Orion Marine Group Updates Investors (USA)
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.
The Company’s overall outlook remains unchanged as 2013 gets underway. Private sector bid opportunities continue to be robust with local and DOT bid opportunities continuing at reasonable levels. Bid opportunities from the Army Corps of Engineers continue to be choppy and uncertain under the current funding levels and budgetary environment. As a result, the Company remains pleased with the robust utilization of construction equipment in the second half of 2012 and into 2013. The Company experienced a temporary increase in dredge utilization in the back half of 2012 as a result of several smaller private jobs in the Gulf Coast and Atlantic regions. However, it is uncertain if this level of utilization will continue as a result of choppy bid letting from the Army Corps of Engineers.
The Company continues to maintain a solid win rate as it executes on its strategy to drive a larger volume of work to offset lower job margins. During the fourth quarter, the Company bid on approximately $253 million worth of opportunities and was successful on approximately $54 million, representing a win rate of approximately 21%. Currently the Company has over $238 million worth of bids outstanding, of which it is the apparent low bidder on approximately $22 million. While the overall amount of work bid is slightly lower than in recent quarters due to normal seasonality, the Company remains comfortable with its future outlook and level of bid opportunities as indicated by its tracking database that currently has over $6.5 billion worth of opportunities over the next few years.
Overall, the Company continues to expect to see solid levels of projects involving construction services in 2013 with uncertain levels of projects involving dredging services. Additionally, the integration of West Construction continues as expected and the Company remains excited regarding the opportunities it sees in the Alaska region as it establishes a major presence there.
Despite the uncertainty surrounding the federal budget, the Company was pleased with its recent award of a seed project by the Army Corps of Engineers under a MATOC contract. The Company will also be eligible to bid on additional projects bid under the MATOC. Up to $500 million of work may be bid under this MATOC. Additionally, the Company was recently awarded two contracts by the Corps in the Gulf Coast. These recent awards by the Corps total approximately $18 million. While these awards will somewhat help dredge utilization in the second quarter of 2013, a steadier, more predictable pace of lettings by the Corps of Engineers is needed to achieve higher dredge utilization levels. With less than 3 months left before expiration of the 6-month stop-gap spending bill passed by Congress at the end of FY2012, another supplemental bill will have to be passed before the end of March in order for the Corps to continue to execute on its mandate to maintain the navigability of the nation’s waterways.
The House of Representatives has also recently passed a bill containing $50 billion in funding for the recovery from Hurricane Sandy. Included in the bill is $742 million for Operations & Maintenance budget of the Army Corps of Engineers along with $582 million for Flood Control & Coastal Emergencies. The bill is expected to be taken up for a vote by the Senate next week. This legislation is welcome news to areas in the Northeast devastated by Hurricane Sandy and will tremendously help the region begin the long road to recovery. The Company will be closely monitoring how and where these funds are spent, and any potential opportunities created as a result.
The Federal Government has also moved a step closer to funding the RESTORE Act after the settlement with Transocean for $1.4 billion related to the Deepwater Horizon disaster. The RESTORE Act will send approximately $1.1 billion of these fines towards the restoration of the Gulf Coast ecosystems and economy that were damaged by the 2010 spill. Fines have not been finalized against BP but are expected to be $5 – $20 billion.
The Company continues to execute on and see a steady stream of bridge opportunities funded primarily through states’ Departments of Transportation. While the Company has not yet seen a material improvement in margins as a result of the two-year, $105 billion highway bill that was signed by the President this past June, the irrational bidding seen in 2011 has abated.
Local & Private Update
The Company continues to see a high level of bid opportunities from local port authorities and private customers, primarily along the Gulf Coast. Private dredging work in the fourth quarter was helpful in increasing dredging asset utilization; however, utilization may dip down again as these relatively short term jobs wrap up in the beginning of 2013. Construction opportunities in both these end markets remain strong in all of the operating regions. The Company continues to be optimistic about the direction of these sectors.
Press Release, January 18, 2013