more resource that they would have availability to invest back in our business.

That being said, I think what you've seen from the largest customers and we serve is a period of record profits where they've been really looking to return a lot of that capital to shareholders already. More fundamentally, I think what the world is facing is that demand is going to outstrip supply for some period of time.

And what that requires is an investment to both maintain current levels of production, as well as find new sources of supply. And so, we continue to believe that there will be an increase in dollar spent on offshore oil and gas and that should benefit our business sector..

And I would also note, a large portion of our U.K. business is our U.K. search and rescue contract, which isn't related to oil and gas, and it's a contract with the government..

Are you able to disclose the mix of revenues you get from oil and gas versus the search and rescue in U.K.?.

We don't disclose it at the U.K. level. We do have government services which is -- most of that government services line is our U.K. SAR business with a small portion of it being other government contracts. And then there is a split between Europe for oil and gas, and we don't disclose the U.K. separately, but we have Norway and the U.K.

in that Europe line..

Okay. Thank you very much..

Thank you. We'll take our next question from John Deysher with Pinnacle..

Good morning. Thanks for taking my questions. Just a quick question on the Dutch SAR and Dutch Caribbean contracts. You mentioned you're going to be putting capital into those businesses.

Curious as to how much you anticipate putting into those contracts and what exactly you're spending it on?.

Sure. And good morning, John. I'll give you one specific number and then some additional commentary. So, first of all, in the Dutch SAR contract which will be the three SAR configured AW189s in the Netherlands, we're going to need to spend up a couple of basis there. We also have one new delivery 189 coming from Leonardo.

I think that's the $17 million that you'll see highlighted in our capital expenditure disclosures that has gone from an option to a firm commitment. The other two aircraft that will be on that contract, we will be refurbishing existing AW189s.

There is a significant modification costs associated with converting those to meet the contract specifications. So there'll be an amount of capital associated with that as well. In the Dutch, Caribbean SAR award, we will be servicing that with two SAR configured AW139s.

Those will come from the existing fleet, however, very specific bespoke configuration requirements, which again are requiring a significant amount of modifications to go into those aircrafts, so that'll require capital.

And then we are, as you will already be aware, John, in the final stages of now of the UKSAR2G tender process, while we're not taking anything for granted there at all. We are optimistic about Bristow securing the 2G version of the U.K. SAR contract.

And while we're not in a position to discuss specifics, given that it is an active competitive process at the moment, it will be a different scope for the 2G contract than the existing version of the contract, and there will be a more material amount of CapEx associated with UKSAR2G than the other couple of government contracts that I just reviewed..

Okay. That's helpful. So on the Dutch contracts, it sounds like the total capital CapEx requirement might be what $25 million or $30 million..

I think it will have a two handle on it..

Okay. All right. And on the U.K. 2G SAR, you're the incumbent there, so that infrastructure sounds like it's already be in place.

Why do you need to put more capital into that? Has the scope changed? Or what's going to drive that CapEx number?.

Yes, happy to address that directionally. Again, can't get into the specifics because it's an active competitive tender real time.

So I think what the government -- what the customer there who we serve, the MCA, what I think they've said for some time leading up to the UKSAR2G renewal process is that there will be a different scope for 2G than there has been in the current SAR-H contract.

We obviously need to be responsive to that, if we want to secure the contract award and continue to serve that customer of ours. So there will be a different scope for 2G than the current contract. Again, can't get into specifics at this time because it's a competitive process that we're going through real time at the moment..

Okay. Fair enough. And is there -- a different topic, is there any -- on the offshore wind business, I know you're evaluating build it or buy it.

And I'm just wondering if there's been any update there in terms of direction you might be taking?.

Short answer is, no material update. We still view it as a sector where there is some promise and there should be some growth. But nothing material update at this time..

Okay. Good. Thanks and good luck..

Thank you, John..

Thank you. We'll hear next from Jason Stan with Clayton..

Hi. Good morning, guys.

Can you hear me?.

Yes, good morning..

Good morning.

Can you talk about the transition in the offshore cycle? Has it slipped at all in what you would have expected from a year ago kind of the merger time when you started to see green shoots, or not really, is this sort of consistent with what you would have thought a year ago that you're going to have to wait till 2023 to see it start in earnest?.

I think it has shifted somewhat from where we would have thought several months ago, where we thought that calendar '22 would see more of the benefit of the increase. And again, we are seeing some increased activity as noted, this calendar year. But, we really think it's calendar '23 and beyond where we will start to see that in earnest.

I think there are maybe a few things driving that timing. One, the customer base, as I think it's been well covered, well reported now has been much more disciplined on the capital side through this cycle, and looking to really return a larger portion of that capital to their shareholders.

That being said, there is a need to invest in additional production. There will be a need to bring on more supply to meet the demand. And obviously, the geopolitical factors have changed, those supply demand dynamics, even further.

So, I think our conviction about the direction and the significance of the increase that will be required in offshore spending has only strengthened. Although, the timing has adjusted somewhat as you noted..

And then I guess just from an outsider, not an industry guy's perspective, with the slippage, I guess what are the primary drivers of the slippage? And what would you be watching to see if it's sort of going to happen again? I thought some of these things had a little bit longer lead times and we were kind of the tail of them a little bit.

So trying to understand the confidence interval around us participating in the turn and it seems like there has been slippage, and I thought some of these things had kind of they're ordering pipe, they're doing other things that allow you to get a little more confidence on the fact that the cycle is in earnest and on its way.

Maybe that -- maybe, I misunderstood that a little bit..

Certainly, budgets and what a customer base is planning to spend. So if you want to track activity levels, looking at that upstream, E&P spending towards offshore is one of the better metrics to look at.

There's number of sell side firms and other third-party resources that publish reports, both on historical and then estimated future offshore E&P spending, that'll be an indication of activity levels. As you referenced, offshore, in general is late cycle.

Within offshore, our portion of that market aviation services where the personnel transportation logistics is very late cycle. And there is a lag effect on when we see the benefit of new projects that are planned and approved before they start actually needing to move more people..

Okay. So the risk is just they get plan and sort of approved and budgeted for, but somehow they get canceled sort of unlike the SAR stuff we win.

That stuff has very, very high chance of coming to fruition, because of the contract with the government for search and rescue and other things, whereas, sort of, the risk is these things get green lighted and then some geopolitical thing changes, and there's just less interest in making kind of dial back their needs over the coming year, that would be a risk..

Yes. I think if you look at what could go wrong that would change our conviction around the inflection that we expect to see in terms of increased offshore oil and gas activity. What could change that would be a fundamental change in the geopolitical picture.

So if hostilities go away and you don't have that kind of restriction on supply and the flow of trade that could change.

If there was some kind of radical acceleration of alternative energy availability that could fund the economic needs and growth of the world faster than currently contemplated, that could change the conviction or the outlook that we have. I'd say those are probably the two biggest things that if changed would impact our conviction.

I think, our view is that for better or worse, neither one is likely to happen within the time period that we're talking about here.

And we are amongst, I think, not an uncommon, not a unique camp of folks who believe that the demand is going to outstrip marketable supply for some period of time, that will continue to result in higher commodity prices, that will support the case for investments and need to bring on the additional sources of supply to meet the world's needs..

Right. Okay. Thank you. That's helpful. And then, I guess the follow-up is on, you talked a lot about CapEx. Clearly the acquisition is a form of purchased CapEx, purchasing the business. And you mentioned it being strategic.

When we think about something being strategic, is it suffice to say that the CapEx that we're looking at from here going forward and the acquisitions hit some sort of hurdle rate that you're looking for? Or are we still looking at some of the CapEx in this strategic acquisition being sort of a deferred maintenance type of kind of infilling of capabilities that we need? Or does kind of everything CapEx wise and the investment going forward hit a hurdle rate for us?.

No. These will need to meet our financial return objectives. When we say strategic, we're not implying that there is not a justifiable economic benefit to Bristow. We're looking at projects. We're looking to put money to work in a way that's going to meet our financial return objectives. The BIH acquisition would fall to that category.

These new government contracts that we've been awarded would certainly fall into that category, as would future pursuit of contracts, whether in the government line of work or our oil and gas line of service..

Okay. So like, when we talk about the next version of the U.K. contract, as you contemplate all that capital, they returned off, then the return on that capital goes into your bid. So, just as you said, CapEx expenditures a lot on this call and people have been asking about it.

In theory, that's a good thing if you're modeling it correctly, because you're getting an economic return on all that CapEx..

We view it as a very good thing for shareholders. This is investing in our business, and in ways that are both diversifying our cash flows, but also strengthening our cash flows on terms that meet our financial return objectives..

Great. Thank you very much. Good luck on everything..

Thank you..

Thank you. We'll take our final question from Dohyun Cha with MacKay..

I appreciate your comments earlier about the oil and gas business and how demand has been outstripping or should be outstripping supply for the time being. I guess, I was wondering if you could characterize what it looks like for the vertical flight business that you guys are involved in.

Like, where are we on supply and demand there? And how is your mix? Has the mix shifted at all from independents like yourselves versus the more integrated services provided by the bigger service companies? Thank you..

Thank you for the question. What we do is a fairly specialized portion of the broader oil field services industry, our competitors are mostly regional in nature. Bristow, is really by a good margin the largest global provider of what we do for vertical lift solutions.

So when we face competition, we have a couple of competitors who compete in multiple regions, but a lot of times it would be a local, in country provider.

By the way, a reminder for everyone, aviation is a very highly regulated industry, so in each jurisdiction in which we operate or we choose to operate, we have to be certified as a local air carrier.

We have to achieve an air operating certificate which has various regulatory requirements, some of those will be specific to nationality, that's why you see in some cases that we have partnership structures to satisfy those local regulations. In other areas, we actually lease the helicopters.

We're not operating ourselves, but we do have a leasing business that we view as complementary where we're able to monetize and capitalize on demand for helicopters coming out of the jurisdictions where we are either not able or where it doesn't make sense for us to operate ourselves. So that leasing business helps us do that as well.

But, for the most part, in terms of the competitive landscape, there have not been fundamental changes. Bristow, again, remains the global leader in this arena by a fairly good margin..

Yes, I understand that.

But you also compete with those that offer vertical flight services along with all the other oil field services like the Schlumberger's of the world, right? So I'm just trying to understand what the dynamic is and how competitive you are versus those competitors, and whether there's been any kind of a shift in mix for the industry given the discipline that we've been seeing?.

So the short answer is, nothing has changed there. None of the majors, Schlumberger, Halliburton or Baker Hughes, none of those companies have aviation services that they provide to our customer base. We don't actually compete against them..

Oh, you don't. Okay. That's helpful. Thank you..

Thank you..

Thank you. And that does conclude today's question-and-answer session. I'd like to turn the conference back over to management for any additional or closing remarks..

Thank you, Cody, and thank you everyone for participating in the call this quarter. I look forward to updating you again later in the summer. Be safe..

Thank you. And that does conclude today's conference. We thank you all for your participation. You may now disconnect..