USA: Orion Marine Group Provides Update on Company’s Outlook

Orion Marine Group Inc, a leading heavy civil marine contractor serving the infrastructure sector, is providing its investors an update on the Company’s outlook and end markets.

Market Outlook

The Company continues to experience uncertain and tough times. The general economic conditions, including anemic Gross Domestic Product growth and delays in Federal spending, has and will continue to put pressure on the Company’s margins for the foreseeable future. The Company has and continues to implement cost containment programs which should help offset some margin pressure in the future.

As noted previously, the Company implemented a program to adjust bid margins in order to build backlog and revenue to cover fixed costs. This program has yielded good results. So far during the first quarter, the Company has bid on $419 million worth of opportunities and was successful on $100 million. Additionally, the Company’s market tracking database continues to remain at high levels as the Company expands geographically, expands its capabilities to go after larger work, and the overall demand for marine construction services continues to increase. Looking out over the next several years, the Company continues to believe there are ample opportunities to continue to grow its market database and bid opportunities.

The Company does not expect the start of recently awarded projects to materially begin until the third and fourth quarter of 2012. Therefore, the Company continues to expect significantly pressured margins and results during at least the first half of 2012, with improvement in results beginning towards the end of the year as jobs get started. Additionally, the Company continues to expect underutilized dredging assets, primarily driven by a lack of Corps of Engineers job lettings, will put added pressure on margins during at least the first half of 2012. As a result, the Company expects first quarter bottom line results to be significantly less than the fourth quarter of 2011. However, the Company expects its results will begin to improve later in the year as recently awarded projects get underway, and the Corps of Engineers returns to more normal job letting levels.

“We believe we have found the appropriate price points in our markets and are pleased with our progress so far executing our strategy of building backlog, controlling costs, and positioning ourselves for improved pricing conditions,” said Mike Pearson, Orion Marine Group’s President and Chief Executive Officer. “While we face continued challenges in the near term, we remain optimistic about our long-term outlook. There is no doubt 2012 will be another tough year, but we are headed in the right direction and brighter days are ahead. Still, we have to be diligent with project execution and vigilant with regard to dredging asset utilization and Corps of Engineers job lettings. As we have said before, we will weather this storm and emerge a stronger Company.”

Federal Update

As noted previously, the Company has still not seen a material increase in lettings from the Army Corps of Engineers since the beginning of 2012. The lack of Corps lettings continues to affect the utilization of the Company’s dredging assets. The Corps of Engineers generally liquidates its budget before the end of the Federal fiscal year on September 30, 2012. For this reason, the Company is cautiously optimistic that the Corps will return to a more normalized pace of project lettings as we progress into the spring and summer months. While dredging projects let by the Corps have been limited, the Company has recently been successful in obtaining an Indefinite Delivery, Indefinite Quantity (IDIQ) contract with the Mobile District of the Corps of Engineers to perform coastal and upriver maintenance dredging in the region. On a separate note, the RAMP Act, which would match Harbor Maintenance Tax collections with expenditures, continues to enjoy broad bipartisan support.

State Update

With the current extension of the highway bill expiring on March 31, 2012, there has been some movement in Washington on a new Highway Transportation Bill. The Senate recently passed a two-year, $109 billion Bill with bipartisan support that now awaits action by the House of Representatives. Speaker of the House John Boehner recently indicated that if the House cannot agree on its own version of the bill, it would consider the recently passed Senate version. Passing any kind of major spending legislation in an election year is challenging and the company is monitoring these developments closely. The Company also reminds investors that a new Highway Bill would not significantly add to our tracking database but could be a factor in the easing of pricing pressure from non-traditional competitors.

Local Update

The Company remains encouraged by the long term drivers in the shipping and waterborne commerce industries. Out of the top 20 US container ports, 18 posted increases in container volume in 2011 over 2010. As shippers move towards more efficient, larger ships to move cargo, local port authorities will have to expand their existing facilities to accommodate the larger vessels. The completion of the expansion of the Panama Canal will bring a larger share of these ships into the Company’s operating regions in the Gulf and East Coasts, further pressuring local port authorities to expand their facilities. These types of projects are typically capital intensive and long term in nature, and we see these drivers as long term catalysts. The Company continues to work on, and bid these types of projects, including the berth construction contract with the Canaveral Port Authority announced earlier this year.

Private Update

The market for both larger private jobs and maintenance call out work continues to show signs of improvement. The increase in private jobs has been driven in part by improving economic conditions and increased activity by the petrochemical industry in the Gulf Coast Region.

About Orion Marine Group

Orion Marine Group, Inc. provides a broad range of marine construction and specialty services on, over and under the water along the Gulf Coast, the Atlantic Seaboard, the West Coast, Canada, and the Caribbean Basin and acts as a single source turn-key solution for its customers’ marine contracting needs. Its heavy civil marine construction services include marine transportation facility construction, marine pipeline construction, marine environmental structures, dredging, and specialty services. Its specialty services include salvage, demolition, diving, surveying, towing and underwater inspection, excavation and repair. The Company is headquartered in Houston, Texas and has a near 100-year legacy of successful operations.

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Dredging Today Staff, March 23, 2012